-----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, H1RTiV8iUaDnHxrJFG1loEGPsF1rNeokHcbXk7sfbDFXnvxnkTL3yJKnHdnP/KEL n7C/0V6f7XefHPZbgjv0VQ== 0000869392-96-000015.txt : 19960927 0000869392-96-000015.hdr.sgml : 19960927 ACCESSION NUMBER: 0000869392-96-000015 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 45 FILED AS OF DATE: 19960926 EFFECTIVENESS DATE: 19960926 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: 485BPOS SEC ACT: 1933 Act SEC FILE NUMBER: 033-37992 FILM NUMBER: 96635054 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-06258 FILM NUMBER: 96635055 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: 485BPOS SEC ACT: 1933 Act SEC FILE NUMBER: 033-05416 FILM NUMBER: 96635056 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-04518 FILM NUMBER: 96635057 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: 485BPOS SEC ACT: 1933 Act SEC FILE NUMBER: 033-08923 FILM NUMBER: 96635058 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-04529 FILM NUMBER: 96635059 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: 485BPOS SEC ACT: 1933 Act SEC FILE NUMBER: 033-08916 FILM NUMBER: 96635060 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-04527 FILM NUMBER: 96635061 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: 485BPOS SEC ACT: 1933 Act SEC FILE NUMBER: 033-28321 FILM NUMBER: 96635062 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-05802 FILM NUMBER: 96635063 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: 485BPOS SEC ACT: 1933 Act SEC FILE NUMBER: 033-08924 FILM NUMBER: 96635064 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-04528 FILM NUMBER: 96635065 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 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: 485BPOS SEC ACT: 1933 Act SEC FILE NUMBER: 033-35677 FILM NUMBER: 96635066 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-06129 FILM NUMBER: 96635067 BUSINESS ADDRESS: STREET 1: ONE POST OFFICE SQUARE STREET 2: MAILSTOP A 14 CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 8002551581 485BPOS 1 DEFINITIVE INFORMATION As filed with the Securities and Exchange Commission on September 26, 1996 - ----------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- FORM N-1A ---- REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X / ---- ---- Pre-Effective Amendment No. / / ---- ---- Post-Effective Amendment No. 7 / X / and ---- ---- REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY / X / ACT OF 1940 ---- ---- Amendment No. 9 / X / (Check appropriate box or boxes) ---- --------------- PUTNAM ARIZONA TAX EXEMPT INCOME FUND (Registration No. 33- 37992; 811- 6258) (Exact name of registrant as specified in charter) REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X / ---- ---- Pre-Effective Amendment No. / / ---- ---- Post-Effective Amendment No. 7 / X / and ---- ---- REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY / X / ACT OF 1940 ---- ---- Amendment No. 8 / X / (Check appropriate box or boxes) ---- --------------- PUTNAM FLORIDA TAX EXEMPT INCOME FUND (Registration No. 33-35677; 811-6129) (Exact name of registrant as specified in charter) REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X / ---- ---- Pre-Effective Amendment No. / / ---- ---- Post-Effective Amendment No. 16 / X / and ---- ---- REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY / X / ACT OF 1940 ---- ---- Amendment No. 18 / X / (Check appropriate box or boxes) ---- --------------- PUTNAM MASSACHUSETTS TAX EXEMPT INCOME FUND Registration No. 33-5416; 811-4518 (Exact name of registrant as specified in charter) ---- REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X / ---- ---- Pre-Effective Amendment No. / / ---- ---- Post-Effective Amendment No. 16 / X / and ---- ---- REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY / X / ACT OF 1940 ---- ---- Amendment No. 18 / X / (Check appropriate box or boxes) ---- --------------- PUTNAM MICHIGAN TAX EXEMPT INCOME FUND Registration No. 33-8923; 811-4529 PUTNAM MINNESOTA TAX EXEMPT INCOME FUND Registration No. 33-8916; 811-4527 PUTNAM OHIO TAX EXEMPT INCOME FUND Registration No. 33-8924; 811-4528 (Exact name of registrant as specified in charter) REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X / ---- ---- Pre-Effective Amendment No. / / ---- ---- Post-Effective Amendment No. 7 / X / and ---- ---- REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY / X / ACT OF 1940 ---- ---- Amendment No. 9 / X / (Check appropriate box or boxes) ---- --------------- PUTNAM NEW JERSEY TAX EXEMPT INCOME FUND (Registration No. 33-32550; 811-5977) (Exact name of registrant as specified in charter) REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X / ---- ---- Pre-Effective Amendment No. / / ---- ---- Post-Effective Amendment No. 9 / X / and ---- ---- REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY / X / ACT OF 1940 ---- ---- Amendment No. 10 / X / (Check appropriate box or boxes) ---- --------------- PUTNAM PENNSYLVANIA TAX EXEMPT INCOME FUND (Registration No. 33-28321; 811-5802) (Exact name of registrant as specified in charter) One Post Office Square, Boston, Massachusetts 02109 (Address of principal executive offices) . . Registrants' Telephone Number, including Area Code (617) 292-1000 It is proposed that this filing will become effective (check appropriate box) ---- / / immediately upon filing pursuant to paragraph (b) - ---- ---- /X / on September 30, 1996 pursuant to paragraph (b) - ---- ---- / / 60 days after filing pursuant to paragraph (a)(1) - ---- ---- / / on [date] pursuant to paragraph (a)(1) - ---- ---- / / 75 days after filing pursuant to paragraph (a)(2) - ---- ---- / / on (date) pursuant to paragraph (a)(2) of Rule 485. - ---- If appropriate, check the following box: ---- / / this post-effective amendment designates a new - ---- effective date for a previously filed post-effective amendment. -------------- JOHN R. VERANI, Vice President 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, Massachusetts 02109 (Name and address of agent for service) --------------- Copy to: JOHN W. GERSTMAYR, Esquire ROPES & GRAY One International Place Boston, Massachusetts 02110 ---------------------- Each Registrant has registered an indefinite number or amount of securities under the Securities Act of 1933 pursuant to Rule 24f-2. Rule 24f-2 notices for Putnam 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 and Putnam Pennslyvania Tax Exempt Income Fund for the fiscal year ended May 31, 1996 were filed on July 29, 1996 .
Putnam Arizona Tax Exempt Income Fund CALCULATION OF REGISTRATION FEE - ----------------------------------------------------------------- - ------------------------ - ----------------------------------------------------------------- - ------------------------ Proposed Proposed maximum maximum Amount offering aggregate Amount of Title of securities being price per offering registration being registeredregistered unit* price** fee - ----------------------------------------------------------------- - ------------------------ Shares of Beneficial Interest 1,248,389 shs. $9.39 $290,000 $100.00 - ----------------------------------------------------------------- - ------------------------ - ----------------------------------------------------------------- - ------------------------ * Based on offering price per share on September 17, 1996 . ** Calculated pursuant to Rule 24e-2 under the Investment Company Act of 1940. The total amount of securities redeemed or repurchased during the Registrant's previous fiscal year was 3,095,618 shares, 1,878,112 of which have been used for reductions pursuant to Rule 24e-2(a) or Rule 24f-2(c) under said Act in the current fiscal year, and 1,217,506 of which are being used for such reduction in this Amendment.
Putnam Florida Tax Exempt Income Fund CALCULATION OF REGISTRATION FEE - ----------------------------------------------------------------- - ------------------------ - ----------------------------------------------------------------- - ------------------------ Proposed Proposed maximum maximum Amount offering aggregate Amount of Title of securities being price per offering registration being registeredregistered unit* price** fee - ----------------------------------------------------------------- - ------------------------ Shares of Beneficial Interest 2,638,275 shs. $9.48 $290,000 $100.00 - ----------------------------------------------------------------- - ------------------------ - ----------------------------------------------------------------- - ------------------------ * Based on offering price per share on September 17, 1996 . ** Calculated pursuant to Rule 24e-2 under the Investment Company Act of 1940. The total amount of securities redeemed or repurchased during the Registrant's previous fiscal year was 7,569,480 shares, 4,961,795 of which have been used for reductions pursuant to Rule 24e-2(a) or Rule 24f-2(c) under said Act in the current fiscal year, and 2,607,685 of which are being used for such reduction in this Amendment. 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 CROSS REFERENCE SHEET (as required by Rule 481(a)) Part A N-1A Item No. Location 1. Cover Page . . . . . . . . . . . . . . Cover page 2. Synopsis . . . . . . . . . . . . . . . Expenses summary 3. Condensed Financial Information. . . . Financial highlights; How performance is shown 4. General Description of Registrant. . . Objectives; How the funds pursue their objectives; Organization and history 5. Management of the Fund . . . . . . . . Expenses summary; How the funds are managed; About Putnam Investments, Inc. 5A. Management's Discussion of Fund Performance. . . . . . . . . . . . . . (Contained in the annual report of the Registrants) 6. Capital Stock and Other Securities . . Cover page; Organization and history; How a fund makes distributions to shareholders; tax information 7. Purchase of Securities Being Offered . How to buy shares; Distribution plans; How to sell shares; How to exchange shares; How a fund values its shares 8. Redemption or Repurchase . . . . . . . How to buy shares; How to sell shares; How to exchange shares; Organization and history 9. Pending Legal Proceedings. . . . . . . Not applicable PART B N-1A ITEM NO. LOCATION 10. Cover Page . . . . . . . . . . . . . . Cover page 11. Table of Contents. . . . . . . . . . . Cover page 12. General Information and History. . . . Organization and history (Part A) 13. Investment Objectives and Policies . . How the funds pursues their objectives (Part A); Investment restrictions; Miscellaneous investment practices 14. Management of the Registrant . . . . . Management (Trustees; Trustee fees; Officers); Additional officers 15. Control Persons and Principal. . . . . Management (Trustees; Holders of Securities Officers); Charges and expenses (Share ownership) 16. Investment Advisory and Other. . . . . Organization and Services history (Part A); Management (Trustees; Officers; The management contract; Principal underwriter; Investor servicing agent and custodian); Charges and expenses; Distribution plans; Independent accountants and financial statements 17. Brokerage Allocation . . . . . . . . . Management (Portfolio transactions); Charges and expenses 18. Capital Stock and Other Securities . . Organization and history (Part A); How a fund makes distributions to shareholders; tax information (Part A); Suspension of redemptions 19. Purchase, Redemption, and Pricing. . . How to buy shares of Securities Being Offered (Part A); How to sell shares (Part A); How to exchange shares (Part A); How to buy shares; Determination of net asset value; Suspension of redemptions 20. Tax Status . . . . . . . . . . . . . . How a fund makes distributions to shareholders; tax information (Part A); Taxes 21. Underwriters . . . . . . . . . . . . . Management (Principal underwriter); Charges and expenses 22. Calculation of Performance Data. . . . How performance is shown (Part A); Investment performance; Standard performance measures 23. Financial Statements . . . . . . . . . Independent accountants and financial statements PART C Information required to be included in Part C is set forth under the appropriate Item, so numbered, in Part C of the Registration Statement. PROSPECTUS SEPTEMBER 30, 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 September 30, 1996 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 , 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 various classes of a fund's 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 the risks that are associated with an investment in a fund. HOW PERFORMANCE IS SHOWN PAGE NUMBER This section describes and defines the measures used to assess fund performance. All data are based on 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 its expenses, and how purchases and sales of securities are made . 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 fund shares , either directly to a fund or through an investment dealer. HOW TO EXCHANGE SHARES PAGE NUMBER Find out in this section how you may exchange fund shares 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 fund dividends . It also discusses the tax status of the payments and counsels you to seek specific advice about your own situation. ABOUT PUTNAM INVESTMENTS, INC. PAGE NUMBER Read this section to learn more about the companies that provide 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 from investing in a fund and expenses based on the 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% 0.23% 1.03% class B 0.60% 0.85% 0.22% 1.67% class M 0.60% 0.50% 0.23% 1.33% Florida fund class A 0.60% 0.20% 0.15% 0.95% class B 0.60% 0.85% 0.15% 1.60% class M 0.60% 0.50% 0.13% 1.23% Massachusetts fund class A 0.60% 0.20% 0.15% 0.95% class B 0.60% 0.85% 0.15% 1.60% class M 0.60% 0.50% 0.14% 1.24% Michigan fund class A 0.60% 0.20% 0.20% 1.00% class B 0.60% 0.85% 0.20% 1.65% class M 0.60% 0.50% 0.18% 1.28% Minnesota fund class A 0.60% 0.20% 0.21% 1.01% class B 0.60% 0.85% 0.22% 1.67% class M 0.60% 0.50% 0.22% 1.32% New Jersey fund class A 0.60% 0.20% 0.16% 0.96% class B 0.60% 0.85% 0.16% 1.61% class M 0.60% 0.50% 0.14% 1.24% Ohio fund class A 0.60% 0.20% 0.16% 0.96% class B 0.60% 0.85% 0.16% 1.61% class M 0.60% 0.50% 0.17% 1.27% Pennsylvania fund class A 0.60% 0.20% 0.18% 0.98% class B 0.60% 0.85% 0.17% 1.62% class M 0.60% 0.50% 0.18% 1.28% 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. The expenses shown in the table do not reflect the application of credits that reduce fund expenses. The 12b-1 fees for class M shares for the Arizona fund and the Pennsylvania fund reflect amounts currently payable under the respective class M distribution plans. Other expense information shown in the table for class M shares of the Arizona and Pennsylvania funds has been restateds based on the expenses for each fund's class A shares for the most recent fiscal year in order to more accurately reflect each fund's expenses for a full fiscal year. Each fund's most recent fiscal period was approximately eleven months . For the Arizona fund, actual management fees for class M shares were 0.52% and annualized management fees were 0.57%, actual and annualized 12b-1 fees were 0.46% and 0.50%, respectively, actual and annualized "Other expenses" were 0.11% and 0.12%, respectively and actual and annual total operating expenses were 1.09% and 1.19%, respectively. For the Pennsylvania fund, actual management fees for class M shares were 0.53% and annualized management fees were 0.58%, actual and annualized 12b-1 fees were 0.46% and 0.50% , respectively, actual and annualized "Other expenses" were 0.14% and 0.16%, respectively and actual and annualized total operating expenses were 1.13% and 1.24%, respectively. 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 3 5 10 year years years years Arizo na fund class A $58 $79 $102 $167 class B $67 $83 $111 $181** * class B (no redemption) $17 $53 $91 $181*** class M $46 $73 $103 $187 Florida fund class A $57 $76 $98 $159 class B $66 $80 $107 $173** * class B (no redemption) $16 $50 $87 $173** * class M $45 $70 $98 $177 Massachusetts fund class A $57 $76 $98 $159 class B $66 $80 $107 $173** * class B (no redemption) $16 $50 $87 $173** * class M $45 $71 $98 $178 Michigan fund class A $57 $78 $100 $164 class B $67 $82 $110 $178*** class B (no redemption) $17 $52 $90 $178*** class M $45 $72 $100 $182 Minnesota fund class A $57 $78 $101 $165 class B $67 $83 $111 $180*** class B (no redemption) $17 $53 $91 $180*** class M $46 $73 $102 $186 New Jersey fund class A $57 $77 $98 $160 class B $66 $81 $108 $174*** class B (no redemption) $16 $51 $88 $174*** class M $45 $71 $98 $178 Ohio fund class A $57 $77 $98 $160 class B $66 $81 $108 $174*** class B (no redemption) $16 $51 $88 $174*** class M $45 $71 $100 $181 Pennsylvania fund class A $57 $77 $99 $162 class B $66 $81 $108 $175** * class B (no redemption) $16 $51 $88 $175*** class M $45 $72 $100 $182 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 class A, B and M shares . This information has been audited and reported on by the independent accountants. The "Report of independent accountants" and financial statements included in each fund's annual report to shareholders for the 1996 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)
FOR THE PERIOD FOR THE PERIOD MAY 12, 1995 JULY 15, 1993 (COMMENCEMENT (COMMENCEMENT OF OPERATIONS) TO YEAR ENDED OF OPERATIONS) TO MAY 31 MAY 31 MAY 31 1996 1995 1996 1995 1994 CLASS M* CLASS B NET ASSET VALUE, BEGINNING OF PERIOD$9.21 $9.10 $9.20 $9.05 $9.71 INVESTMENT OPERATIONS Net investment income.51 .02 .48 .49 .41 Net realized and unrealized gain (loss) on investments (.11) .12 (.11) .17 (.51) TOTAL FROM INVESTMENT OPERATIONS.40 .14 (.37 .66 (.10) LESS DISTRIBUTIONS FROM: (.47) Net investment income (.51) (.03) (.49) (.41) Net realized gain on investments -- -- - -- - -- (.15) In excess of net realized gain -- -- - -- (.02) -- TOTAL DISTRIBUTIONS(.51) (.03) (.47) (.51) (.56) NET ASSET VALUE, END OF PERIOD $9.10 $9.21 $9.10 $9.20 $9.05 TOTAL INVESTMENT RETURN AT NET ASSET VALUE (%)(b) 4.37 1.53(c) 4.12 7.64 (1.15)(c) NET ASSETS, END OF PERIOD (in thousands) $1,290 $22 $65,538 $47,573 $23,017 Ratio of expenses to average net assets (%) 1.24 .06(c) 1.60 1.53 1.41(c) Ratio of net investment income to average net assets (%) 5.58 .30(c) 5.13 5.46 4.32(c) Portfolio turnover (%) 34.57 47.53 34.57 47.53 36.20 FINANCIAL HIGHLIGHTS (continued)
For the period October 23, 1989 (commencement of operations) to Year ended May 31 May 31 1996 1995 1994 1993 1992 1991 1990 Class A $9.21 $9.05 $9.55 $9.02 $8.70 $8.50 $8.50 .54 .55 .55 .59 .61(a) .62(a) .35(a) (.10) .18 (.35) .54 .39 .20 -- .44 .73 .20 1.13 1.00 .82 .35 (.54) (.55) (.55) (.59) (.61) (.62) (.35) -- -- (.15) (.01) (.07) -- -- -- (.02) -- -- -- -- -- (.54) (.57) (.70) (.60) (.68) (.62) (.35) $9.11 $9.21 $9.05 $9.55 $9.02 $8.70 $8.50 4.81 8.45 1.92 12.80 11.96 10.10 6.84(c) $259,934 $251,232 $244,519 $215,611 $149,011 $38,526 $18,249 .95 .89 .96 .97 .88(a) .86(a) .80(a)(c) 5.80 6.11 5.69 6.24 6.82(a) 7.27(a) 6.97(a)(c) 34.57 47.53 36.20 53.18 94.95(d) 123.29 83.26(d) * Per share net investment income for the period ended May 31, 1995 has been determined on the basis of the weighted average number of shares outstanding during the period. (a)Reflects an expense limitation. As a result of this limitation, net investment income of the fund for the years ended May 31, 1992 and 1991 reflect expense reductions of approximately $0.01 and $0.02 respectively. (b) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges. (c) No annualized (d) Portfolio turnover excludes the impact of assets received by the fund,then known as Putnam Massachusetts Tax Exempt Income Fund II, from the acquisition of Putnam Massachusetts Tax Exempt Income Fund. FINANCIAL HIGHLIGHTS (For a share outstanding throughout the year) FOR THE PERIOD FOR THE PERIOD APRIL 17, 1995 JULY 15, 1993 (COMMENCEMENT OF (COMMENCEMENT OF OPERATIONS) TO YEAR ENDED OPERATIONS) TO MAY 31 MAY 31 MAY 31 1995 1995 1994 CLASS M CLASS B NET ASSET VALUE, BEGINNING OF PERIOD $8.80 $8.90$9.43 INVESTMENT OPERATIONS Net investment income .05 .47 .41 Net realized/unrealized gain (loss) on investments .21 .10 (.46) TOTAL FROM INVESTMENT OPERATIONS .26 .57 (.05) LESS DISTRIBUTIONS FROM: Net investment income (.06) (.47) (.40) Net realized gain on investments -- -- -- In excess of net gain on investments -- - -- (.08) TOTAL DISTRIBUTIONS (.06) (.47) (.48) NET ASSET VALUE, END OF PERIOD $9.00 $9.00 $8.90 TOTAL INVESTMENT RETURN AT NET ASSET VALUE (%) 2.03 6.72 (.68) NET ASSETS, END OF PERIOD (in thousands) $119 $21,071 $10,251 Ratio of expenses to average net assets (%).20 1.59 1.42 Ratio of net investment income to average net assets (%) .84 5.31 4.25 Portfolio turnover (%) 82.91 82.91 41.77 FOR THE PERIOD FOR THE PERIOD FOR THE JULY 15, 1993 FOR THE JANUARY 30, 1991 NINE MONTHS (COMMENCEMENT OF NINE MONTHS (COMMENCEMENT OF ENDED YEAR ENDED OPERATIONS) TO ENDED OPERATIONS) TO MAY 31 AUGUST 31 AUGUST 31 MAY 31 YEAR ENDED AUGUST 31 AUGUST 1996 1996 1995* 1994 1993 1996 1995* 1994 1993 1992 1991 CLASS B CLASS A NET ASSET VALUE, BEGINNING OF PERIOD $8.86 $9.01 $9.00 $8.83 $9.47 $9.39 $8.84 $9.47 $9.07 $8.66 $8.50 INVESTMENT OPERATIONS Net investment income .41 .41 .34 .45 .11 .47 .38 .51 .54(a) .57(a) .33(a) Net realized and unrealized gain (loss) on investments (.02) (.18) .17 (.61) .03 (.17) .17 (.61) .47 .42 .16 TOTAL FROM INVESTMENT OPERATIONS .39 .23 .51 (.16) .14 .30 .55 (.10) 1.01 .99 .49 LESS DISTRIBUTIONS FROM: Net investment income (.40) (.41) (.34) (.45) (.06) (.47) (.38) (.50) (.55) (.57) (.33) Net realized gain on investments -- -- - -- -- -- -- -- (.06) (.01) -- In excess of net realized gain on investments -- -- - -- (.03) -- -- -- (.03) - -- -- -- TOTAL DISTRIBUTIONS (.40) (.41) (.34) (.48) (.06) (.47) (.38) (.53) (.61) (.58) (.33) NET ASSET VALUE, END OF PERIOD $8.85 $8.82 $9.00 $8.83 $9.47 $8.84 $9.01 $8.84 $9.47 $9.07 $8.66 TOTAL INVESTMENT RETURN AT NET ASSET VALUE (%) (b) 4.44(c) 2.60 5.99(c) (1.80) 1.45(c) 3.38 6.45(c) (1.07) 11.54 11.85 5.84(c) NET ASSETS, END OF PERIOD (in thousands) $293 $24,050 $21,538 $16,247 $2,974 $126,716 $136,598 $142,950 $145,304 $88,566 $46,902 Ratio of expenses to average net assets (%) (d) 1.09(c) 1.67 1.19(c) 1.60 .19(c) 1.03 .70(c) .97 .89 .58(a) .16(a)(c) Ratio of net investment income to average net assets (%) 4.28(c) 4.52 3.89(c) 4.82 .43(c) 5.20 4.42(c) 5.55 5.82 6.34(a) 3.91(a)(c) Portfolio turnover (%) 108.68 108.68 51.48(c) 34.68 5.72 108.68 51.48(c) 34.68 5.72 31.84 12.46(c) * The fiscal year end has changed from August 31 to May 31. (a) Reflects an expense limitation in effect during the period. As a result of the limitation, net investment income of the fund for the year ended August 31, 1992 and the period ended August 31, 1991, reflect expense reductions of $0.03 and $0.05 per share, respectively. (b) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges. (c) Not annualized. (d) The ratio of expenses to average net assets for the year ended May 31, 1996 includes amounts paid through expense offset arrangements. Prior period ratios exclude these amounts (Note 2). /TABLE FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period)
FOR THE PERIOD MAY 1, 1995 JANUARY 4, 1993 (COMMENCEMENT FOR THE YEAR (COMMENCEMENT OF OPERATIONS) TO ELEVEN MONTHS ENDEDOF OPERATIONS) TO MAY 31 ENDED MAY 31 JUNE 30 JUNE 30 1996 1995(+) 1996 1995* 1994 1993 CLASS M CLASS B NET ASSET VALUE, BEGINNING OF PERIOD $9.12 $8.87 $9.12 $8.76 $9.53 $9.17 INVESTMENT OPERATIONS Net investment income .46 .04 .42 .40 .44 .21 Net realized and unrealized gain (loss) on investments(.21) .25 (.21) .36 (.66) .36 TOTAL FROM INVESTMENT OPERATIONS .25 .29 .21 .76 (.22) .57 LESS DISTRIBUTIONS: From net investment income (.46) (.04) (.42) (.39) (.44) (.21) In excess of net investment income-- -- -- (.01) - -- -- From net realized gain on investments -- -- -- -- (.09) -- In excess of net realized gain on investments -- -- -- - -- (.02) -- TOTAL DISTRIBUTIONS (.46) (.04) (.42) (.40) (.55) (.21) NET ASSET VALUE, END OF PERIOD $8.91 $9.12 $8.91 $9.12 $8.76 $9.53 TOTAL INVESTMENT RETURN AT NET ASSET VALUE (%)(b) 2.76 3.28(c) 2.37 9.06(c) (2.55) 12.84(c) NET ASSETS, END OF PERIOD (in thousands) $986 $1 $52,541 $44,581 $36,930 $17,881 Ratio of expenses to average net assets (%) (c) 1.23 .10(d) 1.60 1.42(c) 1.51 .78(c) Ratio of net investment income to average net assets (%) 4.82 .45(c) 4.64 4.62(c) 4.74 2.21(c) Portfolio turnover (%) 81.99 61.46 81.99 61.46 64.83 106.69 FINANCIAL HIGHLIGHTS (continued) AUGUST 24, 1990 FOR THE (COMMENCEMENT ELEVEN MONTHS OF OPERATIONS) TO ENDED MAY 31 YEAR ENDED JUNE 30 JUNE 30 1996 1995* 1994 1993 1992 1991 CLASS A $9.12 $8.77 $9.53 $9.08 $8.65 $8.50 .48 .46 .50 .56(a) .60(a) .52(a) (.21) .35 (.65) .53 .45 .15 .27 .81 (.15) 1.09 1.05 .67 (.48) (.45) (.50) (.56) (.60) (.52) -- (.01) -- -- -- - -- -- -- (.09) (.08) (.02) - -- -- -- (.02) -- -- - -- (.48) (.46) (.61) (.64) (.62) (.52) $8.91 $9.12 $8.77 $9.53 $9.08 $8.65 3.04 9.58(d) (1.79) 12.44 12.57 9.46(c)(d) $247,920 $271,309 $276,245 $278,039 $195,963 $109,739 .95 .83(d) .91 .77(a) .60(a) .41(a)(d) 5.31 5.24(d) 5.38 5.94(a)(d) 6.73(a) 5.94(a)(d) 81.99 61.46(d) 64.83 106.69 72.73 46.72(d) * The fiscal year end has changed from June 30 to May 31. + Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during the period. (a) Reflects an absorption of expenses incurred by the fund and an expense limitation in effect during the period. As a result of these limitations, expenses of the fund for the periods ended June 30, 1993, 1992 and 1991 reflect a reduction of less than $0.01, $0.02 and $0.04 per share, respectively. (b) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges. (c) The ratio of expenses to average net assets for the year ended May 31, 1996, includes amounts paid through expense offset arrangements. Prior period ratios exclude these amounts. (d) Not annualized. /TABLE FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period)
FOR THE PERIOD FOR THE PERIOD MAY 12, 1995 JULY 15, 1993 (COMMENCEMENT (COMMENCEMENT OF OPERATIONS) TO YEAR ENDED OF OPERATIONS) TO MAY 31 MAY 31 MAY 31 1996 1995 1996 1995 1994 CLASS M* CLASS B NET ASSET VALUE, BEGINNING OF PERIOD$9.21 $9.10 $9.20 $9.05 $9.71 INVESTMENT OPERATIONS Net investment income.51 .02 .48 .49 .41 Net realized and unrealized gain (loss) on investments (.11) .12 (.11) .17 (.51) TOTAL FROM INVESTMENT OPERATIONS.40 .14 (.37 .66 (.10) LESS DISTRIBUTIONS FROM: (.47) Net investment income (.51) (.03) (.49) (.41) Net realized gain on investments -- -- - -- - -- (.15) In excess of net realized gain -- -- - -- (.02) -- TOTAL DISTRIBUTIONS(.51) (.03) (.47) (.51) (.56) NET ASSET VALUE, END OF PERIOD $9.10 $9.21 $9.10 $9.20 $9.05 TOTAL INVESTMENT RETURN AT NET ASSET VALUE (%)(b) 4.37 1.53(c) 4.12 7.64 (1.15)(c) NET ASSETS, END OF PERIOD (in thousands) $1,290 $22 $65,538 $47,573 $23,017 Ratio of expenses to average net assets (%) 1.24 .06(c) 1.60 1.53 1.41(c) Ratio of net investment income to average net assets (%) 5.58 .30(c) 5.13 5.46 4.32(c) Portfolio turnover (%) 34.57 47.53 34.57 47.53 36.20 FINANCIAL HIGHLIGHTS (continued)
For the period October 23, 1989 (commencement of operations) to Year ended May 31 May 31 1996 1995 1994 1993 1992 1991 1990 Class A $9.21 $9.05 $9.55 $9.02 $8.70 $8.50 $8.50 .54 .55 .55 .59 .61(a) .62(a) .35(a) (.10) .18 (.35) .54 .39 .20 -- .44 .73 .20 1.13 1.00 .82 .35 (.54) (.55) (.55) (.59) (.61) (.62) (.35) -- -- (.15) (.01) (.07) -- -- -- (.02) -- -- -- -- -- (.54) (.57) (.70) (.60) (.68) (.62) (.35) $9.11 $9.21 $9.05 $9.55 $9.02 $8.70 $8.50 4.81 8.45 1.92 12.80 11.96 10.10 6.84(c) $259,934 $251,232 $244,519 $215,611 $149,011 $38,526 $18,249 .95 .89 .96 .97 .88(a) .86(a) .80(a)(c) 5.80 6.11 5.69 6.24 6.82(a) 7.27(a) 6.97(a)(c) 34.57 47.53 36.20 53.18 94.95(d) 123.29 83.26(d) * Per share net investment income for the period ended May 31, 1995 has been determined on the basis of the weighted average number of shares outstanding during the period. (a)Reflects an expense limitation. As a result of this limitation, net investment income of the fund for the years ended May 31, 1992 and 1991 reflect expense reductions of approximately $0.01 and $0.02 respectively. (b) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges. (c) No annualized (d) Portfolio turnover excludes the impact of assets received by the fund,then known as Putnam Massachusetts Tax Exempt Income Fund II, from the acquisition of Putnam Massachusetts Tax Exempt Income Fund. FINANCIAL HIGHLIGHTS (For a share outstanding throughout the year) FOR THE PERIOD FOR THE PERIOD APRIL 17, 1995 JULY 15, 1993 (COMMENCEMENT OF (COMMENCEMENT OF OPERATIONS) TO YEAR ENDED OPERATIONS) TO MAY 31 MAY 31 MAY 31 1995 1995 1994 CLASS M CLASS B NET ASSET VALUE, BEGINNING OF PERIOD $8.80 $8.90$9.43 INVESTMENT OPERATIONS Net investment income .05 .47 .41 Net realized/unrealized gain (loss) on investments .21 .10 (.46) TOTAL FROM INVESTMENT OPERATIONS .26 .57 (.05) LESS DISTRIBUTIONS FROM: Net investment income (.06) (.47) (.40) Net realized gain on investments -- -- -- In excess of net gain on investments -- - -- (.08) TOTAL DISTRIBUTIONS (.06) (.47) (.48) NET ASSET VALUE, END OF PERIOD $9.00 $9.00 $8.90 TOTAL INVESTMENT RETURN AT NET ASSET VALUE (%) 2.03 6.72 (.68) NET ASSETS, END OF PERIOD (in thousands) $119 $21,071 $10,251 Ratio of expenses to average net assets (%).20 1.59 1.42 Ratio of net investment income to average net assets (%) .84 5.31 4.25 Portfolio turnover (%) 82.91 82.91 41.77 FINANCIAL HIGHLIGHTS (For a share outstanding throughout the year) FOR THE PERIOD FOR THE PERIOD APRIL 17, 1995 JULY 15, 1993 (COMMENCEMENT OF (COMMENCEMENT OF OPERATIONS) TO YEAR ENDED OPERATIONS) TO MAY 31 MAY 31 MAY 31 1996 1995 1996 1995 1994 CLASS M CLASS B NET ASSET VALUE, BEGINNING OF PERIOD$9.00 $8.80 $9.00 $8.90 $9.43 INVESTMENT OPERATIONS Net investment income.47 .05 .43 .47 .41 Net realized/unrealized gain (loss) on investments (.16) .21 (.16) .10 (.46) TOTAL FROM INVESTMENT OPERATIONS.31 .26 .27 .57 (.05) LESS DISTRIBUTIONS FROM: Net investment income (.46) (.06) (.43) (.47) (.40) Net realized gain on investments-- -- -- -- -- In excess of net gain on investments -- -- -- -- (.08) TOTAL DISTRIBUTIONS(.46) (.06) (.43) (.47) (.48) NET ASSET VALUE, END OF PERIOD $8.85 $9.00 $8.84 $9.00 $8.90 TOTAL INVESTMENT RETURN AT NET ASSET VALUE(%) 3.53 2.03 3.05 6.72 (.68) NET ASSETS, END OF PERIOD (in thousands) $558 $119 $29,371 $21,071 $10,251 Ratio of expenses to average net assets (%) 1.28 .20 1.65 1.59 1.42 Ratio of net investment income to average net assets (%) 5.06 .84 4.74 5.31 4.25 Portfolio turnover (%) 139.08 82.91 139.08 82.91 41.77 FINANCIAL HIGHLIGHTS [continued] (For a share outstanding throughout the year) [continued] FOR THE PERIOD OCTOBER 23, 1989 (COMMENCEMENT OF OPERATIONS) TO YEAR ENDED MAY 31 MAY 31 1996 1995 1994 1993 1992 1991 1990 CLASS A NET ASSET VALUE, BEGINNING OF PERIOD $8.90 $9.30 $8.80 $8.51 $8.43 $8.50 INVESTMENT OPERATIONS Net investment income $9.01 .52 .52 .55 .56 .58 .33 Net realized/unrealized gain (loss) on investments .49 .11 (.32) .52 .29 .08 (.07) TOTAL FROM INVESTMENT OPERATIONS .33 .63 .20 1.07 .85 .66 .26 LESS DISTRIBUTIONS FROM: Net investment income (.49) (.52) (.52) (.56) (.56) (.58) (.33) Net realized gain on investments -- -- (.03) (.01) -- -- -- In excess of net gain on investments -- -- (.05) -- -- -- -- TOTAL DISTRIBUTIONS (.49) (.52) (.60) (.57) (.56) (.58) (.33) NET ASSET VALUE, END OF PERIOD $8.85 $9.01 $8.90 $9.30 $8.80 $8.51 $8.43 TOTAL INVESTMENT RETURN AT NET ASSET VALUE (%) 3.76 7.45 2.03 12.38 10.25 8.13 3.17 NET ASSETS, END OF PERIOD (in thousands) 138,390 $136,010 $128,921 $113,074 $80,310 $19,893 $9,280 Ratio of expenses to average net assets (%) 1.00 .95 .99 1.04 .95 .87 .45 Ratio of net investment income to average net assets (%) 5.42 6.03 5.58 6.04 6.28 6.78 3.84 Portfolio turnover (%) 139.08 82.91 41.77 15.8971.68 16.21 6.46 Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during the period. Reflects an expense limitation, and, during the period ended May 31, 1990, an absorption of expenses incurred by the Fund. As a result, net investment income of the Fund for the years ended May 31, 1992, 1991 and the period ended May 31, 1990 reflect expense reductions of approximately $0.01, $0.05, and $0.05, respectively. Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges. Not annualized. Portfolio turnover excludes the impact of assets received from the fund, then known as Putnam Michigan Tax Exempt Income Fund II, from the acquisition of Putnam Michigan Tax Exempt Income Fund. /TABLE FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
FOR THE PERIOD FOR THE PERIOD APRIL 3, 1995 JULY 15, 1993 (COMMENCEMENT OF YEAR (COMMENCEMENT OF OPERATIONS) TO ENDED OPERATIONS) TO MAY 31 MAY 31 MAY 31 YEAR ENDED MAY 31 1996 1995 1996 1995 1994 1996 1995 1994 CLASS M CLASS B CLASS A Net asset value, beginning of period $8.95 $ 8.77 $8.92 $ 8.77 $ 9.18 $8.95 $ 8.79 $ 9.06 Investment operations Net investment income .43 .08 .41 .45 .39 .47 .51 .51 Net realized and unrealized gain (loss) on investments (.18) .17 (.19) .15 (.41) (.19) .15 (.27) Total from investment operations .25 .25 .22 .60 (.02) .28 .66 .24 Less Distributions from: Net investment income (.44) (.07) (.41) (.45) (.39) (.47) (.50) (.51) Total distributions (.44) (.07) (.41) (.45) (.39) (.47) (.50) (.51) Net asset value, end of period $8.76 $ 8.95 $8.73 $ 8.92 $ 8.77 $8.76 $ 8.95 $ 8.79 Total investment return at net asset value (%) (b) 2.82 2.89(c) 2.49 7.17 (.32)(c) 3.16 7.90 2.57 Net assets, end of period (in thousands) $913 $1 $30,149 $19,698 $8,873 $96,110 $98,418 $95,587 Ratio of expenses to average net assets (%) 1.32 .21(c) 1.67 1.63 1.47(c) 1.01 .99 1.03 Ratio of net investment income to average net assets (%) 4.72 .93(c) 4.57 5.15 4.23(c) 5.26 5.85 5.60 Portfolio turnover (%) 109.85 58.18(c) 109.85 58.18 28.19(c) 109.85 58.18 28.19 FOR THE PERIOD OCTOBER 23, 1989 (COMMENCEMENT OF OPERATIONS) TO YEAR ENDED MAY 31 MAY 31 1993 1992 1991 1990 CLASS A Net asset value, beginning of period $ 8.74 $ 8.56 $ 8.43 $8.50 Investment operations Net investment income .55 .55(a) .59(a) .34(a) Net realized and unrealized gain (loss) on investments .33 .18 .13 (.07) Total from investment operations .88 .73 .72 .27 Less Distributions from: Net investment income (.56) (.55) (.59) (.34) Total distributions (.56) (.55) (.59) (.34) Net asset value, end of period $ 9.06 $ 8.74 $ 8.56 $8.43 Total investment return at net asset value (%) (b) 10.33 8.86 8.82 5.25(c) Net assets, end of period (in thousands) $86,611 $59,914 $16,615 $7,363 Ratio of expenses to average net assets (%) 1.08 .91(a) .66(a) .27(a)(d) Ratio of net investment income to average net assets (%) 6.12 6.34(a) 6.84(a) 4.09(a)(d) Portfolio turnover (%) 37.69 38.79(d) 14.85 98.54(d) (a) Reflects an expense limitation incurred by the fund. As a result of the limitation, net investment income of the fund for the years ended May 31, 1992, and 1991 reflects expense reductions of approximately $0.02 and $0.07, respectively. (b) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges. (c) Not annualized. (d) Portfolio turnover excludes the impact of assets received from the fund then known as Putnam Minnesota Tax Exempt Income Fund II, from the acquisition of Putnam Minnesota Tax Exempt Income Fund. /TABLE FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR)
FOR THE PERIOD FOR THE PERIOD MAY 1, 1995 FOR THE JANUARY 4, 1993 (COMMENCEMENT ELEVEN MONTHS (COMMENCEMENT OF OPERATIONS) TO ENDED YEAR ENDED OF OPERATIONS) TO MAY 31, MAY 31 JUNE 30 JUNE 30 1996 1995 1996 1995* 1994 1993 CLASS M CLASS B Net asset value, beginning of period $8.98 $8.74 $8.97 $8.75 $9.46 $9.02 Investment operations Net investment income .45 .04 .42 .41 .45 .21 Net realized and unrealized gain (loss) on investments (.21) .28 (.22) .22 (.58) .43 Total from investment operations .24 .32 .20 .63 (.13) .64 Less distributions: From net investment income (.46) (.08) (.42) (.41) (.45) (.20) Net realized gain on investments -- -- -- (.02) -- In excess of realized gain on investments -- -- -- -- (.11) -- Total distributions (.46) (.08) (.42) (.41) (.58) (.20) Net asset value, end of period $8.76 $8.98 $8.75 $8.97 $8.75 $9.46 Total investment return at net asset value (%) (a) 2.65 3.21(b) 2.25 7.51(b) (1.59) 7.21(b) Net assets, end of period (in thousands) $355 $ 1 $72,083 $58,591 $44,916 $15,113 Ratio of expenses to average net assets (%) 1.24 .09(b) 1.61 1.46(b) 1.59 .77(b) Ratio of net investment income to average net assets (%) 4.92 .42(b) 4.69 4.72(b) 4.77 2.42(b) Portfolio turnover (%)52.82 51.86(b) 52.82 51.86(b) 51.74 44.58(b) FOR THE PERIOD FOR THE FEBRUARY 20, ELEVEN 1990 MONTHS (COMMENCEMENT ENDED OF OPERATIONS) MAY 31 YEAR ENDED JUNE 30 TO JUNE 30 1996 1995+ 1994 1993 1992 1991 1990 CLASS A Net asset value, beginning of period $8.98 $ 8.75 $ 9.46 $ 8.97 $ 8.64 $ 8.50 $ 8.50 Investment operations Net investment income .48 .46 .51 .54 .59(c) .62(c) .22(c) Net realized and unrealized gain (loss) on investments (.22) .23 (.58) .58 .38 .13 .01 Total from investment operations .26 .69 (.07) 1.12 .97 .75 .23 Less distributions: From net investment income (.48) (.46) (.51) (.55) (.60) (.61) (.23) Net realized gain on investments -- -- (.08) (.08) (.04) -- -- In excess of realized gain on investments -- -- (.05) -- -- -- -- Total distributions (.48) (.46) (.64) (.63) (.64) (.61) (.23) Net asset value, end of period $8.76 $8.98 $ 8.75 $9.46 $ 8.97 $ 8.64 $8.50 Total investment return at net asset value (%) (a) 2.92 8.25(b) (.94) 13.02 11.52 9.17 2.71(b) Net assets, end of period (in thousands) $227,940 $242,569 $246,336 $235,243 $159,658 $99,978 $34,588 Ratio of expenses to average net assets (%) .96 .87(b) .95 .92 .75(c) .66(c) .26(b)(c) Ratio of net investment income to average net assets (%) 5.36 5.36(b) 5.43 5.90 6.69(c) 7.09(c) 3.06(b)(c) Portfolio turnover (%) 52.82 51.86(b) 51.74 44.58 80.21 101.21 `7.58(b) * The fiscal year has been chnaged from June 30 to May 31. (a) Total Investment return assumes dividend reinvestment and does not reflect the effect of sales charges. (b) Not annualized. (c) Reflects an expense limitation. As a result of the limitation, expenses of the fund for the years ended June 30, 1992 and 1991 and for the period ended June 30, 1990 reflect a reduction of $0.01, $0.03 and $0.02, respectively. /TABLE FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period)
FOR THE PERIOD FOR THE PERIOD APRIL 3, 1995 JULY 15, 1993 (COMMENCEMENT (COMMENCEMENT OF OPERATIONS)TO YEAR ENDED OF OPERATIONS) TO MAY 31 MAY 31 MAY 31 1996 1995 1996 1995 1994 Class M Class B NET ASSET VALUE, BEGINNING OF PERIOD$8.95 $8.76 $8.94 $8.79 $9.37 INVESTMENT OPERATIONS Net investment income.45 .08 ,42 .46 .40 Net realized and unrealized gain (loss) on investments (.18) .19 (.19) .16 (.46) TOTAL FROM INVESTMENT OPERATIONS .27 .27 .23 .62 (.06) LESS DISTRIBUTIONS FROM: Net investment income (.46) (.08) (.42) (.46) (.40) Net realized gain on investments -- -- -- (.01) (.12) TOTAL DISTRIBUTIONS(.46) (.08) (.42) (.47) (.52) NET ASSET VALUE, END OF PERIOD $8.76 $8.95 $8.75 $8.94 $8.79 TOTAL INVESTMENT RETURN AT NET ASSET VALUE (%)(b) 3.00 3.05(c) 2.63 7.39 (1.49)(c) NET ASSETS, END OF PERIOD (in thousands) $495 $1 $41,655 $32,847 $17,959 Ratio of expenses to average net assets (%) 1.27 0.20(c) 1.61 1.58 1.42(c) Ratio of net investment income to average net assets (%) 4.85 0.89(c) 4.71 5.24 4.35(c) Portfolio turnover (%) 33.23 66.29 33.23 66.29 44.45 FINANCIAL HIGHLIGHTS (continued) For the period October 23, 1989 (commencement of operations) to Year ended May 31 May 31 1996 1995 1994 1993 1992 1991 1990 Class A $8.95 $8.80 $9.26 $8.78 $8.55 $8.40 $8.50 .48 .52 .53 .54 .57(a) .59(a) .35(a) (.19) .15 (.35) .48 .23 .14 (.10) .29 .67 .18 1.02 .80 .73 .25 (.48) (.51) (.52) (.54) (.57) (.58) (.35) -- (.01) (.12) -- -- -- -- (.48) (.52) (.64) (.54) (.57) (.58) (.35) $8.76 $8.95 $8.80 $9.26 $8.78 $8.55 $8.40 3.30 8.04 1.88 11.94 9.65 9.09 4.94(c) $186,633 $193,176 $194,130 $177,879 $140,309 $21,136 $7,684 .96 .93 .99 1.04 .90(a) .87(a) .47(a)(d) 5.39 5.97 5.68 5.90 6.41(a) 6.83(a) 4.19(a)(d) 33.23 66.29 44.45 21.57 15.20(d) 17.40 23.27(d) (a) Reflects an expense limitation in effect during the period. As a result, net investment income of the fund for the years ended May 31, 1992 and 1991, reflect expense reductions of approximately $0.01 and $0.05, per class A share, respectively. (b) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges. (c) Not annualized. (d) Portfolio turnover excludes the impact of assets received from the fund, then known as Putnam Ohio Tax Exempt Income Fund II, from the acquisition of Putnam Ohio Tax Exempt Income Fund.
FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period)
FOR THE PERIOD JULY 15, 1993 THREE MONTHS (COMMENCEMENT OF ENDED YEAR ENDEDOPERATIONS) TO MAY 31 FEBRUARY 28 FEBRUARY 28 1996 1996 1995* 1995 1994 CLASS M CLASS B NET ASSET VALUE, BEGINNING OF PERIOD $9.10 $9.23 $8.97 $9.38 $9.48 INVESTMENT OPERATIONS Net investment income .44 .44 .11 .47 .28 Net realized and unrealized gain (loss) on investments (.01) (.15) .27 (.40)(.08) TOTAL FROM INVESTMENT OPERATIONS .43 .29 .38 .07 .20 LESS DISTRIBUTIONS: From net investment income (.44) (.45) (.12) (.47)(.28) From net realized gain on investments -- -- -- (.01) (.02) TOTAL DISTRIBUTIONS (.44) (.45) (.48) (.30) NET ASSET VALUE, END OF PERIOD $9.09 $9.07 $9.23 $8.97 $9.38 TOTAL INVESTMENT RETURN AT NET ASSET VALUE (%)(b)4.70(c) 3.14 4.23(c) .93 2.18(c) NET ASSETS, END OF PERIOD (in thousands) $337 $65,669 $44,252 $36,670 $12,633 Ratio of expenses to average net assets (%)1.13(c) 1.62 .38(c) 1.57 1.00(c) Ratio of net investment income to average net assets (%)4.49 4.78 1.26(c) 5.23 2.90(c) Portfolio turnover (%) 41.40 41.40 4.15(c) 26.09 15.65(c) FINANCIAL HIGHLIGHTS (continued) For the period July 21, 1989 THREE MONTHS (commencement ENDED of operations) MAY 31 YEAR ENDED FEBRUARY 28 to February 28 1996 1995* 1995 1994 1993 1992 1991 1990 CLASS A $9.24 $8.98 $9.39 $9.40 $8.76 $8.42 $8.36 $8.50 .51 .13 .53 .54 .57(a) .61(a) .62(a) .36(a) (.16) .26 (.40) .01 .65 .34 .06 (.14) .35 .39 .13 .55 1.22 .95 .68 (.22) (.51) (.13) (.53) (.54) (.57) (.61) (.62) (.36) -- -- (.01) (.02) (.01) -- - -- -- (.51) (.13) (.54) (.56) (.58) (.61) (.62) (.36) $9.08 $9.24 $8.98 $9.39 $9.40 $8.76 $8.42 $8.36 3.82 4.39(c) 1.60 5.93 14.34 11.65 8.53 4.30(c) $183,117 $178,785 $171,568 $171,757 $144,374 $93,086 $47,112 $19,203 .98 .21(c) .92 .91 .72(a) .52(a) .41(a) .79(a)(c) 5.46 1.44(c) 5.94 5.36 6.31(a) 6.98(a) 7.43(a)6.96(a)(c) 41.40 4.15(c) 26.09 15.65 12.26 3.30 9.01 4.41(c) *The fiscal year end has chnaged from February 28 to May 31. (a)Reflects an expense limitation. As a result, net investment income for the years ended February 28, 1993, 1992 and 1991, reflects expense reductions of approximately $0.01, $0.04, and $0.06 per share, respectively. (b)Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges. (c)Not annualized. /TABLE 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 is intended to be a complete investment program, and there is no assurance that any fund will achieve its objective. Each fund may also invest in fixed-income securities not included in the definition of tax-exempt securities and may hold a portion of its assets in cash or money market instruments. 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 that 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 on tax-exempt securities (as defined with respect to such fund), such distributions will generally be exempt from federal income tax and personal income tax in the relevant state (other than any applicable federal or state alternative minimum tax or any state minimum corporate income tax). Certain states may impose additional requirements on the composition of a fund's portfolio in order for distributions from that fund to be exempt from the foregoing state taxes. Although, Florida does not impose an individual income tax it does impose certain additional requirements on the composition of the Florida fund's portfolio in order for shares of that fund to be exempt from the Florida intangibles tax. See "How a fund makes distributions to shareholders; tax information ." Investments by each fund will be limited to securities rated at the time of purchase at least Ba by Moody's Investors Service, Inc. ("Moody's") or BB by Standard & Poor's ("S&P"), or unrated securities that Putnam Management determines are of comparable quality. A fund will not purchase a tax-exempt security rated 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 its 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. 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. At a shareholder meeting to be held on December 5, 1996, the shareholders of the Pennsylvania fund will be asked toapprove a number of changes to the fund's fundamental investment restrictions, including the deletion of the fundamental investment restriction described in the preceding paragraph. If this proposal does not ultimately receive enough votes for approval, this prospectus will be revised or supplemented, as appropriate. ALTERNATIVE MINIMUM TAX INTEREST INCOME DISTRIBUTED BY A FUND FROM CERTAIN TYPES OF TAX-EXEMPT SECURITIES MAY BE SUBJECT TO FEDERAL ALTERNATIVE MINIMUM TAX FOR INDIVIDUALS AND CORPORATIONS . 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. All tax-exempt interest dividends will, however, be included in the federal 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 fund 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, these alternative strategies will be used . 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 fund 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. 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 , TOGETHER WITH UNRATED SECURITIES OF COMPARABLE QUALITY, ARE COMMONLY KNOWN AS "JUNK BONDS." The values of these 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 for each fund invested during fiscal 1996 in securities assigned to the 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 . FLORIDA FUND MINNESOTA FUND OHIO FUND ------------------------- -------------------------- - ------------------------ UNRATED UNRATED UNRATED RATED SECURITIES RATED SECURITIES RATED SECURITIES SECURITIES , OF COMPARABLESECURITIES , OF COMPARABLESECURITIES , OF COMPARABLE AS PERCENTAGE QUALITY, AS AS PERCENTAGE QUALITY, AS AS PERCENTAGEQUALITY, AS OF NET PERCENTAGE OF OF NET PERCENTAGE OF OF NET PERCENTAGE OF RATINGS ASSETS NET ASSETS ASSETS NET ASSETS ASSETS NET ASSETS - ----------------------------------------------------------------- - ------------------------------------------------------- "AAA" 67.16% 0.16% 49.44% - 66.48% 1.03% "AA" 8.57% 0.33% 23.29% - 7.11% - "A" 8.72% - 13.15% - 10.60% 0.19% "BBB" 10.84% 1.11% 8.90% 2.32% 7.56% 4.70% "BB" - 3.77% - 3.94% 0.70% 3.66% "B" - 0.86% - - - - ------ ------ ------ ------ - ------- ------ 95.41% 5.91% 94.77% 6.26% 92.45% 9.58% NEW JERSEY FUND PENNSYLVANIA FUND ---------------- - ----------------------------------- UNRATED UNRATED RATED SECURITIES RATED SECURITIES SECURITIES, OF COMPARABLE SECURITIES, OF COMPARABLE AS PERCENTAGEQUALITY, AS AS PERCENTAGE QUALITY, AS OF NET PERCENTAGE OF OF FUND PERCENTAGE OF RATINGS ASSETS NET ASSETS ASSETS FUND ASSETS - ----------------------------------------------------------------- - ------------------------------------------------------- "AAA" 50.04% - 65.89% 0.13% "AA" 14.00% - 4.21% - "A" 11.27% 0.93% 8.81% - "BBB" 7.89% 1.55% 13.47% 3.24% "BB" 3.92% 12.10% 2.90% 3.24% "B" - - - 0.20% ------ ------ - ------- ------ 87.12% 14.58% 95.28% 6.81% [/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 its goals is more dependent on Putnam Management's ability than would be the case if it 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 the lower rating categories. 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 consider such reduction in its determination of whether a fund should continue to hold the security in its portfolio. At times, a substantial portion of fund assets may be invested in securities as to which the fund, by itself or together with other funds and accounts managed by Putnam Management and its affiliates, holds 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, it may be more difficult to sell these securities when Putnam Management believes it advisable to do so or the fund 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 fund operating expenses and adversely affect its net asset value. Any income derived from the 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 securities of private issuers . 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 , which 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. The values of zero-coupon bonds are subject to greater fluctuation in response to changes in market interest rates than bonds that pay interest currently. 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 it may be necessary 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 to value or buy and sell certain of these securities. Certain investment grade securities share some of the risk factors discussed above with respect to lower- rated 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 THEIR 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 , including a reduction in the rating of the issuer's outstanding securities, would likely have an adverse effect on the market value and marketability of its obligations. Doubts surrounding 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 such issuers may have a general adverse effect on all tax- exempt securities in a particular market segment. (Examples of such developments 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 a 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 fund 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 fund shares during these periods would initially receive higher monthly distributions (derived from the higher coupon rates payable on fund 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 , investors may find it useful to compare the current dividend rate with a 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 , 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 are shown in the section "Financial highlights." FINANCIAL FUTURES AND OPTIONS EACH FUND MAY PURCHASE AND SELL FINANCIAL FUTURES CONTRACTS AND OPTIONS. Each fund may purchase and sell futures contracts on the Municipal Bond Index , which 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, the fund realizes a gain or loss. A fund may also purchase and sell put and call options on index futures or on indexes directly, in addition to or as an alternative to purchasing and selling index futures. A 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. In addition, a fund may purchase put and call options on, or warrants to purchase , tax-exempt securities, either directly or through custodial arrangements in which a fund and other investors own an interest in one or more options on tax-exempt securities. A fund will engage in these transactions for hedging purposes and, to the extent permitted by applicable law, for nonhedging purposes, such as to manage the effective duration (a measure of the longevity of the fixed income securities in the fund's portfolio) of the fund's portfolio or as a substitute for direct investment. 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 among movements in the prices of financial futures and options purchased or sold by a fund, of the underlying bond index or U.S. government securities and, in the case of hedging transactions, of the tax- exempt securities that are the subject of the hedge. 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. The successful use of these strategies further depends on the ability of Putnam Management to forecast interest rates and market movements correctly. 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. A fund may enter into repurchase agreements on up to 25% of its assets. These transactions must be fully collateralized at all times. A 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 if the other party should default on its obligation and a fund is delayed or prevented from recovering the collateral or completing the transaction. DERIVATIVES Certain of the instruments in which each fund may 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 TO LIMIT INVESTMENT RISKS FOR ITS SHAREHOLDERS. These restrictions prohibit a fund from investing more than: (a) (For the Massachusetts, Michigan, Minnesota and Ohio funds with respect to 100% of 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 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. At a shareholder meeting to be held on December 5, 1996, the shareholders of each fund will be asked to approve a number of changes to each fund's fundamental investment restrictions. If the proposed changes are approved, restriction (a) above will provide that a fund may not and will not: - - (For the Massachusetts, Michigan, Minnesota, Ohio and Pennsylvania funds with respect to 75% of total assets, and for the Arizona, Florida and New Jersey funds with respect to 50% of total assets) acquire more than 10% of the voting securities of any issuer; - - (For the Massachusetts, Michigan, Minnesota, Ohio and Pennsylvania funds with respect to 75% of total assets, and for the Arizona, Florida and New Jersey funds with respect to 50% of total assets) invest more than 5% of the total assets in the securities of any issuer. (Investments in obligations issued or guaranteed as to interest or principal by the U.S. government or its agencies or instrumentalities are not subject to any limitation.) If some or all of these proposals do not ultimately receive sufficient votes for approval, this prospectus will be revised or supplemented, as appropriate. 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, the investment policies described in this prospectus and in the SAI are not fundamental investment policies. The Trustees may change any non-fundamental investment policy 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 FUND ADVERTISEMENTS MAY, FROM TIME TO TIME, INCLUDE PERFORMANCE INFORMATION . "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 a fund. It reflects the approximate yield that a taxable investment must earn for shareholders at stated income levels to produce an after-tax yield equivalent to a 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, portfolio composition , fund 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. Fund performance may be compared to that of various indexes. See the SAI. HOW THE FUNDS ARE MANAGED THE TRUSTEES ARE RESPONSIBLE FOR GENERALLY OVERSEEING THE CONDUCT OF FUND 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 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 years 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 fund 1996 Ohio fund 1996 Pennsylvania fund 1990 Leslie J. Burke Employed as an investment Vice President professional by Putnam New Jersey fund 1995 Management since February, 1992. Prior to February, 1992, Ms. Burke was a Research Associate and Municipal Bond Trader at Fidelity Management and Research Company. 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 fund officers and their staff who provide administrative services . The total reimbursement is determined annually by the Trustees. Putnam Management places all orders for purchases and sales of fund 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 fund shares (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. Each of Putnam Massachusetts Tax Exempt Income Fund, 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 Massachusetts Tax Exempt Income Fund, 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 July 14, 1989 . 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. The Trustees may, without shareholder approval , create 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. Only 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 all classes 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. Each fund may suspend the sale of shares at any time and may refuse any order to purchase shares. Although each fund is not 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 the minimum 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; RONALD J. JACKSON, Former Chairman, President and Chief Executive Officer of Fisher-Price, Inc., Director of Safety 1st, Inc., Trustee of Salem Hospital and Overseer of the Peabody Essex Museum; 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, 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 and 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 Trustees are also Trustees of the other Putnam funds. Those marked with an asterisk (*) are or may be deemed to be "interested persons" of a fund , Putnam Management or Putnam Mutual Funds. ABOUT YOUR INVESTMENT ALTERNATIVE SALES ARRANGEMENTS 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 certain 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 includes information about how shares acquired through reinvestment of distributions are treated for conversion purposes. The discussion also notes 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 appropriate 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 within the first or second year after purchase on redemptions by any investor that purchased that purchased fund shares without an initial sales charge as part of an investment of $1 million of more. Shares purchased by investors investing $1 million or more in class A shares whose dealer of record waived its commission with the approval of Putnam Mutual Funds are not subject to the CDSC. In determining whether a CDSC is payable, shares not subject to any charge will be redeemed first, followed by shares held the longest during the CDSC period. Any CDSC will be 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. 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 $47 million and 0.25% thereafter. CLASS B SHARES Class B shares are sold without an initial sales charge, although a CDSC will be imposed if you redeem shares within a specified period after purchase, as shown in the table below. The following types of shares may be redeemed without charge at any time: (i) shares acquired by reinvestment of distributions , and (ii) shares otherwise exempt from the CDSC, as described in "How to buy shares -- General" below. For other shares, the amount of the charge is determined as a percentage of the lesser of the current market value or the cost of the shares being redeemed. YEAR 1 2 3 4 5 6 7+ - ------------------------------------------------------------- CHARGE 5% 4% 3% 3% 2% 1% 0% In determining whether a CDSC is payable on any redemption, shares not subject to any charge will be redeemed first, followed by shares held longest during the CDSC period. For this purpose, the amount of any increase in a share's value above its initial purchase price is not regarded as a share exempt from the CDSC. Thus, when a share that has appreciated in value is redeemed during the CDSC period, a CDSC is assessed only on its initial purchase price. For information on how sales charges are calculated if you exchange your shares, see "How to exchange shares." Putnam Mutual Funds receives the entire amount of any CDSC you pay. CLASS M SHARES The public offering price of class M shares is the net asset value plus a sales charge that varies depending on the size of your purchase. The relevant fund receives the net asset value. The sales charge is allocated between your investment dealer and Putnam Mutual Funds as shown in the following table, except when Putnam Mutual Funds, at its discretion, allocates the entire amount to your investment dealer. SALES CHARGE AMOUNT OF AS A PERCENTAGE OF: SALES CHARGE ------------------- REALLOWED TO NET DEALERS AS A AMOUNT OF TRANSACTION AMOUNT OFFERING PERCENTAGE OF AT OFFERING PRICE ($) 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 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 a contingent deferred sales charge. Members of qualified groups may also purchase class M shares without a sales charge. GENERAL YOU MAY BE ELIGIBLE TO BUY FUND 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, qualified retirement plans, and other plans. Descriptions are also included in the order form and in the SAI. Class A, class B and class M shares are available at net asset value without an initial sales charge or a CDSC to 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, shares are available at net asset value without an initial sales charge or a CDSC in connection with the acquisition by a fund of assets of an investment company or personal holding company . 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 shares subject to a systematic withdrawal plan may also be redeemed each year without a CDSC. The SAI contains additional information about purchasing 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, fund shares 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 , payment may be delayed 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, certificates will not be issued 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 by shareholders investing $1 million or more. These 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 the quarterly payments at the annual rate of 0.15% of such average net asset value for shares outstanding as of March 5, 1993 for the Arizona fund, July 8, 1993 for the Florida and Pennsylvania funds, May 11, 1992 for the Massachusetts fund, March 9, 1992 for the Michigan, Minnesota and Ohio funds and December 31, 1992 for the New Jersey fund, and 0.20% of such average net asset value for shares of each fund 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 the appropriate 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. YOUR 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 your fund, the fund reserves the right to revise or terminate the exchange privilege, limit the amount or number of exchanges or reject any exchange. Consult Putnam Investor Services before requesting an exchange. See the SAI to find out more about the exchange privilege. HOW A FUND VALUES ITS SHARES EACH FUND CALCULATES THE NET ASSET VALUE OF A SHARE OF EACH CLASS BY DIVIDING THE TOTAL VALUE OF ITS ASSETS, LESS LIABILITIES, BY THE NUMBER OF SHARES OUTSTANDING. SHARES ARE VALUED AS OF THE CLOSE OF REGULAR TRADING ON THE NEW YORK STOCK EXCHANGE EACH DAY THE EXCHANGE IS OPEN. Tax-exempt securities 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 , other than the Pennsylvania 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. Fund 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 and in the SAI , 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). The treatment for tax purposes of distributions from a fund's long-term capital gains is discussed below. 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 distributions 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, to the extent as described below, tax- exempt securities ( defined above under "How the funds pursue their objectives-- tax exempt securities" ), such distributions will be exempt from Arizona state personal 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 personal 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 personal 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 personal income tax purposes, distributions by the Arizona fund, other than distributions exempt from Arizona state personal 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 that 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. The fund believes that distributions from net realized long- term capital gains that are taxable by Massachusetts are reportable as long-term capital gains, irrespective of how long the shareholder has held shares in the fund. In 1994, the Massachusetts personal income tax statute was modified to provide for graduated rates of tax (with some exceptions) on long-term capital gains based on the length of time the asset has been held since January 1, 1995. There is as yet no official guidance concerning the treatment under the revised statute of mutual fund shareholders that receive capital gain distributions. However, the state Department of Revenue has released "working" draft regulations providing that the holding period of the mutual fund (rather than that of its shareholders) will be determinative for purposes of applying the revised statute to shareholders that receive capital gain distributions, so long as the mutual fund separately designates each portion of such distributions in a notice provided to shareholders within 30 days of year-end. A challenge to the new law is currently pending before the Massachusetts Supreme Judicial Court. Shareholders should consult their tax advisers with respect to the Massachusetts personal income tax treatment of capital gain distributions from the fund. MICHIGAN. Distributions received from the Michigan fund are exempt from Michigan personal income tax and excluded from the taxable income base of the 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 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 tax- exempt securities 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 derived from interest on obligations of the State of Minnesota and its agencies, instrumentalities, political subdivisions and Indian tribes , provided that at least 95% of the fund's total exempt-interest dividends are derived from interest on obligations of such Minnesota entities. 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 other 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 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 Ohio Obligations 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 received from 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 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 a fund . 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 the funds and of other Putnam funds. Putnam Fiduciary Trust Company is the custodian of the funds . Putnam Investor Services, a division of Putnam Fiduciary Trust Company, is the investor servicing and transfer agent for the funds . 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 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. STANDARD & POOR'S: BONDS AAA -- Debt rated `AAA' has the highest rating assigned by Standard & Poor's . 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 higher 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 in higher rated categories. BB- B - CCC-CC-C -- Debt rated `BB' ,`B',`CCC',`CC' AND`C' is regarded on balance, as predominantly speculative with respect to capacity to pay interest and repay principal in accordance with the terms of the obligation. `BB' indicates the lowest degree of speculation and `C' the highest. While such debt will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major exposures to adverse conditions. 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. 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'. 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. GLOSSARY OF TERMS BOND An IOU issued by a government or corporation that usually pays interest. - ----------------------------------------------------------------- CAPITAL A rise in an investment's principal value. Also APPRECIATION used to describe the investment objective of a mutual fund whose primary criterion for choosing securities is the potential to rise in value rather than to provide dividend income. - ----------------------------------------------------------------- CAPITAL A profit or loss on the sale of securities GAIN/LOSS (generally stocks or bonds). - ----------------------------------------------------------------- CLASS A, B, Types of shares, each class offering investors a M SHARES different way to pay sales charges and distribution fees. A fund's prospectus explains the availability and attributes of each type. - ----------------------------------------------------------------- COMMON A unit of ownership of a corporation. STOCK - ----------------------------------------------------------------- CONTINGENT A charge applied at the time of redemption of DEFERRED certain mutual fund shares, rather than at SALES the time of purchase. A fund's CDSC generally CHARGE declines each year after purchase until it no (CDSC) longer applies. - ----------------------------------------------------------------- DECLARATION The date on which the Trustees approve the amount DATE of your fund's next distribution. - ----------------------------------------------------------------- DISTRIBUTION A payment from a mutual fund to shareholders. It may include interest from bonds and dividends from stocks (dividend distributions). It may also include profits from the sale of securities from the fund's portfolio (capital gains distributions). -------------------------------------------------------------- - --- DIVIDEND For mutual fund shares, a payment derived solely from dividends or interest paid on securities held in the portfolio (i.e. not including capital gains). - ----------------------------------------------------------------- EQUITY Securities representing ownership in a corporation. SECURITIES Common stock and preferred stock are equity securities. - ----------------------------------------------------------------- EX-DIVIDEND The date on or after which a new shareholder will DATE not receive the fund's next distribution. For Putnam funds, it is the same as the record date. - ----------------------------------------------------------------- NET ASSET The value of one share of a mutual fund VALUE (NAV) without regard to sales charges. Some bond funds aim for a steady NAV, representing stability; most stock funds aim to raise NAV, representing growth in the value of an investment. -------------------------------------------------------------- - --- PAYABLE DATE The date on which a mutual fund pays its distributions to shareholders. - ----------------------------------------------------------------- PUBLIC The purchase price of one class A share or class M OFFERING share of a mutual fund, including the applicable PRICE up-front sales charge. (POP) - ----------------------------------------------------------------- RECORD DATE The date used to determine which shareholders are entitled to a distribution. After the record date, shares are sold "ex-dividend," or without the dividend. For Putnam funds, the ex-dividend date is the same as the record date. - ----------------------------------------------------------------- TOTAL RETURN A measure of performance showing the change in the value of an investment over a given period, assuming all earnings are reinvested in the fund. - ----------------------------------------------------------------- YIELD The percentage rate at which a fund has earned income from its investments over the indicated period. "Dividend rate" is a current return that includes interest and dividend income, net of all fund expenses. "Distribution rate" is a current return that includes short-term capital gains, as well as net investment income. "SEC yield" is a current return based on net investment income over a recent 30-day period, computed on a yield-to-maturity basis, which may differ from net investment income as determined for financial reporting purposes. All of these returns are calculated by annualizing the dividends or distributions over the indicated period and dividing it by the price of a share at the end of the period. 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 PUTNA M ARIZONA TAX EXEMPT INCOME FUND (THE "ARIZONA FUND") PUTNA M FLORIDA TAX EXEMPT INCOME FUND (THE "FLORIDA FUND") PUTNA M MASSACHUSETTS TAX EXEMPT INCOME FUND (THE "MASSACHUSETTS FUND") PUTNA M MICHIGAN TAX EXEMPT INCOME FUND (THE "MICHIGAN FUND") PUTNA M MINNESOTA TAX EXEMPT INCOME FUND (THE "MINNESOTA FUND") PUTNA M NEW JERSEY TAX EXEMPT INCOME FUND (THE "NEW JERSEY FUND") PUTNA M OHIO TAX EXEMPT INCOME FUND (THE "OHIO FUND") PUTNA M PENNSYLVANIA TAX EXEMPT INCOME FUND (THE "PENNSYLVANIA FUND") (EACH A "FUND" AND COLLE CTIVELY, THE "FUNDS") FORM N-1A PART B STATE MENT OF ADDITIONAL INFORMATION ("SAI") SE PTEMBER 30, 1996 This SAI is not a prospectus and is only authorized for distribution when accompanied or preceded by the prospectus of the funds dated September 30, 1996 , as revised from time to time. This SAI contains information which may be useful to investors but which is not included in the prospectus. If a fund has more than one form of current prospectus, each reference to the prospectus in this SAI shall include all of that fund's prospectuses, unless otherwise noted. The SAI should be read together with the applicable prospectus. Investors may obtain a free copy of the applicable prospectus from Putnam Investor Services, Mailing address: P.O. Box 41203, Providence, RI 02940- 1203. Part I of this SAI contains specific information about each fund. Part II includes information about the funds and the other Putnam funds. TABLE OF CONTENTS PART I PAGE TAX - EXEMPT SECURITIES . . . . . . . . . . . . . . . . . . I- 3 INVESTMENT RESTRICTIONS. . . . . . . . . . . . . . . . . . . . . I- 5 PROPOSED INVESTMENT RESTRICTIONS. . . . . . . . . . . . . . . . I-11 CHARGES AND EXPENSES . . . . . . . . . . . . . . . . . . . . . .I- 14 TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .I- 39 EQUIVALENT YIELDS: TAX-EXEMPT VERSUS TAXABLE SECURITIES . . . .I- 42 ADDITIONAL OFFICERS. . . . . . . . . . . . . . . . . . . . . . .I- 51 INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS . . . . . . . .I- 51 PART II MISCELLANEOUS INVESTMENT PRACTICES . . . . . . . . . . . . . . . . . . II-1 TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-22 MANAGEMENT OF THE FUND . . . . . . . . . . . . . . . . . . . . . . . II-27 DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . . . . . II-36 HOW TO BUY SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . II-38 DISTRIBUTION PLAN. . . . . . . . . . . . . . . . . . . . . . . . . . II-49 INVESTOR SERVICES. . . . . . . . . . . . . . . . . . . . . . . . . . II-50 SIGNATURE GUARANTEES . . . . . . . . . . . . . . . . . . . . . . . . II-56 SUSPENSION OF REDEMPTIONS. . . . . . . . . . . . . . . . . . . . . . II-56 SHAREHOLDER LIABILITY. . . . . . . . . . . . . . . . . . . . . . . II- 56 STANDARD PERFORMANCE MEASURES. . . . . . . . . . . . . . . . . . . . II-57 COMPARISON OF PORTFOLIO PERFORMANCE. . . . . . . . . . . . . . . . . II-58 DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-63 SAI PART I TAX - EXEMPT SECURITIES GENERAL DESCRIPTION. As used in the prospectus and in this SAI, the term "tax-exempt securities" includes obligations of a state and its political subdivisions (for example, counties, cities, towns, villages, districts and authorities) and their agencies, instrumentalities or other governmental units, the interest from which is , in the opinion of bond counsel, exempt from federal income tax and (except for Florida, which has no personal income tax) personal or gross income tax of the relevant state. Such obligations are issued to obtain funds for various public purposes, including the construction of a wide range of public facilities, such as airports, bridges, highways, housing, hospitals, mass transportation, schools, streets and water and sewer works. Other public purposes for which tax-exempt securities may be issued include the refunding of outstanding obligations or the payment of general operating expenses. Short-term tax-exempt securities are generally issued by state and local governments and public authorities as interim financing in anticipation of tax collections, revenue receipts, or bond sales to finance such public purposes. In addition, certain types of "private activity" bonds may be issued by public authorities to finance such projects as privately operated housing facilities and certain local facilities for water supply, gas, electricity or sewage or solid waste disposal, student loans, or the obtaining of funds to lend to public or private institutions for the construction of facilities such as educational, hospital and housing facilities. Such obligations are included within the term tax-exempt securities if the interest paid thereon is, in the opinion of bond counsel, exempt from federal income tax and (except for the Florida fund) personal or gross income tax of the relevant state (such interest may, however, be subject to federal alternative minimum tax). Other types of private activity bonds, the proceeds of which are used for the construction, repair or improvement of, or to obtain equipment for, privately operated industrial or commercial facilities, may constitute tax-exempt securities, although the current federal tax laws place substantial limitations on the size of such issues. STAND-BY COMMITMENTS. When a fund purchases tax-exempt securities, it has the authority to acquire stand-by commitments from banks and broker-dealers with respect to those tax-exempt securities. A stand-by commitment may be considered a security independent of the tax-exempt security to which it relates. The amount payable by a bank or dealer during the time a stand-by commitment is exercisable, absent unusual circumstances, would be substantially the same as the market value of the underlying tax-exempt security to a third party at any time. Each fund expects that stand-by commitments generally will be available without the payment of direct or indirect consideration. None of the funds expect to assign any value to stand-by commitments. YIELDS. The yields on tax-exempt securities depend on a variety of factors, including general money market conditions, effective marginal tax rates, the financial condition of the issuer, general conditions of the tax-exempt security market, the size of a particular offering, the maturity of the obligation and the rating of the issue. The ratings of Moody's Investors Service, Inc. and Standard & Poor's represent their opinions as to the quality of the tax-exempt securities which they undertake to rate. It should be emphasized, however, that ratings are general and are not absolute standards of quality. Consequently, tax- exempt securities with the same maturity and interest rate but with different ratings may have the same yield. Yield disparities may occur for reasons not directly related to the investment quality of particular issues or the general movement of interest rates, due to such factors as changes in the overall demand or supply of various types of tax-exempt securities or changes in the investment objectives of investors. Subsequent to purchase by a fund, an issue of tax-exempt securities or other investments may cease to be rated or its rating may be reduced below the minimum rating required for purchase by a fund. Neither event will require the elimination of an investment from a fund's portfolio, but Putnam Management will consider such an event in its determination of whether a fund should continue to hold an investment in its portfolio. "MORAL OBLIGATION" BONDS. None of the funds currently intends to invest in so-called "moral obligation" bonds, where payment is backed by a moral commitment of an entity other than the issuer, unless the credit of the issuer itself, without regard to the "moral obligation," meets the investment criteria established for investments by the fund. ADDITIONAL RISKS. Securities in which each fund may invest, including tax-exempt securities, are subject to the provisions of bankruptcy, insolvency and other laws affecting the rights and remedies of creditors, such as the federal Bankruptcy Code (including special provisions related to municipalities and other public entities), and to laws, if any, which may be enacted by Congress or the appropriate state legislature extending the time for payment of principal or interest, or both, or imposing other constraints upon enforcement of such obligations. There is also the possibility that as a result of litigation or other conditions the power, ability or willingness of issuers to meet their obligations for the payment of interest and principal on their tax-exempt securities may be materially affected. From time to time, proposals have been introduced before Congress for the purpose of restricting or eliminating the federal income tax exemption for interest on debt obligations issued by states and their political subdivisions. Federal tax laws limit the types and amounts of tax-exempt bonds issuable for certain purposes, especially industrial development bonds and private activity bonds. Such limits may affect the future supply and yields of these types of tax-exempt securities. Further proposals limiting the issuance of tax-exempt bonds may well be introduced in the future. If it appeared that the availability of tax- exempt securities for investment by a fund and the value of that fund's portfolio could be materially affected by such changes in law, the Trustees of that fund would reevaluate its investment objective and policies and consider changes in the structure of that fund or its dissolution. INVESTMENT RESTRICTIONS AS FUNDAMENTAL INVESTMENT RESTRICTIONS, WHICH MAY NOT BE CHANGED WITHOUT A VOTE OF A MAJORITY OF THE OUTSTANDING VOTING SECURITIES, A FUND MAY NOT AND WILL NOT: (1) Borrow money in excess of 10% of the value (taken at the lower of cost or current value) of its total assets (not including the amount borrowed) at the time the borrowing is made, and then only from banks as a temporary measure to facilitate the meeting of redemption requests (not for leverage) which might otherwise require the untimely disposition of portfolio investments or for extraordinary or emergency purposes. Such borrowings will be repaid before any additional investments are purchased. (2) (All funds except Arizona and New Jersey funds) Pledge, hypothecate, mortgage or otherwise encumber its assets in excess of 15% of its total assets (taken at current value) in connection with borrowings permitted by restriction 1 above. (3) (Arizona fund only) Pledge, hypothecate, mortgage or otherwise encumber its assets in excess of 15% of its total assets (taken at the lower of cost or current value) in connection with borrowings permitted by restriction 1 above. (4) (New Jersey fund only) Pledge, hypothecate, mortgage or otherwise encumber its assets in excess of 15% of its total assets (taken at current value) and then only to secure borrowings permitted by restriction 1 above. (The deposit of underlying securities and other assets in escrow and collateral arrangements with respect to margin for financial futures contracts, options on such contracts and on securities indices are not deemed to be pledges or other encumbrances.) (5) (Massachusetts, Michigan, Minnesota and Ohio funds only) Purchase securities on margin, except such short-term credits as may be necessary for the clearance of purchases and sales of securities, and except that it may make margin payments in connection with options on financial futures contracts and on futures contracts. (6) (Florida, New Jersey and Pennsylvania funds only) Purchase securities on margin, except such short-term credits as may be necessary for the clearance of purchases and sales of securities, and except that it may make margin payments in connection with futures contracts and related options. (7) (Arizona fund only) Purchase securities on margin, except such short-term credits as may be necessary for the clearance of purchases and sales of securities, and except that it may make margin payments in connection with futures contracts and options. (8) Make short sales of securities or maintain a short sale position for the account of the fund unless at all times when a short position is open it owns an equal amount of such securities or owns securities which, without payment of any further consideration, are convertible into or exchangeable for securities of the same issue as, and equal in amount to, the securities sold short. (9) Underwrite securities issued by other persons except to the extent that, in connection with the disposition of its portfolio investments, it may be deemed to be an underwriter under certain federal securities laws. (10) (Massachusetts, Michigan, Minnesota, Ohio and Pennsylvania funds only) Purchase or sell real estate, although it may purchase or sell securities which are secured by or represent interests in real estate. (11) (Arizona, Florida, and New Jersey funds only) Purchase or sell real estate, although it may purchase securities of issuers which deal in real estate, securities which are secured by interests in real estate, and securities representing interests in real estate, and it may acquire and dispose of real estate or interests in real estate acquired through the exercise of its rights as a holder of debt obligations secured by real estate or interests therein. (12) (Massachusetts, Michigan, Minnesota and Ohio funds only) Purchase or sell commodities or commodity contracts, except that a fund may write and purchase options on financial futures contracts and buy and sell financial futures contracts. (13) (Florida, New Jersey and Pennsylvania funds only) Purchase or sell commodities or commodity contracts, except that a Fund may write and purchase financial futures contracts and related options. (14) (Arizona fund only) Purchase or sell commodities or commodity contracts, except that the Arizona fund may purchase and sell financial futures contracts and related options. (15) (All funds except Arizona fund) Make loans, except by purchase of debt obligations in which a fund may invest consistent with its investment policies, or by entering into repurchase agreements with respect to not more than 25% of its total assets (taken at current value). (16) (Arizona fund only) Make loans, except by purchase of debt obligations in which the Arizona fund may invest consistent with its investment policies, or by entering into repurchase agreements with respect to not more than 25% of its total assets (taken at current value) or through the lending of its portfolio securities with respect to not more than 25% of its assets. (17) Invest in securities of any issuer if, to the knowledge of the fund, officers and Trustees of the fund and officers and directors of Putnam Management who beneficially own more than 0.5% of the shares or securities of that issuer together own more than 5%. (18) (Massachusetts, Michigan, Minnesota and Ohio funds only). Invest in securities of any issuer if, immediately after such investment, more than 5% of the total assets of a fund (taken at current value) would be invested in the securities of such issuer; provided that this limitation does not apply to obligations issued or guaranteed as to interest and principal by the U.S. government, its agencies or instrumentalities or to tax-exempt securities. (19) (Pennsylvania fund only). With respect to 75% of its total assets, invest in securities of any issuer if, immediately after such investment, more than 5% of the total assets of the Pennsylvania fund (taken at current value) would be invested in the securities of such issuer; provided that this limitation does not apply to obligations issued or guaranteed as to interest and principal by the U.S. government or its agencies or instrumentalities. (20) (Arizona, Florida and New Jersey funds only). With respect to 50% of its total assets, invest in securities of any issuer if, immediately after such investment, more than 5% of the total assets of the fund (taken at current value) would be invested in the securities of such issuer; provided that this limitation does not apply to obligations issued or guaranteed as to interest or principal by the U.S. government or its agencies or instrumentalities. (21) Acquire more than 10% of the voting securities of any issuer. (22) (All funds except Arizona fund) Purchase securities (other than securities of the U.S. government, its agencies or instrumentalities and tax-exempt securities, except obligations backed only by the assets and revenues of nongovernmental issuers) if as a result of such purchase more than 25% of the fund's total assets would be invested in any one industry. (23) (Arizona fund only) Purchase securities (other than securities of the U.S. government, its agencies or instrumentalities or tax-exempt securities, except obligations backed only by the assets and revenues of nongovernmental issuers) if as a result of such purchase, more than 25% of the Arizona fund's total assets would be invested in any one industry. (24) (New Jersey fund only). Invest in the securities of other registered open-end investment companies, except as they may be acquired as part of a merger or consolidation or acquisition of assets. (25) (All funds except Arizona fund) Purchase securities restricted as to resale, if, as a result, such investments would exceed 15% of the value of a fund's net assets, excluding restricted securities that have been determined by the Trustees of the fund (or the person designated by them to make such determinations) to be readily marketable. (26) (Arizona fund only) Purchase securities the disposition of which is restricted under federal securities law, if, as a result, such investments would exceed 15% of the value of the Arizona fund's current net assets, excluding restricted securities that have been determined by the Trustees of the Arizona fund (or the person designated by them to make such determinations) to be readily marketable. (27) (Massachusetts, Michigan, Minnesota, Ohio and Pennsylvania funds only) Buy or sell oil, gas or other mineral leases, rights or royalty contracts. (28) (Florida fund only) Buy or sell oil, gas or other mineral leases, rights or royalty contracts, although it may purchase securities which represent interests in, are secured by interests in, or which are issued by issuers which deal in, such leases, rights, or contracts, and it may acquire or dispose of such leases, rights, or contracts acquired through the exercise of its rights as a holder of debt obligations secured thereby. (29) (New Jersey fund only) Buy or sell oil, gas or other mineral leases, rights or royalty contracts, although it may purchase securities of issuers which deal in, represent interests in, or are secured by interests in such leases, rights, or contracts, and it may acquire or dispose of such leases, rights, or contracts acquired through the exercise of its rights as a holder of debt obligations secured thereby. (30) Make investments for the purpose of gaining control of a company's management. (31) Issue any class of securities which is senior to the fund's shares of beneficial interest. Although certain of the funds' fundamental investment restrictions permit each fund to borrow money to a limited extent, none of the funds currently intends to do so and none of the funds did so last year. The Investment Company Act of 1940 provides that a "vote of a majority of the outstanding voting securities" of a fund means the affirmative vote of the lesser of (1) more than 50% of the outstanding fund shares, or (2) 67% or more of the shares present at a meeting if more than 50% of the outstanding fund shares are represented at the meeting in person or by proxy. ------------------ IT IS CONTRARY TO A FUND'S PRESENT POLICY, WHICH MAY BE CHANGED WITHOUT SHAREHOLDER APPROVAL, TO: (1) (For Massachusetts, Michigan, Minnesota and Ohio funds only) Invest in (a) securities which are not readily marketable, (b) securities restricted as to resale and (c) repurchase agreements maturing in more than seven days, if, as a result, more than 15% of a fund's net assets (taken at current value) would be invested in securities described in (a), (b) and (c) above. (2) (For Arizona, Florida, New Jersey and Pennsylvania funds only) Invest in (a) securities which are not readily marketable, (b) securities restricted as to resale (excluding securities determined by the Trustees of a fund to make such determinations) to be readily marketable, and (c) repurchase agreements maturing in more than seven days, if, as a result, more than 15% of a fund's net assets (taken at current value) would be invested in securities described in (a), (b) and (c) above. (3) (All funds except Arizona fund). Invest in warrants (other than warrants acquired by the fund as part of a unit or attached to securities at the time of purchase). (4) (All funds except Arizona and Florida funds) Invest in securities of any issuer if the party responsible for payment, together with any predecessors, has been in operation for less than three consecutive years and, as a result of the investment, the aggregate of such investments would exceed 5% of the value of the fund's net assets; provided, however, that this restriction shall not apply to any obligation of the United States or its agencies or instrumentalities, or to any obligation for the payment of which is pledged the faith, credit and taxing power of any person authorized to issue tax-exempt securities. (5) (Arizona fund only) Invest in securities of any issuer if the party responsible for payment, together with any predecessors, has been in operation for less than three consecutive years and, as a result of the investment, the aggregate of such investments would exceed 5% of the value of the Arizona fund's net assets; provided, however, that this restriction shall not apply to any obligation of the United States or its agencies or instrumentalities, or to any general obligation for the payment of which is pledged the faith, credit and taxing power of any person authorized to issue tax-exempt securities. (6) (Florida fund only) Invest in securities of any issuer if the party responsible for payment, together with any predecessors, has been in operation for less than three consecutive years and, as a result of the investment, the aggregate of such investments would exceed 5% of the value of the Florida fund's net assets; provided, however, that this restriction shall not apply to any obligation of the United States or its agencies or instrumentalities, or to any obligation for the payment of which is pledged the full faith, credit and taxing power of any person authorized to issue tax-exempt securities. (7) (All funds except New Jersey fund). Invest in the securities of other registered open-end investment companies, except as they may be acquired as part of a merger or consolidation or acquisition of assets. All percentage limitations on investments (other than pursuant to non-fundamental restrictions (1 and 2) will apply at the time of the making of an investment and shall not be considered violated unless an excess or deficiency occurs or exists immediately after and as a result of such investment. PROPOSED RESTRICTIONS At a meeting to be held on December 5, 1996, shareholders of each fund are being asked to approve a number of changes to each fund's fundamental investment restrictions, including the elimination of certain of these restrictions. If these proposals are approved at that meeting, each fund's fundamental and non- fundamental investment restrictions will be as follows after that date: FUNDAMENTAL RESTRICTIONS (1) Borrow money in excess of 10% of the value (taken at the lower of cost or current value) of its total assets (not including the amount borrowed) at the time the borrowing is made, and then only from banks as a temporary measure to facilitate the meeting of redemption requests (not for leverage) which might otherwise require the untimely disposition of portfolio investments or for extraordinary or emergency purposes. Such borrowings will be repaid before any additional investments are purchased. (2) Underwrite securities issued by other persons except to the extent that, in connection with the disposition of its portfolio investments, it may be deemed to be an underwriter under certain federal securities laws. (3) Purchase or sell real estate, although it may purchase securities of issuers which deal in real estate, securities which are secured by interests in real estate, and securities which represent interests in real estate, and it may acquire and dispose of real estate or interests in real estate acquired through the exercise of its rights as a holder of debt obligations secured by real estate or interests therein. (4) Purchase or sell commodities or commodity contracts, except that the fund may purchase and sell financial futures contracts and options and may enter into foreign exchange contracts and other financial transactions not involving physical commodities. (5) Make loans, except by purchase of debt obligations in which the fund may invest consistent with its investment policies, by entering into repurchase agreements, or by lending its portfolio securities. (6) (Arizona, Florida and New Jersey funds only). With respect to 50% of its total assets, invest in securities of any issuer if, immediately after such investment, more than 5% of the total assets of the fund (taken at current value) would be invested in the securities of such issuer; provided that this limitation does not apply to obligations issued or guaranteed as to interest or principal by the U.S. government or its agencies or instrumentalities. (7) (Massachusetts, Michigan, Minnesota, Ohio and Pennsylvania funds only) With respect to 75% of its total assets, invest in the securities of any issuer if, immediately after such investment, more than 5% of the total assets of the fund (taken at current value) would be invested in the securities of such issuer; provided that this limitation does not apply to obligations issued or guaranteed as to interest or principal by the U.S. government or its agencies or instrumentalities. (8) (Arizona, Florida and New Jersey funds only). With respect to 50% of its assets, acquire more than 10% of the outstanding voting securities of any issuer. (9) (Massachusetts, Michigan, Minnesota, Ohio and Pennsylvania funds only). With respect to 75% of its total assets, acquire more than 10% of the outstanding voting securities of any issuer. (10) Purchase securities (other than securities of the U.S. government, its agencies or instrumentalities or tax-exempt securities, except tax-exempt securities backed only by the assets and revenues of non-governmental issuers) if as a result of such purchase, more than 25% of the fund's total assets would be invested in any one industry. (11) Issue any class of securities which is senior to the fund's shares of beneficial interest, except for permitted borrowings. NON-FUNDAMENTAL RESTRICTIONS (1) (For Massachusetts, Michigan, Minnesota and Ohio funds only) Invest in (a) securities which are not readily marketable, (b) securities restricted as to resale and (c) repurchase agreements maturing in more than seven days, if, as a result, more than 15% of a fund's net assets (taken at current value) would be invested in securities described in (a), (b) and (c) above. (2) (For Arizona, Florida, New Jersey and Pennsylvania funds only) Invest in (a) securities which are not readily marketable, (b) securities restricted as to resale (excluding securities determined by the Trustees of a fund to make such determinations) to be readily marketable, and (c) repurchase agreements maturing in more than seven days, if, as a result, more than 15% of a fund's net assets (taken at current value) would be invested in securities described in (a), (b) and (c) above. (3) (All funds except Arizona fund). Invest in warrants (other than warrants acquired by the fund as part of a unit or attached to securities at the time of purchase). (4) (All funds except Arizona and Florida funds) Invest in securities of any issuer if the party responsible for payment, together with any predecessors, has been in operation for less than three consecutive years and, as a result of the investment, the aggregate of such investments would exceed 5% of the value of the fund's net assets; provided, however, that this restriction shall not apply to any obligation of the United States or its agencies or instrumentalities, or to any obligation for the payment of which is pledged the faith, credit and taxing power of any person authorized to issue tax-exempt securities. (5) (Arizona fund only) Invest in securities of any issuer if the party responsible for payment, together with any predecessors, has been in operation for less than three consecutive years and, as a result of the investment, the aggregate of such investments would exceed 5% of the value of the Arizona fund's net assets; provided, however, that this restriction shall not apply to any obligation of the United States or its agencies or instrumentalities, or to any general obligation for the payment of which is pledged the faith, credit and taxing power of any person authorized to issue tax-exempt securities. (6) (Florida fund only) Invest in securities of any issuer if the party responsible for payment, together with any predecessors, has been in operation for less than three consecutive years and, as a result of the investment, the aggregate of such investments would exceed 5% of the value of the Florida fund's net assets; provided, however, that this restriction shall not apply to any obligation of the United States or its agencies or instrumentalities, or to any obligation for the payment of which is pledged the full faith, credit and taxing power of any person authorized to issue tax-exempt securities. (7) Invest in the securities of other registered open-end investment companies, except as they may be acquired as part of a merger or consolidation or acquisition of assets. (8) Invest in securities of any issuer if, to the knowledge of the fund, officers and Trustees of the fund and officers and directors of Putnam Management who beneficially own more than 0.5% of the securities of that issuer together own more than 5% of such securities. (9) Purchase securities on margin, except such short-term credits as may be necessary for the clearance of purchases and sales of securities, and except that it may make margin payments in connection with financial futures contracts or options. (10) Make short sales of securities or maintain a short position for the account of the fund unless at all times when a short position is open it owns an equal amount of such securities or owns securities which, without payment of any further consideration, are convertible into or exchangeable for securities of the same issue as, and in equal amount to, the securities sold short. (11) Pledge, hypothecate, mortgage or otherwise encumber its assets in excess of 33 1/3% of its total assets (taken at cost) in connection with permitted borrowings. (12) Buy or sell oil, gas or other mineral leases, rights or royalty contracts, although it may purchase securities which represent interests in, are secured by interests in, or which are issued by issuers which deal in, such leases, rights or contracts, and it may acquire and dispose of such leases, rights or contracts acquired through the exercise of its rights as a holders of debt obligations secured thereby. If shareholders do not ultimately approve some or all of the proposed changes, this SAI will be revised accordingly. ------------------- ------------------ CHARGES AND EXPENSES MANAGEMENT FEES Under Management Contracts dated September 20, 1996 , each fund pays a quarterly fee to Putnam Management based on the average net assets of that fund, as determined at the close of each business day during the quarter, at the annual rate of 0.60% of the first $500 million, 0.50% of the next $500 million, 0.45% of the next $500 million, 0.40% of the next $5 billion, 0.375% of the next $5 billion, 0.355% of the next $5 billion, 0.340% of the next $5 billion and 0.330% thereafter. For the past three fiscal years, pursuant to management contracts in effect prior to September 20, 1996 (dated set forth as below), the funds incurred the following fees: FISCAL MANAGEMENT YEAR FEE PAID ------ ---------------- Arizona fund 1996 $943,091 1995+ $683,508 1994 $952,651 Florida fund 1996 $1,860,534 1995++ $1,686,928 1994 $1,921,362 Massachusetts fund 1996 $1,885,492 1995 $1,638,366 1994 $1,549,215 Michigan fund 1996 $990,338 1995 $858,323 1994 $782,934 Minnesota fund 1996 $742,566 1995 $643,810 1994 $589,840 New Jersey fund 1996 $1,824,907 1995++ $1,588,880 1994 $1,702,343 Ohio fund 1996 $1,379,995 1995 $1,286,605 1994 $1,206,826 Pennsylvania fund 1996 $1,426,014 1995+++ $323,968 1995 $1,155,995 + for fiscal period 9/1/94 - 5/31/95 ++ for fiscal period 7/1/94 - 5/31/95 +++ for fiscal period 3/1/95 - 5/31/95 PRIORPRIOR FUND NAME CONTRACT DATE RATES Arizona fund 3/5/92 0.60% of the first $500 million 0.50% of the next $500 million 0.45% of the next $500 million and 0.40% thereafter Florida fund 12/5/91 0.60% of the first $500 million 0.50% of the next $500 million 0.45% of the next $500 million and 0.40% thereafter Massachusetts fund 7/11/91 0.60% of the first $500 million 0.50% of the next $500 million 0.45% of the next $500 million and 0.40% thereafter Michigan fund 7/11/91 0.60% of the first $500 million 0.50% of the next $500 million 0.45% of the next $500 million and 0.40% thereafter Minnesota fund 7/11/91 0.60% of the first $500 million 0.50% of the next $500 million 0.45% of the next $500 million and 0.40% thereafter New Jersey fund 6/6/91 0.60% of the first $500 million 0.50% of the next $500 million 0.45% of the next $500 million and 0.40 % thereafter Ohio fund 7/11/91 0.60% of the first $500 million 0.50% of the next $500 million 0.45% of the next $500 million and 0.40% thereafter Pennsylvania fund 7/11/91 0.60% of the first $500 million 0.50% of the next $500 million 0.45% of the next $500 million and 0.40% thereafter BROKERAGE COMMISSIONS The following table shows brokerage commissions paid during the fiscal periods indicated. FISCAL BROKERAGE YEAR COMMISSIONS ------ ------------ Arizona fund 1996 $8,892 1995+ $16,040 1994 $0 Florida fund 1996 $10,049 1995++ $29,166 1994 $34,899 Massachusetts fund 1996 $11,986 1995 $27,290 1994 $9,696 Michigan fund 1996 $5,967 1995 $5,208 1994 $0 Minnesota fund 1996 $4,667 1995 $9,645 1994 $1,095 New Jersey fund 1996 $18,629 1995++ $41,937 1994 $9,708 Ohio fund 1996 $6,578 1995 $13,759 1994 $6,063 Pennsylvania fund 1996 $9,269 1995+++ $2,119 1995 $2,612 + for fiscal period 9/1/94 - 5/31/95 ++ for fiscal period 7/1/94 - 5/31/95 +++ for fiscal period 3/1/95 - 5/31/95 The following table shows transactions placed with brokers and dealers during the most recent fiscal year to recognize research, statistical and quotation services Putnam Management considered to be particularly useful to it and its affiliates. DOLLAR VALUE PERCENT OF OF THESE TOTAL AMOUNT OF TRANSACTIONS TRANSACTIONS COMMISSIONS ------------ ------------ - ----------- Arizona fund $753,670 0.72%$4,377 Florida fund $11,037,152 7.04% $48,817 Massachusetts fund $3,198,724 2.51% $17,313 Michigan fund $12,234,127 10.01% $54,562 Minnesota fund $1,550,388 2.17% $12,864 New Jersey fund $4,273,325 1.97% $13,409 Ohio fund $5,584,381 5.83% $27,985 Pennsylvania fund $2,731,725 2.51% $16,250 ADMINISTRATIVE EXPENSE REIMBURSEMENT The funds reimbursed Putnam Management in the following amounts for administrative services during fiscal 1996 , including the following amounts for compensation of certain fund officers and contributions to the Putnam Investments, Inc. Profit Sharing Retirement Plan for their benefit: PORTION OF TOTAL REIMBURSEMENT FOR COMPENSATION TOTAL AND REIMBURSEMENT CONTRIBUTIONS ------------- - ---------------- Arizona fund $7,808 $6,820 Florida fund $8,123 $7,095 Massachusetts fund $8,170 $7,136 Michigan fund $7,790 $6,804 Minnesota fund $7,786 $6,801 New Jersey fund $8,170 $7,136 Ohio fund $7,989 $6,978 Pennsylvania fund $8,046 $7,028 TRUSTEE FEES Each Trustee receives a fee for his or her services. Each Trustee also receives fees for serving as Trustee of other Putnam funds. The Trustees periodically review their fees to assure that such fees continue to be appropriate in light of their responsibilities as well as in relation to fees paid to trustees of other mutual fund complexes. The Trustees meet monthly over a two-day period, except in August. The Compensation Committee, which consists solely of Trustees not affiliated with Putnam Management and is responsible for recommending Trustee compensation, estimates that Committee and Trustee meeting time together with the appropriate preparation requires the equivalent of at least three business days per Trustee meeting. The following table shows the year each Trustee was first elected a Trustee of the Putnam funds, the fees paid to each Trustee by each fund for fiscal 1996 and the fees paid to each Trustee by all of the Putnam funds during the calendar year 1995 : COMPENSATION TABLE AGGREGATE COMPENSATION (1) FROM: ALL PUTNAM TRUSTEE/YEAR AZ FL MA MI MN NJ OH PA FUNDS (2) Jameson A. Baxter/1994 $773 $860 $867 $779 $761 $873 $825 $827 $150,854 Hans H. Estin/1972 $770 $857 $863 $776 $758 $869 $821 $824 150,854 John A. Hill/1985 $765 $850 $856 $770 $753 $862 $816 $818 149,854 Ronald J. Jackson/1996 (3) n/a n/a n/a n/a n/a n/a n/a n/a n/a Elizabeth T. Kennan/1992 $770 $857 $863 $776 $758 $869 $821 $824 148,854 Lawrence J. Lasser/1992 $766 $852 $858 $772 $754 $863 $817 $819 150,854 Robert E. Patterson/1984 $792 $885 $893 $798 $780 $898 $848 $851 152,854 Donald S. Perkins/1982 $767 $853 $859 $773 $755 $865 $818 $820 150,854 William F. Pounds/1971 $781(4) $880(4) $889(4) $788(4) $767(4) $892(4) $839(4)$843(4) 149,854 George Putnam/1957 $770 $857 $863 $776 $758 $869 $821 $824 150,854 George Putnam, III/1984 $770 $857 $863 $776 $758 $869 $821 $824 150,854 Eli Shapiro/1995 (5) $792 $886 $893 $799 $780 $899 $848 $852 95,372 A.J.C. Smith/1986 $765 $850 $856 $771 $753 $862 $816 $818 149,854 W. Nicholas Thorndike/1992 $792 $885 $893 $779 $780 $899 $848 $852 152,854 (1) Includes an annual retainer and an attendance fee for each meeting attended. (2) Reflects total payments received from all Putnam funds in the most recent calendar year. As of December 31, 1995, there were 99 funds in the Putnam family. (3) Elected as Trustee in May 1996. (4) Includes additional compensation for service as Vice Chairman of the Putnam funds. (5) Elected as Trustee in April 1995. The Trustees have approved Retirement Guidelines for Trustees of the Putnam funds. These Guidelines provide generally that a Trustee who retires after reaching age 72 and who has at least 10 years of continuous service will be eligible to receive a retirement benefit from each Putnam fund for which he or she served as a Trustee. The amount and form of such benefit is subject to determination annually by the Trustees and, unless otherwise determined by the Trustees, will be an annual cash benefit payable for life equal to one-half of the Trustee retainer fees paid by each fund at the time of retirement. Several retired Trustees are currently receiving benefits pursuant to the Guidelines and it is anticipated that the current Trustees will receive similar benefits upon their retirement. A Trustee who retired in calendar 1995 and was eligible to receive benefits under these Guidelines would have received an annual benefit of $66,749 , based upon the aggregate retainer fees paid by the Putnam funds for such year. The Trustees reserve the right to amend or terminate such Guidelines and the related payments at any time, and may modify or waive the foregoing eligibility requirements when deemed appropriate. For additional information concerning the Trustees, see "Management" in Part II of this SAI. SHARE OWNERSHIP At August 31, 1996 , the officers and Trustees of each fund as a group owned less than 1% of the outstanding shares of each class of each fund, and, except as noted below, to the knowledge of each fund no person owned of record or beneficially 5% or more of the shares of any class of that fund : SHAREHOLDER NAME PERCENTAGE FUND NAME CLASS AND ADDRESS OWNED (%) - ----------- ----- -------------------- -------- Arizona fund A Merrill Lynch 5.50 4800 Dear Lake Dr. East Jacksonville, FL 32246 B Merrill Lynch 6.00 4800 Dear Lake Dr. East Jacksonville, FL 32246 M Edward D. Jones & Co. 45.60 P.O. Box 2500 Maryland Heights, MO 63043 MDonaldson, Lufkin & Jenrette 28.00 P.O. 2052 Jersey City, NJ 07303 MG. Donald Haarer 12.40 354 Forest Highlands Flagstaff, AZ 86001 Florida fund A Merrill Lynch 9.30 4800 Dear Lake Dr. East Jacksonville, FL 32246 B Merrill Lynch 8.20 4800 Dear Lake Dr. East Jacksonville, FL 32246 M Randy M. Poffo, Trustee 22.70 7650 Bayshore Drive St. Petersburg, FL 33706 M Raymond James & Associates, Inc. 22.60 P.O. Box 12749 St. Petersburg, FL 33716 MEdward D. Jones & Co. 14.90 P.O. Box 2500 Maryland Heights, MO 63043 M John R. McAllister 8.70 12372 Comorant Dr. Jacksonville, FL 32223 MSylvia Maulitz 6.90 101 Clyde Morris Blvd. Ormand Beach, FL 32174 M Paine Webber 5.00 1000 Harbor Blvd. Weehawken, NJ 07087 Massachusetts M Smith Barney, Inc. 49.00 fund 333 W. 34th St. New York, NY 10001 MNicholas J. Stasinos, TTE 7.10 22 Brewster St. Plymouth, MA 02360 MDavid P. Matoes 6.20 332 Main St. Wareham, MA 02571 Michigan fund M Pauline B. Pickford, TTE 20.90 64 Pleasant St. Oxford, MI 48837 MFrank R. Farkas 20.70 1832 ADA Ave Muskegon, MI 49442 MEdward D. Jones & Co. 5.90 P.O. Box 2500 Maryland Heights, MO 63043 MEmory J. Anderson 11.80 1481 E. Jackson Rd. St. Louis, MI 48880 MWheat First FBO 16.30 P.O. Box 6540 Glen Allen, VA 23058 Minnesota fund M Craig M. Larson 25.20 200 Chainview Chanhassen, MN 55317 MKermit J. Swenson 13.90 7819 408th St. Kenyon, MN 55946 MGertrude L. Palublicki 6.40 576 E. 2nd St. Winona, MN 55987 MEdward D. Jones & Co.18.20 P.O. Box 2500 Maryland Heights, MO 63043 New Jersey fund A Merrill Lynch 10.10 4800 Dear Lake Dr. East Jacksonville, FL 32246 B Merrill Lynch 9.10 4800 Dear Lake Dr. East Jacksonville, FL 32246 MThomas Chiego 27.80 48 Huntley Rd. Summit, NJ 55317 M Jack Keshish 19.30 148 Lakeview Ave. S. Plainfield, NJ 07080 MEdward J. Gibeny 9.00 25 Hickory Place Chatham, NJ 07928 MKathleen Sisolak 6.70 198 Lakeview Drive Rd. Basking Ridge, NJ 07920 M Allen Samuels 5.40 563 Stonewall Dr. Smithville, NJ 08201 MChristine Vallet 5.00 40 Fieldcrest Way Hazlet, NJ 07430 Ohio fund B Merrill Lynch 13.20 4800 Dear Lake Dr. East Jacksonville, FL 32246 M Donaldson, Lufkin & Jenrette 31.30 P.O. 2052 Jersey City, NJ 07303 M Prudential Securities, Inc. 10.70 111 8th Ave. New York, NY 10011 M NFSC FEBO 9.60 One New York Plaza New York, NY 10292 MRick D. Gerdeman 6.80 816 Atalant Rd. Lima, OH 45805 Pennsylvania fund A BHC Securities, Inc. 7.30 100 North 20th St. Philadelphia, PA 19103 B Merrill Lynch 7.60 4800 Dear Lake Dr. East Jacksonville, FL 32246 M Paine Webber 15.40 1000 Harbor Blvd. Weehawken, NJ 07087 M Nancy Wyndham 12.10 P.O. Box 831 Wenden Hall, PA 19357 M Sharon L. Haller 9.60 610 Cambridge Ct. Palmyra, PA 17078 MGerald M. Stuczynski, TTE 7.00 3008 Florida Ave. Erie, PA 17078 MPatricia A. Fox 5.10 119 Haverford Dr. Lafkin, PA 18702 MEdward D. Jones & Co.18.20 P.O. Box 2500 Maryland Heights, MO 63043 NFSC FEBO 10.00 One New York Plaza New York, NY 10292 DISTRIBUTION FEES During fiscal 1996 , the funds paid the following 12b-1 fees to Putnam Mutual Funds: FUND NAME CLASS A CLASS B CLASS M - ---------- ------- ------- ------- Arizona fund $268,581 $195,822 $393 Florida fund $521,621 $419,027$2,219 Massachusetts fund $515,338 $479,943$2,855 Michigan fund $278,111 $220,327$1,551 Minnesota fund $196,064 $216,102$2,375 New Jersey fund $476,014 $564,213$1,119 Ohio fund $384,848 $320,710 $900 Pennsylvania fund $364,644 $473,557 $527 CLASS A SALES CHARGES AND CONTINGENT DEFERRED SALES CHARGES Putnam Mutual Funds received sales charges with respect to class A shares in the following amounts during the periods indicated: SALES CHARGES RETAINED BY PUTNAM CONTINGENT TOTAL MUTUAL FUNDS DEFERRED FRONT-END AFTER SALES SALES CHARGESDEALER CONCESSIONS CHARGES ------------------------------- -------- Arizona fund Fiscal year 1996 $363,781 $23,412 $10,000 1995+ $257,469 $15,552 $200 1994 $894,004 $59,472 $1,639 Florida fund Fiscal year 1996 $603,590 $45,457 $8,800 1995++ $501,152 $39,037 $19,781 1994 $1,391,801 $80,999 $584 Massachusetts fund Fiscal year 1996 $866,435 $82,951 $1,562 1995 $783,963 $27,221 $680 1994 $1,740,049 $140,316 $10,092 Michigan fund Fiscal year 1996 $507,284 $35,487 $0 1995 $419,491 $15,212 $0 1994 $935,249 $65,629 $0 Minnesota fund Fiscal year 1996 $389,372 $25,681 $0 1995 $312,177 $18,588 $7 1994 $670,795 $41,915 $27 New Jersey fund Fiscal year 1996 $725,211 $48,772 $1,048 1995++ $777,971 $48,327 $2,864 1994 $2,132,078 $123,856 $0 Ohio fund Fiscal year 1996 $435,027 $33,619 $0 1995 $466,247 $30,918 $0 1994 $1,129,631 $73,168 $0 Pennsylvania fund Fiscal year 1996 $816,256 52,102 $996 1995+++ $273,245 $18,254 $10,000 1995 $1,113,142 $71,739 $640 + for fiscal period 9/1/94 - 5/31/95 ++ for fiscal period 7/1/94 - 5/31/95 +++ for fiscal period 3/1/95 - 5/31/95 CLASS B CONTINGENT DEFERRED SALES CHARGES Putnam Mutual Funds received contingent deferred sales charges upon redemptions of class B shares in the following amounts during the periods indicated: CONTINGENT DEFERRED SALES CHARGES ------------------- Arizona fund Fiscal year 1996 $100,749 1995+ $48,101 1994 $309,154 Florida fund Fiscal year 1996 $131,967 1995++ $153,120 1994 $78,903 Massachusetts fund Fiscal year 1996 $165,517 1995 $35,000 1994 $34,720 Michigan fund Fiscal year 1996 $40,870 1995 $32,819 1994 $3,489 Minnesota fund Fiscal year 1996 $33,959 1995 $20,926 1994 $4,372 New Jersey fund Fiscal year 1996 $146,756 1995++ $150,939 1994 $62,483 Ohio fund Fiscal year 1996 $85,990 1995 $60,907 1994 $9,032 Pennsylvania fund Fiscal year 1996 $105,045 1995+++ $18,160 1995 $2,473 + for fiscal period 9/1/94 - 5/31/95 ++ for fiscal period 7/1/94 - 5/31/95 +++ for fiscal period 3/1/95 - 5/31/95 CLASS M SHARES Putnam Mutual Funds received sales charges with respect to class M shares in the following amounts during the periods indicated : SALES CHARGES RETAINED BY PUTNAM MUTUAL FUNDS TOTAL AFTER SALES CHARGES DEALER CONCESSIONS ------------- ------------------ Arizona fund Fiscal year 1996 $5,471 $674 Florida fund Fiscal year 1996 $7,950 $502 1995+ $0 $0 Massachusetts fund Fiscal year 1996 $8,403 $865 1995 $692 $62 Michigan fund Fiscal year 1996 $10,181 $1,078 1995 $0 $0 Minnesota fund Fiscal year 1996 $4,671 $141 1995 $0 $0 New Jersey fund Fiscal year 1996 $4,939 $419 1995+ $0 $0 Ohio fund Fiscal year 1996 $2,641 $259 1995 $0 $0 Pennsylvania fund Fiscal year 1996 $4,286 $432 + for fiscal period 7/1/94 - 5/31/95 INVESTOR SERVICING AND CUSTODY FEES AND EXPENSES During the 1996 fiscal year, each fund incurred the following fees and out-of-pocket expenses for investor servicing and custody services provided by Putnam Fiduciary Trust Company: Arizona fund $192,766 Florida fund $312,233 Massachusetts fund $350,820 Michigan fund $212,118 Minnesota fund $177,771 New Jersey fund $340,358 Ohio fund $227,456 Pennsylvania fund $237,695 INVESTMENT PERFORMANCE STANDARD PERFORMANCE MEASURES (FOR PERIODS ENDED MAY 31, 1996) ARIZONA FUND Class A Class B Class M Inception date: 1/30/91 7/15/93 7/3/95 ANNUALIZED TOTAL RETURN -------------------------------------------------------------- - --- 1 year -1.54% -2.30% n/a 5 years 5.80 n/a n/a Life of class 6.07 1.89 1.02%* YIELD 30 - day yield 4.62% 4.20% 4.39% Tax - equivalent yield** 8.10% 7.37% 7.70% *Represents cumulative, rather than average annual, total return. **Assumes the maximum combined 42.98% federal and state rate. Results for investors subject to lower tax rates would not be as advantageous. FLORIDA FUND Class A Class B Class M Inception date: 8/24/90 1/4/93 5/1/95 ANNUALIZED TOTAL RETURN -------------------------------------------------------------- - --1 year -1.80% -2.52% -0.62% 5 years 5.96 n/a n/a Life of class 6.59 3.57 2.43 YIELD 30 - day yield 4.99% 4.58% 4.77% Tax - equivalent yield* 8.26% 7.58% 7.90% *Assumes the maximum 39.60% federal rate. Results for investors subject to lower tax rates would not be as advantageous. MASSACHUSETTS FUND Class A Class B Class M Inception date: 10/23/89 7/15/93 5/12/95 ANNUALIZED TOTAL RETURN -------------------------------------------------------------- - -- 1 year -0.17% -0.83% 0.79% 5 years 6.87 n/a n/a Life of class 7.36 2.70 2.15 YIELD 30 - day yield 5.32% 4.93% 5.12% Tax - equivalent 10.01% 9.28% 9.63% yield* *Assumes the maximum combined 46.85% federal and state rate. Results for investors subject to lower tax rates would not be as advantageous. MICHIGAN FUND Class A Class B Class M Inception date: 10/23/89 7/15/93 4/17/95 ANNUALIZED TOTAL RETURN -------------------------------------------------------------- - --- 1 year -1.18% -1.86% 0.19% 5 years 6.08 n/a n/a Life of class 6.30 2.18 2.73 YIELD 30 - day yield 5.04% 4.64% 4.83% Tax - equivalent yield* 8.73% 8.04% 8.37% *Assumes the maximum combined 42.26% federal and state rate. Results for investors subject to lower tax rates would not be as advantageous. MINNESOTA FUND Class A Class B Class M Inception date: 10/23/89 7/15/93 4/3/95 ANNUALIZED TOTAL RETURN -------------------------------------------------------------- - -- 1 year -1.78% -2.40% -0.51% 5 years 5.48 n/a n/a Life of class 5.97 2.26 2.07 YIELD 30 - day yield 4.81% 4.40% 4.59% Tax - equivalent yield* 8.70% 7.96% 8.30% *Assumes the maximum combined 44.73% federal and state rate. Results for investors subject to lower tax rates would not be as advantageous. NEW JERSEY FUND Class A Class B Class M Inception date: 2/20/90 1/4/93 5/1/95 ANNUALIZED TOTAL RETURN -------------------------------------------------------------- - --- 1 year -1.99% -2.62% -0.68% 5 years 5.77 n/a n/a Life of class 6.62 3.67 2.33 YIELD 30 - day yield 5.06% 4.65% 4.84% Tax - equivalent yield* 8.95% 8.22% 8.56% *Assumes the maximum combined 43.45% federal and state rate. Results for investors subject to lower tax rates would not be as advantageous. OHIO FUND Class A Class B Class M Inception date: 10/23/89 7/15/93 4/3/95 ANNUALIZED TOTAL RETURN -------------------------------------------------------------- - --- 1 year -1.65% -2.26% -0.34% 5 years 5.85 n/a n/a Life of class 6.26 2.23 2.35 YIELD 30-day yield 4.71% 4.29% 4.49% Tax-equivalent yield* 8.43% 7.68% 8.04% *Assumes the maximum combined 44.13% federal and state rate. Results for investors subject to lower tax rates would not be as advantageous. PENNSYLVANIA FUND Class A Class B Class M Inception date: 7/21/89 7/15/93 7/3/95 ANNUALIZED TOTAL RETURN -------------------------------------------------------------- - --- 1 year -1.09% -1.77% n/a 5 years 6.66 n/a n/a Life of class 6.90 2.71 1.24%* YIELD 30 - day yield 5.04% 4.63% 4.82% Tax - equivalent yield** 8.58% 7.89% 8.21% *Represents cumulative, rather than average annual, total return. **Assumes the maximum combined 41.29% federal and state rate. Results for investors subject to lower tax rates would not be as advantageous. -------------------------------------------------------------- - --- Data represent past performance and are not indicative of future results. Total return and yield for class A and class M shares reflect the deduction of the maximum sales charge of 4.75% and 3.25%, respectively. Total return for class B shares reflects the deduction of the applicable contingent deferred sales charge ("CDSC") . The maximum class B CDSC is 5.00%. See "Standard performance measures" in Part II of this SAI for information on how performance is calculated. Past performance is no guarantee of future results. TAXES The prospectus describes generally the tax treatment of distributions by the funds. This section of the SAI and the section entitled "Taxes" in Part II of this SAI include additional information concerning certain state and federal tax consequences of an investment in a fund, respectively. Prospective investors should be aware that an investment in a state tax-exempt fund may not be suitable for persons who do not receive income subject to income taxes of such state. (MICHIGAN AND MINNESOTA FUNDS ONLY) That percentage of interest on indebtedness incurred or continued to purchase or carry shares of an investment company paying exempt-interest dividends, such as the funds , that is equal to the percentage of the funds' distributions from investment income and short-term capital gains that is exempt from federal income tax, will not be deductible by the investor for single business tax or Minnesota personal income tax purposes. For Michigan personal income tax and Michigan intangibles tax purposes, such interest deduction is wholly disallowed. To the extent that distributions are derived from interest on Michigan tax-exempt securities, such distributions will be exempt from Michigan personal income tax and excluded from the taxable income base of the Michigan intangibles tax under the current position of the Michigan Department of Treasury. Such distributions, if received in connection with a shareholder's business activity, may alternatively be subject to the Michigan single business tax. For Michigan personal income tax, intangibles tax and single business tax purposes, exempt-interest dividends attributable to any investment other than Michigan tax- exempt securities will be fully taxable as will dividends arising from any source other than exempt-interest irrespective of the investment to which any such dividend is attributable. More specifically, Michigan law provides an exemption from both the Michigan personal income tax and the Michigan single business tax with respect to interest paid to the owner of tax-exempt securities, and a corresponding exemption is provided under the Michigan intangibles tax with respect to ownership of such securities . The Michigan Department of Treasury, in a ruling letter dated December 19, 1986 and published in April, 1987, revised a previous administrative position that shareholders of an investment company other than a "unit investment trust" are to be treated as the owners of shares in the investment company and not as the owners of a proportionate share of the company's assets. This revised position was reaffirmed in a ruling published in March, 1989. The Michigan fund is not a unit investment trust, and accordingly shareholders will , in the view of the Michigan Department of Treasury, be treated as the owners of the fund's assets including the fund's tax-exempt securities. The Department has not addressed the question of whether the distinction between ownership of tax-exempt obligations and ownership of mutual fund shares may be accorded significance in connection with application of the single business tax to investment company distributions representing interest on obligations which are exempt from federal income tax and Michigan tax. NEW JERSEY. Income distributions paid from a "qualified investment fund" are exempt from the New Jersey Gross Income Tax to the extent attributable to tax-exempt obligations specified by New Jersey law. A "qualified investment fund" is any investment company or trust, or series of such investment company or trust, registered with the Securities and Exchange Commission which, for the calendar year in which a distribution is paid, (i) has no investments other than interest-bearing obligations, obligations issued at a discount, and cash and cash items (including receivables) and 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, and (ii) has at least 80 percent of the aggregate principal amount of all 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 section 851(b) of the Internal Revenue Code, and cash and cash items, which cash items include receivables), invested in obligations issued by New Jersey or obligations that are free from state or local taxation under New Jersey and federal laws, such as obligations issued by the governments of Puerto Rico, Guam or the Virgin Islands. Provided the fund qualifies as a "qualified investment fund," interest income and gains realized by the fund and distributed to shareholders will be exempt from the New Jersey Gross Income Tax to the extent attributable to tax-exempt obligations. Gains resulting from the redemption or sale of shares of the New Jersey fund will also be exempt from the New Jersey Gross Income Tax. The New Jersey Gross Income Tax is not applicable to corporations. For all corporations subject to the New Jersey Corporation Business Tax, interest on tax-exempt obligations is included in the net income tax base for purposes of computing the corporate business tax. Furthermore, any gain upon the redemption or sale of shares by a corporate shareholder is also included in the net income tax base for purposes of computing the Corporation Business Tax. The New Jersey fund will notify shareholders by February 15 of each calendar year as to the amounts of dividends and distributions made with respect to the preceding calendar year that are exempt from federal income taxes and New Jersey personal income tax and the amounts, if any, which are subject to such taxes. The New Jersey fund will also make appropriate certification of its status to New Jersey tax authorities by that date. PENNSYLVANIA . 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. An additional deduction from Pennsylvania taxable income is permitted for the amount of distributions paid by the Pennsylvania fund 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 to the extent included in federal taxable income, but such a deduction is reduced by any interest on indebtedness incurred to carry the securities and other expenses incurred in the production of such interest income, including expenses deducted on the federal income tax return that would not have been allowed under the Internal Revenue Code if the interest were exempt from federal income tax. Distributions by the Pennsylvania fund attributable to most other sources may be subject to the Pennsylvania corporate net income tax. It is the current position of the Pennsylvania Department of Revenue that fund shares are considered exempt assets (with a pro rata exclusion based on the value of the Pennsylvania fund attributable to its investments in tax-exempt securities and obligations of the United States, its territories and certain of its agencies and instrumentalities) for purposes of determining a corporation's capital stock value subject to the Commonwealth's capital stock or franchise tax. EQUIVALENT YIELDS: TAX-EXEMPT VERSUS TAXABLE SECURITIES The tables below show the effect of the tax status of each fund's tax-exempt securities on the effective yield received by their holders under the Internal Revenue Code of 1986, as amended (the "Code") , and personal and gross income tax laws of the relevant state, (except Florida, which has no personal income tax) in effect for 1996 . The tables give the approximate yield a taxable security must earn at various income levels to produce after-tax yields equivalent to those of the relevant tax- exempt securities yielding from 4.0%, 6.0% and 8.0% . Arizona fund 1996 TAXABLE INCOME* COMBINED ----------------------- ARIZONA AND TAX-EXEMPT YIELD FEDERAL SINGLE JOINT TAX RATE** 4.0% 6.0% 8.0% - ----------------------------------------------------------------- - ----------------------------------- EQUIVALENT TAXABLE YIELD $0-10,000 $0-20,000 17.55% 4.85% 7.28% 9.70% 10,001- 24,000 20,001- 40,000 17.98% 4.88 7.31 9.75 24,001 -25,000 40,001 -50,000 30.52% 5.76 8.64 11.51 25,001-50,000 50,001- 96,900 31.02% 5.80 8.70 11.60 50,001- 58,150 31.74% 5.86 8.79 11.72 96,900 -100,000 33.90% 6.05 9.08 12.10 58,151-121,300 100,001- 147,700 34.59% 6.12 9.17 12.23 121,301 -150,000 147,601-263,750 39.33% 6.59 9.89 13.19 150,001- 263,750 39.58% 6.62 9.93 13.24 263,751 300,000 42.74% 6.99 10.48 13.97 over 263,750 over 300,000 42.98% 7.02 10.52 14.03 - ----------------------------------------------------------------- - ------------------------------------------------------- * This amount represents taxable income as defined in the Code. It is assumed that taxable income under Arizona law is the same as taxable income as defined under the Code , however, Arizona taxable income is likely to differ due to differences in exemptions, itemized deductions, and other items. ** For federal income tax purposes, these combined rates reflect the applicable marginal rates for 1996, including indexing for inflation . These rates include the effect of deducting state taxes on your federal return. Florida fund TAXABLE INCOME* 1996 TAX-EXEMPT YIELD COMBINED FLORIDA - --------------------------- SINGLE JOINT AND FEDERAL TAX RATE** 4% 6% 8% - ----------------------------------------------------------------- - -------------------------------------- EQUIVALENT TAXABLE YIELD $ 0 - 24,000 $ 0 - 40,100 15.00% 4.71% 7.06% 9.41% 24,001 - 58,150 40,101 - 96,900 28.00 5.56 8.33 11.11 58,150 - 121,300 96,901- 147,700 31.00 5.80 8.70 11.59 121,301- 263,750 147,701-263,750 36.00 6.25 9.38 12.50 over 263,751 over 263,751 39.60 6.62 9.93 13.25 * This amount represents taxable income as defined in the Code. ** These rates reflect only the federal income tax since Florida does not have a personal income tax. Massachusetts fund 1996 COMBINED MASSACHUSETTS TAXABLE INCOME* AND FEDERAL TAX-EXEMPT YIELD TAX - ------------------------------------------ SINGLE JOINT RATE** 4% 6% 8% - ----------------------------------------------------------------- - ----------------------------- EQUIVALENT TAXABLE YIELD $ 0 - 24,000 $ 0 - 40,100 25.20% 5.35% 8.02% 10.70% 24,001 - 58,150 40,001 - 96,900 36.64 6.31 9.47 12.63 58,151 - 121,300 96,901- 147,700 39.28 6.59 9.88 13.18 121,301 - 263,750 147,701-263,750 43.68 7.10 10.65 14.20 263,751 and over 263,751 and over 46.85 7.53 11.29 15.05 - ----------------------------------------------------------------- - --------------------------------------------------- * This amount represents taxable income as defined in the Code and Massachusetts income tax law . It is assumed that taxable income as defined in the Code is the same as under the Massachusetts personal income tax law. However, Massachusetts taxable income may differ due to differences in exemptions, itemized deductions, and other items. ** For federal tax purposes, these combined rates reflect the applicable marginal rates on taxable income in effect for 1996. These combined rates include the effect of deducting state taxes on your federal return. Michigan fund 1996 COMBINED MICHIGAN TAX-EXEMPT YIELD TAXABLE INCOME* AND FEDERAL-------------------------------------------------- TAX SINGLE JOINT RATE** 4% 6% 8% - ----------------------------------------------------------------- - ------------------------------- EQUIVALENT TAXABLE YIELD $ 0 - 24,000 $0 - 39,000 18.74% 4.92% 7.38% 9.84% 24,001 - 58,150 39,001 - 94,250 31.17 5.81 8.72 11.62 58,151-121,300 94,251-143,600 34.04 6.06 9.10 12.13 121,301-263,750 143,601- 263,750 38.82 6.54 9.81 13.08 over 263,750 over 263,750 42.26 6.93 10.39 13.85 - ----------------------------------------------------------------- - ----------------------------------------------- * This amount represents taxable income as defined in the Code . It is assumed that taxable income as defined in the Code is the same as under the Michigan personal income tax law, however, Michigan taxable income may differ due to differences in exemptions, itemized deductions, and other items. ** For federal tax purposes, these combined rates reflect the applicable marginal rates on taxable income in effect for 1996, including indexing for inflation. These combined rates include the effect of deducting state taxes on your Federal return. *** The amount of taxable income in this bracket may be affected by the phase-out of personal exemptions and the limitation on itemized deductions, based on adjusted gross income, under the Code. Minnesota fund 1996 COMBINED MINNESOTA AND FEDERAL TAX-EXEMPT YIELD TAXABLE INCOME* TAX - ------------------------------------------------------- SINGLE JOINT RATE** 4% 6% 8% - ----------------------------------------------------------------- - -------------------------- EQUIVALENT TAXABLE YIELD $ 0 - 16,070 $0 - 23,490 20.10% 5.01% 7.51% 10.01% 16,071 - 24,000 23,491- 40,100 21.80 5.12 7.67 10.23 24,001 - 52,790 39,001- 93,340 33.76 6.04 9.06 12.08 52,791 - 58,150 90,761- 96,900 34.12 6.07 9.11 12.14 58,151 - 121,300 94,251- 147,700 36.87 6.34 9.50 12.67 121,301 - 263,750 143,601- 263,750 41.44 6.83 10.25 13.66 263,751 and over 263,751 and over 44.73 7.24 10.86 14.47 - ----------------------------------------------------------------- - --------------------------------------------------- * This amount represents taxable income as defined in the Code. It is assumed that taxable income as defined in the Code is the same as under the Minnesota personal income tax law. However, Minnesota taxable income may differ due to differences in exemptions, itemized deductions, and other items. ** For federal tax purposes, these combined rates reflect the applicable marginal rates on taxable income in effect for 1996. These combined rates include the effect of deducting state taxes on your Federal return. New Jersey fund 1996 COMBINED TAXABLE INCOME* NEW JERSEY TAX EXEMPT YIELD: ----------------------- AND - --------------------------------------------------------------- FEDERAL SINGLE JOINT TAX RATE** 4% 6% 8% ------------------------------ - ----------------------------------------------------------------- - ------- EQUIVALENT TAXABLE YIELD $ 0 - 20,000 0 - 20,000 16.19% 4.77% 7.16% 9.55% 20,001 - 24,000 20,001 - 40,100 16.49 4.79 7.18 9.58 24,001 - 35,000 40,001 - 50,000 29.26 5.65 8.48 11.31 50,001 - 70,000 29.76 5.70 8.54 11.39 35,001 - 40,000 70,001 - 80,000 30.52 5.76 8.64 11.51 40,001 - 58,150 80,001 - 96,900 31.98 5.88 8.82 11.76 58,151 - 75,000 96,901 - 147,700 34.81 6.14 9.20 12.27 75,001 - 121,300 35.40 6.19 9.29 12.38 147,701 - 150,000 39.54 6.62 9.92 13.23 121,301 - 263,750 150,001 - 263,750 40.08 6.68 10.01 13.35 over 263,750 over 263,750 43.45 7.07 10.61 14.15 - ----------------------------------------------------------------- - ------------------------------------------------------ * This amount represents taxable income as defined in the Code. It is assumed that taxable income as defined in the Code is the same as under the New Jersey State Personal Income Tax law , however, New Jersey taxable income may differ due to differences in exemptions, itemized deductions, and other items. ** For federal tax purposes, these combined rates reflect the applicable marginal rates on taxable income in effect for 1996, including indexing for inflation . These rates include the effect of deducting state taxes on your Federal return. Ohio fund 1996 COMBINED OHIO AND FEDERAL TAX-EXEMPT YIELD TAXABLE INCOME* TAX - ---------------------------------------------------------- SINGLE JOINT RATE ** 4% 6% 8% - ----------------------------------------------------------------- - ------------------------- EQUIVALENT TAXABLE YIELD $ 0 - 5,000 0 - 5,000 15.63% 4.74% 7.11% 9.48% 5,001 - 10,000 5,001 - 10,000 16.26 4.78 7.17 9.55 10,001 - 15,000 10,001 - 15,000 17.53 4.85 7.28 9.70 15,001 - 20,000 15,001 - 20,000 18.16 4.89 7.33 9.77 20,001 - 24,000 20,001 - 39,000 18.79 4.93 7.39 9.85 24,001 - 40,000 31.21 5.81 8.72 11.63 39,001 - 40,000 18.79 4.93 7.39 9.85 40,001 - 40,100 19.42 4.96 7.45 9.93 40,001 - 58,15040,101 - 80,000 31.74 5.86 8.79 11.72 80,001- 96,900 32.28 5.91 8.86 11.81 58,151 - 80,000 34.59 6.12 9.17 12.23 80,001- 100,000 96,901 -100,000 35.10 6.16 9.25 12.33 100,001- 121,300 100,001- 147,700 35.76 6.23 9.34 12.45 121,301 - 200,000 147,701 -200,000 40.42 6.17 10.07 13.43 200,001- 263,750 200,001- 263,750 40.80 6.76 10.14 13.51 over 263,750 over 263,750 44.13 7.16 10.74 14.32 - ----------------------------------------------------------------- - ----------------------------------------------------- * This amount represents taxable income as defined in the Code. It is assumed that taxable income as defined in the Code is the same as under the Ohio personal income tax law, however, Ohio taxable income may differ due to differences in exemptions, itemized deductions, and other items. ** For federal tax purposes, these combined rates reflect the applicable marginal rates on taxable income in effect for 1996, including indexing for inflation . These rates include the effect of deducting state taxes on your Federal return. Pennsylvania fund 1996 COMBINED MARGINAL TAXABLE INCOME* PENNSYLVANIA TAX-EXEMPT YIELD: ------------------------ AND - ------------------------------------------------------ FEDERAL TAX SINGLE JOINT RATE** 4% 6% 8% - ----------------------------------------------------------------- - --------------------------------- EQUIVALENT TAXABLE YIELD $0- $24,000 $0- 40,100 17.38% 4.84% 7.26% 9.68% $23,351- $58,150 $40,101-$96,900 30.02 5.72 8.57 11.43 $56,551-$121,300 $96,901-$147,700 32.93 5.96 8.95 11.93 $117,951-$263,750 $147,701-$263,750 37.79 6.43 9.64 12.86 over $263,751 over $263,751 41.29 6.81 10.22 13.63 - ----------------------------------------------------------------- - ----------------------------------------------------- * This amount represents taxable income as defined in the Code and the Pennsylvania income tax law. Pennsylvania taxable income may differ due to differences in exemptions, itemized deductions, and other items. ** For federal income tax purposes these combined rates reflect the marginal rates on taxable income in effect for 1996 . For Pennsylvania personal income tax purposes the combined rates reflect tax rates in expected to be in effect for 1996. These combined rates reflect the effect of deducting state taxes on the Federal return. -------------------------------------------------------------- - ------------------------------------------------------- - - Of course, there is no assurance that a fund will achieve any specific tax-exempt yield. While it is expected that each fund will invest principally in obligations which pay interest exempt from federal income tax and personal income tax of its respective state, other income received by a fund may be taxable. The tables do not take into account any federal alternative minimum taxes or state or local taxes payable on each fund's distributions except for the personal income tax of its respective state. ADDITIONAL OFFICERS In addition to the persons listed as fund officers in Part II of this SAI, each of the following persons is also a Vice President of one or more funds and certain of the other Putnam funds , the total number of which is noted parenthetically . Officers of Putnam Management hold the same offices in Putnam Management's parent company, Putnam Investments, Inc. OFFICER NAME (AGE) (NUMBER OF FUNDS) GARY N. COBURN (age 50) (58 funds) . Senior Managing Director of Putnam Management. JAMES E. ERICKSON (age 61) (23 funds) . Managing Director of Putnam Management. BLAKE E. ANDERSON (age 39) (15 funds) . Senior Vice President of Putnam Management. HOWARD K. MANNING (age 43) (5 funds) . Senior Vice President of Putnam Management. RICHARD P. WYKE (age 40) (7 funds) . Senior Vice President of Putnam Management. LESLIE J. BURKE (age 33) (3 funds) . Vice President of Putnam Management. Prior to 1992, Ms. Burke was a Research Associate and Municipal Bond Trader at Fidelity Management and Research Company. INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS Coopers & Lybrand L.L.P., One Post Office Square, Boston, MA 02109, are the independent accountants for the Arizona fund, Michigan fund, New Jersey fund and Ohio fund, and Price Waterhouse LLP, 160 Federal Street, Boston, MA 02110, are the independent accountants for the Florida fund, Massachusetts fund, Minnesota fund and Pennsylvania fund, each providing audit services, tax return review services and assistance and consultation in connection with the review of various Securities and Exchange Commission filings. The Report of Independent Accountants, financial highlights and financial statements included in each fund's Annual Report for the fiscal year ended May 31, 1996 , filed electronically on the following dates, are incorporated by reference into this SAI: Date filed Fund File No. with SEC _________________________________________________________ Arizona fund 811-6258 7/25/96 Florida fund 811-6129 8/2/96 Massachusetts fund 811-4518 7/30/96 Michigan fund 811-4529 7/25/96 Minnesota fund 811-4527 8/1/96 New Jersey fund 811-5977 7/29/96 Ohio fund 811-4528 7/29/96 Pennsylvania fund 811-5802 8/2/96 The financial highlights included in the prospectus and incorporated by reference into this SAI and the financial statements incorporated by reference into the prospectus and this SAI have been so included and incorporated in reliance upon the reports of Coopers & Lybrand, L.L.P. (for the Arizona, Michigan, New Jersey and Ohio funds) and Price Waterhouse LLP (for the Florida, Massachusetts, Minnesota and Pennsylvania funds), independent accountants, given on the authority of said firms as experts in auditing and accounting. TABLE OF CONTENTS MISCELLANEOUS INVESTMENT PRACTICES . . . . . . . . . . . . . . . . . . II-1 TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .II-25 MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .II-30 DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . . . . . .II-40 HOW TO BUY SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . .II-42 DISTRIBUTION PLANS . . . . . . . . . . . . . . . . . . . . . . . . . .II-54 INVESTOR SERVICES. . . . . . . . . . . . . . . . . . . . . . . . . . .II-55 SIGNATURE GUARANTEES . . . . . . . . . . . . . . . . . . . . . . . . .II-60 SUSPENSION OF REDEMPTIONS. . . . . . . . . . . . . . . . . . . . . . .II-61 SHAREHOLDER LIABILITY. . . . . . . . . . . . . . . . . . . . . . . . .II-61 STANDARD PERFORMANCE MEASURES. . . . . . . . . . . . . . . . . . . . .II-61 COMPARISON OF PORTFOLIO PERFORMANCE. . . . . . . . . . . . . . . . . .II-63 DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .II-67 THE PUTNAM FUNDS STATEMENT OF ADDITIONAL INFORMATION ("SAI") PART II The following information applies generally to your fund and to the other Putnam funds. In certain cases the discussion applies to some but not all of the funds or their shareholders, and you should refer to your prospectus to determine whether the matter is applicable to you or your fund. You will also be referred to Part I for certain information applicable to your particular fund. Shareholders who purchase shares at net asset value through employer-sponsored defined contribution plans should also consult their employer for information about the extent to which the matters described below apply to them. MISCELLANEOUS INVESTMENT PRACTICES YOUR FUND'S PROSPECTUS STATES WHICH OF THE FOLLOWING INVESTMENT PRACTICES ARE AVAILABLE TO YOUR FUND. THE FACT THAT YOUR FUND IS AUTHORIZED TO ENGAGE IN A PARTICULAR PRACTICE DOES NOT NECESSARILY MEAN THAT IT WILL ACTUALLY DO SO. YOU SHOULD DISREGARD ANY PRACTICE DESCRIBED BELOW WHICH IS NOT MENTIONED IN THE PROSPECTUS. SHORT-TERM TRADING In seeking the fund's objectives(s), Putnam Management will buy or sell portfolio securities whenever Putnam Management believes it appropriate to do so. In deciding whether to sell a portfolio security, Putnam Management does not consider how long the fund has owned the security. From time to time the fund will buy securities intending to seek short-term trading profits. A change in the securities held by the fund is known as "portfolio turnover" and generally involves some expense to the fund. This expense may include brokerage commissions or dealer markups and other transaction costs on both the sale of securities and the reinvestment of the proceeds in other securities. If sales of portfolio securities cause the fund to realize net short-term capital gains, such gains will be taxable as ordinary income. As a result of the fund's investment policies, under certain market conditions the fund's portfolio turnover rate may be higher than that of other mutual funds. Portfolio turnover rate for a fiscal year is the ratio of the lesser of purchases or sales of portfolio securities to the monthly average of the value of portfolio securities -- excluding securities whose maturities at acquisition were one year or less. The fund's portfolio turnover rate is not a limiting factor when Putnam Management considers a change in the fund's portfolio. LOWER-RATED SECURITIES The fund may invest in lower-rated fixed-income securities (commonly known as "junk bonds"), to the extent described in the prospectus. The lower ratings of certain securities held by the fund reflect a greater possibility that adverse changes in the financial condition of the issuer or in general economic conditions, or both, or an unanticipated rise in interest rates, may impair the ability of the issuer to make payments of interest and principal. The inability (or perceived inability) of issuers to make timely payment of interest and principal would likely make the values of securities held by the fund more volatile and could limit the fund's ability to sell its securities at prices approximating the values the fund had placed on such securities. In the absence of a liquid trading market for securities held by it, the fund at times may be unable to establish the fair value of such securities. Securities ratings are based largely on the issuer's historical financial condition and the rating agencies' analysis at the time of rating. Consequently, the rating assigned to any particular security is not necessarily a reflection of the issuer's current financial condition, which may be better or worse than the rating would indicate. In addition, the rating assigned to a security by Moody's Investors Service, Inc. or Standard & Poor's (or by any other nationally recognized securities rating organization) does not reflect an assessment of the volatility of the security's market value or the liquidity of an investment in the security. See the prospectus or Part I of this SAI for a description of security ratings. Like those of other fixed-income securities, the values of lower-rated securities fluctuate in response to changes in interest rates. A decrease in interest rates will generally result in an increase in the value of the fund's assets. Conversely, during periods of rising interest rates, the value of the fund's assets will generally decline. The values of lower- rated securities may often be affected to a greater extent by changes in general economic conditions and business conditions affecting the issuers of such securities and their industries. Negative publicity or investor perceptions may also adversely affect the values of lower-rated securities. Changes by recognized rating services in their ratings of any 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 the fund's net asset value. The fund will not necessarily dispose of a security when its rating is reduced below its rating at the time of purchase. However, Putnam Management will monitor the investment to determine whether its retention will assist in meeting the fund's investment objective(s). Issuers of lower-rated securities are often highly leveraged, so that their ability to service their debt obligations during an economic downturn or during sustained periods of rising interest rates may be impaired. Such issuers may not have more traditional methods of financing available to them and may be unable to repay outstanding obligations at maturity by refinancing. The risk of loss due to default in payment of interest or repayment of principal by such issuers is significantly greater because such securities frequently are unsecured and subordinated to the prior payment of senior indebtedness. At times, a substantial portion of the fund's assets may be invested in securities as to which the fund, by itself or together with other funds and accounts managed by Putnam Management and its affiliates, holds all or a major portion. Although Putnam Management generally considers such securities to be liquid because of the availability of an institutional market for such securities, it is possible that, under adverse market or economic conditions or in the event of adverse changes in the financial condition of the issuer, the fund could find it more difficult to sell 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 the fund's net asset value. In order to enforce its rights in the event of a default under such securities, the fund may be required to participate in various legal proceedings or take possession of and manage assets securing the issuer's obligations on such securities. This could increase the fund's operating expenses and adversely affect the fund's net asset value. In the case of tax-exempt funds, any income derived from the fund's ownership or operation of such assets would not be tax-exempt. 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. In addition, the fund's intention to qualify as a "regulated investment company" under the Internal Revenue Code may limit the extent to which the fund may exercise its rights by taking possession of such assets. Certain securities held by the fund may permit the issuer at its option to "call," or redeem, its securities. If an issuer were to redeem securities held by the fund during a time of declining interest rates, the fund may not be able to reinvest the proceeds in securities providing the same investment return as the securities redeemed. If the fund's prospectus describes so-called "zero-coupon" bonds and "payment-in-kind" bonds as possible investments, the fund may invest without limit in such bonds unless otherwise specified in the prospectus. Zero-coupon bonds are issued at a significant discount from their principal amount in lieu of paying interest periodically. Payment-in-kind bonds allow the issuer, at its option, to make current interest payments on the bonds either in cash or in additional bonds. Because zero-coupon and payment-in- kind bonds do not pay current interest in cash, their value is subject to greater fluctuation in response to changes in market interest rates than bonds that pay interest currently. Both zero-coupon and payment-in-kind bonds allow an issuer to avoid the need to generate cash to meet current interest payments. Accordingly, such bonds may involve greater credit risks than bonds paying interest currently in cash. The fund is required to accrue interest income on such investments and to distribute such amounts at least annually to shareholders even though such bonds do not pay current interest in cash. Thus, the fund could be required at times to liquidate investments in order to satisfy its dividend requirements. To the extent the fund invests in securities in the lower rating categories, the achievement of the fund's goals is more dependent on Putnam Management's investment analysis than would be the case if the fund were investing in securities in the higher rating categories. This may be particularly true with respect to tax- exempt securities, as the amount of information about the financial condition of an issuer of tax-exempt securities may not be as extensive as that which is made available by corporations whose securities are publicly traded. INVESTMENTS IN MISCELLANEOUS FIXED INCOME SECURITIES Unless otherwise specified in the prospectus or elsewhere in this SAI, if the fund may invest in inverse floating obligations, premium securities, or interest-only or principal-only classes of mortgage-backed securities (IOs and POs), it may do so without limit. The fund, however, currently does not intend to invest more than 15% of its assets in inverse floating obligations or more than 35% of its assets in IOs and POs under normal market conditions. PRIVATE PLACEMENTS The fund may invest in securities that are purchased in private placements and, accordingly, are subject to restrictions on resale as a matter of contract or under federal securities laws. Because there may be relatively few potential purchasers for such investments, especially under adverse market or economic conditions or in the event of adverse changes in the financial condition of the issuer, the fund could find it more difficult to sell such securities when Putnam Management believes it advisable to do so or may be able to sell such securities only at prices lower than if such securities were more widely held. At times, it may also be more difficult to determine the fair value of such securities for purposes of computing the fund's net assets value. MORTGAGE RELATED SECURITIES The fund may invest in mortgage-backed securities, including collateralized mortgage obligations ("CMOs") and certain stripped mortgage-backed securities. CMOs and other mortgage-backed securities represent a participation in, or are secured by, mortgage loans. Mortgage-backed securities have yield and maturity characteristics corresponding to the underlying assets. Unlike traditional debt securities, which may pay a fixed rate of interest until maturity, when the entire principal amount comes due, payments on certain mortgage-backed securities include both interest and a partial repayment of principal. Besides the scheduled repayment of principal, repayments of principal may result from the voluntary prepayment, refinancing, or foreclosure of the underlying mortgage loans. If property owners make unscheduled prepayments of their mortgage loans, these prepayments will result in early payment of the applicable mortgage-related securities. In that event the fund may be unable to invest the proceeds from the early payment of the mortgage-related securities in an investment that provides as high a yield as the mortgage-related securities. Consequently, early payment associated with mortgage-related securities may cause these securities to experience significantly greater price and yield volatility than that experienced by traditional fixed- income securities. The occurrence of mortgage prepayments is affected by factors including the level of interest rates, general economic conditions, the location and age of the mortgage and other social and demographic conditions. During periods of falling interest rates, the rate of mortgage prepayments tends to increase, thereby tending to decrease the life of mortgage- related securities. During periods of rising interest rates, the rate of mortgage prepayments usually decreases, thereby tending to increase the life of mortgage-related securities. If the life of a mortgage-related security is inaccurately predicted, the fund may not be able to realize the rate of return it expected. Mortgage-backed securities are less effective than other types of securities as a means of "locking in" attractive long-term interest rates. One reason is the need to reinvest prepayments of principal; another is the possibility of significant unscheduled prepayments resulting from declines in interest rates. These prepayments would have to be reinvested at lower rates. As a result, these securities may have less potential for capital appreciation during periods of declining interest rates than other securities of comparable maturities, although they may have a similar risk of decline in market value during periods of rising interest rates. Prepayments may cause losses in securities purchased at a premium. At times, some of the mortgage-backed securities in which the fund may invest will have higher than market interest rates and therefore will be purchased at a premium above their par value. Unscheduled prepayments, which are made at par, will cause the fund to experience a loss equal to any unamortized premium. CMOs may be issued by a U.S. government agency or instrumentality or by a private issuer. Although payment of the principal of, and interest on, the underlying collateral securing privately issued CMOs may be guaranteed by the U.S. government or its agencies or instrumentalities, these CMOs represent obligations solely of the private issuer and are not insured or guaranteed by the U.S. government, its agencies or instrumentalities or any other person or entity. Prepayments could cause early retirement of CMOs. CMOs are designed to reduce the risk of prepayment for investors by issuing multiple classes of securities, each having different maturities, interest rates and payment schedules, and with the principal and interest on the underlying mortgages allocated among the several classes in various ways. Payment of interest or principal on some classes or series of CMOs may be subject to contingencies or some classes or series may bear some or all of the risk of default on the underlying mortgages. CMOS of different classes or series are generally retired in sequence as the underlying mortgage loans in the mortgage pool are repaid. If enough mortgages are repaid ahead of schedule, the classes or series of a CMO with the earliest maturities generally will be retired prior to their maturities. Thus, the early retirement of particular classes or series of a CMO held by the fund would have the same effect as the prepayment of mortgages underlying other mortgage-backed securities. Prepayments could result in losses on stripped mortgage-backed securities. Stripped mortgage-backed securities are usually structured with two classes that receive different portions of the interest and principal distributions on a pool of mortgage loans. The fund may invest in both the interest-only or "IO" class and the principal-only or "PO" class. The yield to maturity on an IO class of stripped mortgage-backed securities is extremely sensitive not only to changes in prevailing interest rates but also to the rate of principal payments (including prepayments) on the underlying assets. A rapid rate of principal prepayments may have a measurable adverse effect on the fund's yield to maturity to the extent it invests in IOs. If the assets underlying the IO experience greater than anticipated prepayments of principal, the fund may fail to recoup fully its initial investment in these securities. Conversely, POs tend to increase in value if prepayments are greater than anticipated and decline if prepayments are slower than anticipated. The secondary market for stripped mortgage-backed securities may be more volatile and less liquid than that for other mortgage- backed securities, potentially limiting the fund's ability to buy or sell those securities at any particular time. SECURITIES LOANS The fund may make secured loans of its portfolio securities, on either a short-term or long-term basis, amounting to not more than 25% of its total assets, thereby realizing additional income. The risks in lending portfolio securities, as with other extensions of credit, consist of possible delay in recovery of the securities or possible loss of rights in the collateral should the borrower fail financially. As a matter of policy, securities loans are made to broker-dealers pursuant to agreements requiring that the loans be continuously secured by collateral consisting of cash or short-term debt obligations at least equal at all times to the value of the securities on loan, "marked-to-market" daily. The borrower pays to the fund an amount equal to any dividends or interest received on securities lent. The fund retains all or a portion of the interest received on investment of the cash collateral or receives a fee from the borrower. Although voting rights, or rights to consent, with respect to the loaned securities may pass to the borrower, the fund retains the right to call the loans at any time on reasonable notice, and it will do so to enable the fund to exercise voting rights on any matters materially affecting the investment. The fund may also call such loans in order to sell the securities. FORWARD COMMITMENTS The fund may enter into contracts to purchase securities for a fixed price at a future date beyond customary settlement time ("forward commitments") if the fund holds, and maintains until the settlement date in a segregated account, cash or high-grade debt obligations in an amount sufficient to meet the purchase price, or if the fund enters into offsetting contracts for the forward sale of other securities it owns. In the case of to-be- announced ("TBA") purchase commitments, the unit price and the estimated principal amount are established when the fund enters into a contract, with the actual principal amount being within a specified range of the estimate. Forward commitments may be considered securities in themselves, and involve a risk of loss if the value of the security to be purchased declines prior to the settlement date, which risk is in addition to the risk of decline in the value of the fund's other assets. Where such purchases are made through dealers, the fund relies on the dealer to consummate the sale. The dealer's failure to do so may result in the loss to the fund of an advantageous yield or price. Although the fund will generally enter into forward commitments with the intention of acquiring securities for its portfolio or for delivery pursuant to options contracts it has entered into, the fund may dispose of a commitment prior to settlement if Putnam Management deems it appropriate to do so. The fund may realize short-term profits or losses upon the sale of forward commitments. The fund may enter into TBA sale commitments to hedge its portfolio positions or to sell securities it owns under delayed delivery arrangements. Proceeds of TBA sale commitments are not received until the contractual settlement date. During the time a TBA sale commitment is outstanding, equivalent deliverable securities, or an offsetting TBA purchase commitment deliverable on or before the sale commitment date, are held as "cover" for the transaction. Unsettled TBA sale commitments are valued at current market value of the underlying securities. If the TBA sale commitment is closed through the acquisition of an offsetting purchase commitment, the fund realizes a gain or loss on the commitment without regard to any unrealized gain or loss on the underlying security. If the fund delivers securities under the commitment, the fund realizes a gain or loss from the sale of the securities based upon the unit price established at the date the commitment was entered into. REPURCHASE AGREEMENTS The fund may enter into repurchase agreements up to the limit specified in the prospectus. A repurchase agreement is a contract under which the fund acquires a security for a relatively short period (usually not more than one week) subject to the obligation of the seller to repurchase and the fund to resell such security at a fixed time and price (representing the fund's cost plus interest). It is the fund's present intention to enter into repurchase agreements only with commercial banks and registered broker-dealers and only with respect to obligations of the U.S. government or its agencies or instrumentalities. Repurchase agreements may also be viewed as loans made by the fund which are collateralized by the securities subject to repurchase. Putnam Management will monitor such transactions to ensure that the value of the underlying securities will be at least equal at all times to the total amount of the repurchase obligation, including the interest factor. If the seller defaults, the fund could realize a loss on the sale of the underlying security to the extent that the proceeds of sale including accrued interest are less than the resale price provided in the agreement including interest. In addition, if the seller should be involved in bankruptcy or insolvency proceedings, the fund may incur delay and costs in selling the underlying security or may suffer a loss of principal and interest if the fund is treated as an unsecured creditor and required to return the underlying collateral to the seller's estate. Pursuant to an exemptive order issued by the Securities and Exchange Commission, the fund may transfer uninvested cash balances into a joint account, along with cash of other Putnam funds and certain other accounts. These balances may be invested in one or more repurchase agreements and/or short-term money market instruments. OPTIONS ON SECURITIES WRITING COVERED OPTIONS. The fund may write covered call options and covered put options on optionable securities held in its portfolio, when in the opinion of Putnam Management such transactions are consistent with the fund's investment objective(s) and policies. Call options written by the fund give the purchaser the right to buy the underlying securities from the fund at a stated exercise price; put options give the purchaser the right to sell the underlying securities to the fund at a stated price. The fund may write only covered options, which means that, so long as the fund is obligated as the writer of a call option, it will own the underlying securities subject to the option (or comparable securities satisfying the cover requirements of securities exchanges). In the case of put options, the fund will hold cash and/or high-grade short-term debt obligations equal to the price to be paid if the option is exercised. In addition, the fund will be considered to have covered a put or call option if and to the extent that it holds an option that offsets some or all of the risk of the option it has written. The fund may write combinations of covered puts and calls on the same underlying security. The fund will receive a premium from writing a put or call option, which increases the fund's return on the underlying security in the event the option expires unexercised or is closed out at a profit. The amount of the premium reflects, among other things, the relationship between the exercise price and the current market value of the underlying security, the volatility of the underlying security, the amount of time remaining until expiration, current interest rates, and the effect of supply and demand in the options market and in the market for the underlying security. By writing a call option, the fund limits its opportunity to profit from any increase in the market value of the underlying security above the exercise price of the option but continues to bear the risk of a decline in the value of the underlying security. By writing a put option, the fund assumes the risk that it may be required to purchase the underlying security for an exercise price higher than its then-current market value, resulting in a potential capital loss unless the security subsequently appreciates in value. The fund may terminate an option that it has written prior to its expiration by entering into a closing purchase transaction, in which it purchases an offsetting option. The fund realizes a profit or loss from a closing transaction if the cost of the transaction (option premium plus transaction costs) is less or more than the premium received from writing the option. If the fund writes a call option but does not own the underlying security, and when it writes a put option, the fund may be required to deposit cash or securities with its broker as "margin," or collateral, for its obligation to buy or sell the underlying security. As the value of the underlying security varies, the fund may have to deposit additional margin with the broker. Margin requirements are complex and are fixed by individual brokers, subject to minimum requirements currently imposed by the Federal Reserve Board and by stock exchanges and other self-regulatory organizations. PURCHASING PUT OPTIONS. The fund may purchase put options to protect its portfolio holdings in an underlying security against a decline in market value. Such protection is provided during the life of the put option since the fund, as holder of the option, is able to sell the underlying security at the put exercise price regardless of any decline in the underlying security's market price. In order for a put option to be profitable, the market price of the underlying security must decline sufficiently below the exercise price to cover the premium and transaction costs. By using put options in this manner, the fund will reduce any profit it might otherwise have realized from appreciation of the underlying security by the premium paid for the put option and by transaction costs. PURCHASING CALL OPTIONS. The fund may purchase call options to hedge against an increase in the price of securities that the fund wants ultimately to buy. Such hedge protection is provided during the life of the call option since the fund, as holder of the call option, is able to buy the underlying security at the exercise price regardless of any increase in the underlying security's market price. In order for a call option to be profitable, the market price of the underlying security must rise sufficiently above the exercise price to cover the premium and transaction costs. RISK FACTORS IN OPTIONS TRANSACTIONS The successful use of the fund's options strategies depends on the ability of Putnam Management to forecast correctly interest rate and market movements. For example, if the fund were to write a call option based on Putnam Management's expectation that the price of the underlying security would fall, but the price were to rise instead, the fund could be required to sell the security upon exercise at a price below the current market price. Similarly, if the fund were to write a put option based on Putnam Management's expectation that the price of the underlying security would rise, but the price were to fall instead, the fund could be required to purchase the security upon exercise at a price higher than the current market price. When the fund purchases an option, it runs the risk that it will lose its entire investment in the option in a relatively short period of time, unless the fund exercises the option or enters into a closing sale transaction before the option's expiration. If the price of the underlying security does not rise (in the case of a call) or fall (in the case of a put) to an extent sufficient to cover the option premium and transaction costs, the fund will lose part or all of its investment in the option. This contrasts with an investment by the fund in the underlying security, since the fund will not realize a loss if the security's price does not change. The effective use of options also depends on the fund's ability to terminate option positions at times when Putnam Management deems it desirable to do so. There is no assurance that the fund will be able to effect closing transactions at any particular time or at an acceptable price. If a secondary market in options were to become unavailable, the fund could no longer engage in closing transactions. Lack of investor interest might adversely affect the liquidity of the market for particular options or series of options. A market may discontinue trading of a particular option or options generally. In addition, a market could become temporarily unavailable if unusual events -- such as volume in excess of trading or clearing capability -- were to interrupt its normal operations. A market may at times find it necessary to impose restrictions on particular types of options transactions, such as opening transactions. For example, if an underlying security ceases to meet qualifications imposed by the market or the Options Clearing Corporation, new series of options on that security will no longer be opened to replace expiring series, and opening transactions in existing series may be prohibited. If an options market were to become unavailable, the fund as a holder of an option would be able to realize profits or limit losses only by exercising the option, and the fund, as option writer, would remain obligated under the option until expiration or exercise. Disruptions in the markets for the securities underlying options purchased or sold by the fund could result in losses on the options. If trading is interrupted in an underlying security, the trading of options on that security is normally halted as well. As a result, the fund as purchaser or writer of an option will be unable to close out its positions until options trading resumes, and it may be faced with considerable losses if trading in the security reopens at a substantially different price. In addition, the Options Clearing Corporation or other options markets may impose exercise restrictions. If a prohibition on exercise is imposed at the time when trading in the option has also been halted, the fund as purchaser or writer of an option will be locked into its position until one of the two restrictions has been lifted. If the Options Clearing Corporation were to determine that the available supply of an underlying security appears insufficient to permit delivery by the writers of all outstanding calls in the event of exercise, it may prohibit indefinitely the exercise of put options. The fund, as holder of such a put option, could lose its entire investment if the prohibition remained in effect until the put option's expiration. Foreign-traded options are subject to many of the same risks presented by internationally-traded securities. In addition, because of time differences between the United States and various foreign countries, and because different holidays are observed in different countries, foreign options markets may be open for trading during hours or on days when U.S. markets are closed. As a result, option premiums may not reflect the current prices of the underlying interest in the United States. Over-the-counter ("OTC") options purchased by the fund and assets held to cover OTC options written by the fund may, under certain circumstances, be considered illiquid securities for purposes of any limitation on the fund's ability to invest in illiquid securities. FUTURES CONTRACTS AND RELATED OPTIONS Subject to applicable law, and unless otherwise specified in the prospectus, the fund may invest without limit in the types of futures contracts and related options identified in the prospectus for hedging and non-hedging purposes. The use of futures and options transactions for purposes other than hedging entails greater risks. A financial futures contract sale creates an obligation by the seller to deliver the type of financial instrument called for in the contract in a specified delivery month for a stated price. A financial futures contract purchase creates an obligation by the purchaser to take delivery of the type of financial instrument called for in the contract in a specified delivery month at a stated price. The specific instruments delivered or taken, respectively, at settlement date are not determined until on or near that date. The determination is made in accordance with the rules of the exchange on which the futures contract sale or purchase was made. Futures contracts are traded in the United States only on commodity exchanges or boards of trade -- known as "contract markets" -- approved for such trading by the Commodity Futures Trading Commission (the "CFTC"), and must be executed through a futures commission merchant or brokerage firm which is a member of the relevant contract market. Although futures contracts (other than index futures) by their terms call for actual delivery or acceptance of commodities or securities, in most cases the contracts are closed out before the settlement date without the making or taking of delivery. Closing out a futures contract sale is effected by purchasing a futures contract for the same aggregate amount of the specific type of financial instrument or commodity with the same delivery date. If the price of the initial sale of the futures contract exceeds the price of the offsetting purchase, the seller is paid the difference and realizes a gain. Conversely, if the price of the offsetting purchase exceeds the price of the initial sale, the seller realizes a loss. If the fund is unable to enter into a closing transaction, the amount of the fund's potential loss is unlimited. The closing out of a futures contract purchase is effected by the purchaser's entering into a futures contract sale. If the offsetting sale price exceeds the purchase price, the purchaser realizes a gain, and if the purchase price exceeds the offsetting sale price, he realizes a loss. In general 40% of the gain or loss arising from the closing out of a futures contract traded on an exchange approved by the CFTC is treated as short-term gain or loss, and 60% is treated as long-term gain or loss. Unlike when the fund purchases or sells a security, no price is paid or received by the fund upon the purchase or sale of a futures contract. Upon entering into a contract, the fund is required to deposit with its custodian in a segregated account in the name of the futures broker an amount of cash and/or U.S. government securities. This amount is known as "initial margin." The nature of initial margin in futures transactions is different from that of margin in security transactions in that futures contract margin does not involve the borrowing of funds to finance the transactions. Rather, initial margin is similar to a performance bond or good faith deposit which is returned to the fund upon termination of the futures contract, assuming all contractual obligations have been satisfied. Futures contracts also involve brokerage costs. Subsequent payments, called "variation margin" or "maintenance margin," to and from the broker (or the custodian) are made on a daily basis as the price of the underlying security or commodity fluctuates, making the long and short positions in the futures contract more or less valuable, a process known as "marking to the market." For example, when the fund has purchased a futures contract on a security and the price of the underlying security has risen, that position will have increased in value and the fund will receive from the broker a variation margin payment based on that increase in value. Conversely, when the fund has purchased a security futures contract and the price of the underlying security has declined, the position would be less valuable and the fund would be required to make a variation margin payment to the broker. The fund may elect to close some or all of its futures positions at any time prior to their expiration in order to reduce or eliminate a hedge position then currently held by the fund. The fund may close its positions by taking opposite positions which will operate to terminate the fund's position in the futures contracts. Final determinations of variation margin are then made, additional cash is required to be paid by or released to the fund, and the fund realizes a loss or a gain. Such closing transactions involve additional commission costs. OPTIONS ON FUTURES CONTRACTS. The fund may purchase and write call and put options on futures contracts it may buy or sell and enter into closing transactions with respect to such options to terminate existing positions. Options on future contracts give the purchaser the right in return for the premium paid to assume a position in a futures contract at the specified option exercise price at any time during the period of the option. The fund may use options on futures contracts in lieu of writing or buying options directly on the underlying securities or purchasing and selling the underlying futures contracts. For example, to hedge against a possible decrease in the value of its portfolio securities, the fund may purchase put options or write call options on futures contracts rather than selling futures contracts. Similarly, the fund may purchase call options or write put options on futures contracts as a substitute for the purchase of futures contracts to hedge against a possible increase in the price of securities which the fund expects to purchase. Such options generally operate in the same manner as options purchased or written directly on the underlying investments. As with options on securities, the holder or writer of an option may terminate his position by selling or purchasing an offsetting option. There is no guarantee that such closing transactions can be effected. The fund will be required to deposit initial margin and maintenance margin with respect to put and call options on futures contracts written by it pursuant to brokers' requirements similar to those described above in connection with the discussion of futures contracts. RISKS OF TRANSACTIONS IN FUTURES CONTRACTS AND RELATED OPTIONS. Successful use of futures contracts by the fund is subject to Putnam Management's ability to predict movements in various factors affecting securities markets, including interest rates. Compared to the purchase or sale of futures contracts, the purchase of call or put options on futures contracts involves less potential risk to the fund because the maximum amount at risk is the premium paid for the options (plus transaction costs). However, there may be circumstances when the purchase of a call or put option on a futures contract would result in a loss to the fund when the purchase or sale of a futures contract would not, such as when there is no movement in the prices of the hedged investments. The writing of an option on a futures contract involves risks similar to those risks relating to the sale of futures contracts. There is no assurance that higher than anticipated trading activity or other unforeseen events might not, at times, render certain market clearing facilities inadequate, and thereby result in the institution by exchanges of special procedures which may interfere with the timely execution of customer orders. To reduce or eliminate a position held by the fund, the fund may seek to close out such position. The ability to establish and close out positions will be subject to the development and maintenance of a liquid secondary market. It is not certain that this market will develop or continue to exist for a particular futures contract or option. Reasons for the absence of a liquid secondary market on an exchange include the following: (i) there may be insufficient trading interest in certain contracts or options; (ii) restrictions may be imposed by an exchange on opening transactions or closing transactions or both; (iii) trading halts, suspensions or other restrictions may be imposed with respect to particular classes or series of contracts or options, or underlying securities; (iv) unusual or unforeseen circumstances may interrupt normal operations on an exchange; (v) the facilities of an exchange or a clearing corporation may not at all times be adequate to handle current trading volume; or (vi) one or more exchanges could, for economic or other reasons, decide or be compelled at some future date to discontinue the trading of contracts or options (or a particular class or series of contracts or options), in which event the secondary market on that exchange for such contracts or options (or in the class or series of contracts or options) would cease to exist, although outstanding contracts or options on the exchange that had been issued by a clearing corporation as a result of trades on that exchange would continue to be exercisable in accordance with their terms. U.S. TREASURY SECURITY FUTURES CONTRACTS AND OPTIONS. U.S. Treasury security futures contracts require the seller to deliver, or the purchaser to take delivery of, the type of U.S. Treasury security called for in the contract at a specified date and price. Options on U.S. Treasury security futures contracts give the purchaser the right in return for the premium paid to assume a position in a U.S. Treasury security futures contract at the specified option exercise price at any time during the period of the option. Successful use of U.S. Treasury security futures contracts by the fund is subject to Putnam Management's ability to predict movements in the direction of interest rates and other factors affecting markets for debt securities. For example, if the fund has sold U.S. Treasury security futures contracts in order to hedge against the possibility of an increase in interest rates which would adversely affect securities held in its portfolio, and the prices of the fund's securities increase instead as a result of a decline in interest rates, the fund will lose part or all of the benefit of the increased value of its securities which it has hedged because it will have offsetting losses in its futures positions. In addition, in such situations, if the fund has insufficient cash, it may have to sell securities to meet daily maintenance margin requirements at a time when it may be disadvantageous to do so. There is also a risk that price movements in U.S. Treasury security futures contracts and related options will not correlate closely with price movements in markets for particular securities. For example, if the fund has hedged against a decline in the values of tax-exempt securities held by it by selling Treasury security futures and the values of Treasury securities subsequently increase while the values of its tax-exempt securities decrease, the fund would incur losses on both the Treasury security futures contracts written by it and the tax-exempt securities held in its portfolio. INDEX FUTURES CONTRACTS. An index futures contract is a contract to buy or sell units of an index at a specified future date at a price agreed upon when the contract is made. Entering into a contract to buy units of an index is commonly referred to as buying or purchasing a contract or holding a long position in the index. Entering into a contract to sell units of an index is commonly referred to as selling a contract or holding a short position. A unit is the current value of the index. The fund may enter into stock index futures contracts, debt index futures contracts, or other index futures contracts appropriate to its objective(s). The fund may also purchase and sell options on index futures contracts. For example, the Standard & Poor's Composite 500 Stock Price Index ("S&P 500") is composed of 500 selected common stocks, most of which are listed on the New York Stock Exchange. The S&P 500 assigns relative weightings to the common stocks included in the Index, and the value fluctuates with changes in the market values of those common stocks. In the case of the S&P 500, contracts are to buy or sell 500 units. Thus, if the value of the S&P 500 were $150, one contract would be worth $75,000 (500 units x $150). The stock index futures contract specifies that no delivery of the actual stocks making up the index will take place. Instead, settlement in cash must occur upon the termination of the contract, with the settlement being the difference between the contract price and the actual level of the stock index at the expiration of the contract. For example, if the fund enters into a futures contract to buy 500 units of the S&P 500 at a specified future date at a contract price of $150 and the S&P 500 is at $154 on that future date, the fund will gain $2,000 (500 units x gain of $4). If the fund enters into a futures contract to sell 500 units of the stock index at a specified future date at a contract price of $150 and the S&P 500 is at $152 on that future date, the fund will lose $1,000 (500 units x loss of $2). There are several risks in connection with the use by the fund of index futures. One risk arises because of the imperfect correlation between movements in the prices of the index futures and movements in the prices of securities which are the subject of the hedge. Putnam Management will, however, attempt to reduce this risk by buying or selling, to the extent possible, futures on indices the movements of which will, in its judgment, have a significant correlation with movements in the prices of the securities sought to be hedged. Successful use of index futures by the fund is also subject to Putnam Management's ability to predict movements in the direction of the market. For example, it is possible that, where the fund has sold futures to hedge its portfolio against a decline in the market, the index on which the futures are written may advance and the value of securities held in the fund's portfolio may decline. If this occurred, the fund would lose money on the futures and also experience a decline in value in its portfolio securities. It is also possible that, if the fund has hedged against the possibility of a decline in the market adversely affecting securities held in its portfolio and securities prices increase instead, the fund will lose part or all of the benefit of the increased value of those securities it has hedged because it will have offsetting losses in its futures positions. In addition, in such situations, if the fund has insufficient cash, it may have to sell securities to meet daily variation margin requirements at a time when it is disadvantageous to do so. In addition to the possibility that there may be an imperfect correlation, or no correlation at all, between movements in the index futures and the portion of the portfolio being hedged, the prices of index futures may not correlate perfectly with movements in the underlying index due to certain market distortions. First, all participants in the futures market are subject to margin deposit and maintenance requirements. Rather than meeting additional margin deposit requirements, investors may close futures contracts through offsetting transactions which could distort the normal relationship between the index and futures markets. Second, margin requirements in the futures market are less onerous than margin requirements in the securities market, and as a result the futures market may attract more speculators than the securities market does. Increased participation by speculators in the futures market may also cause temporary price distortions. Due to the possibility of price distortions in the futures market and also because of the imperfect correlation between movements in the index and movements in the prices of index futures, even a correct forecast of general market trends by Putnam Management may still not result in a profitable position over a short time period. OPTIONS ON STOCK INDEX FUTURES. Options on index futures are similar to options on securities except that options on index futures give the purchaser the right, in return for the premium paid, to assume a position in an index futures contract (a long position if the option is a call and a short position if the option is a put) at a specified exercise price at any time during the period of the option. Upon exercise of the option, the delivery of the futures position by the writer of the option to the holder of the option will be accompanied by delivery of the accumulated balance in the writer's futures margin account which represents the amount by which the market price of the index futures contract, at exercise, exceeds (in the case of a call) or is less than (in the case of a put) the exercise price of the option on the index future. If an option is exercised on the last trading day prior to its expiration date, the settlement will be made entirely in cash equal to the difference between the exercise price of the option and the closing level of the index on which the future is based on the expiration date. Purchasers of options who fail to exercise their options prior to the exercise date suffer a loss of the premium paid. OPTIONS ON INDICES As an alternative to purchasing call and put options on index futures, the fund may purchase and sell call and put options on the underlying indices themselves. Such options would be used in a manner identical to the use of options on index futures. INDEX WARRANTS The fund may purchase put warrants and call warrants whose values vary depending on the change in the value of one or more specified securities indices ("index warrants"). Index warrants are generally issued by banks or other financial institutions and give the holder the right, at any time during the term of the warrant, to receive upon exercise of the warrant a cash payment from the issuer based on the value of the underlying index at the time of exercise. In general, if the value of the underlying index rises above the exercise price of the index warrant, the holder of a call warrant will be entitled to receive a cash payment from the issuer upon exercise based on the difference between the value of the index and the exercise price of the warrant; if the value of the underlying index falls, the holder of a put warrant will be entitled to receive a cash payment from the issuer upon exercise based on the difference between the exercise price of the warrant and the value of the index. The holder of a warrant would not be entitled to any payments from the issuer at any time when, in the case of a call warrant, the exercise price is greater than the value of the underlying index, or, in the case of a put warrant, the exercise price is less than the value of the underlying index. If the fund were not to exercise an index warrant prior to its expiration, then the fund would lose the amount of the purchase price paid by it for the warrant. The fund will normally use index warrants in a manner similar to its use of options on securities indices. The risks of the fund's use of index warrants are generally similar to those relating to its use of index options. Unlike most index options, however, index warrants are issued in limited amounts and are not obligations of a regulated clearing agency, but are backed only by the credit of the bank or other institution which issues the warrant. Also, index warrants generally have longer terms than index options. Although the fund will normally invest only in exchange-listed warrants, index warrants are not likely to be as liquid as certain index options backed by a recognized clearing agency. In addition, the terms of index warrants may limit the fund's ability to exercise the warrants at such time, or in such quantities, as the fund would otherwise wish to do. FOREIGN SECURITIES Under its current policy, which may be changed without shareholder approval, the fund may invest up to the limit of its total assets specified in its prospectus in securities principally traded in markets outside the United States. Eurodollar certificates of deposit are excluded for purposes of this limitation. Since foreign securities are normally denominated and traded in foreign currencies, the value of the fund's assets may be affected favorably or unfavorably by changes in currency exchange rates, exchange control regulations and restrictions or prohibitions on the repatriation of foreign currencies. There may be less information publicly available about a foreign company than about a U.S. company, and foreign companies are not generally subject to accounting, auditing and financial reporting standards and practices comparable to those in the United States. The securities of some foreign companies are less liquid and at times more volatile than securities of comparable U.S. companies. Foreign brokerage commissions and other fees are also generally higher than in the United States. Foreign settlement procedures and trade regulations may involve certain risks (such as delay in payment or delivery of securities or in the recovery of the fund's assets held abroad) and expenses not present in the settlement of domestic investments. In addition, there may be a possibility of nationalization or expropriation of assets, imposition of currency exchange controls, confiscatory taxation, political or financial instability and diplomatic developments which could affect the value of the fund's investments in certain foreign countries. Legal remedies available to investors in certain foreign countries may be more limited than those available with respect to investments in the United States or in other foreign countries. The laws of some foreign countries may limit the fund's ability to invest in securities of certain issuers located in those foreign countries. Special tax considerations apply to foreign securities. The risks described above, including the risks of nationalization or expropriation of assets, are typically increased to the extent that the fund invests in issuers located in less developed and developing nations, whose securities markets are sometimes referred to as "emerging securities markets." Investments in securities located in such countries are speculative and subject to certain special risks. Political and economic structures in many of these countries may be in their infancy and developing rapidly, and such countries may lack the social, political and economic stability characteristic of more developed countries. Certain of these countries have in the past failed to recognize private property rights and have at times nationalized and expropriated the assets of private companies. In addition, unanticipated political or social developments may affect the values of the fund's investments in these countries and the availability to the fund of additional investments in these countries. The small size, limited trading volume and relative inexperience of the securities markets in these countries may make the fund's investments in such countries illiquid and more volatile than investments in more developed countries, and the fund may be required to establish special custodial or other arrangements before making investments in these countries. There may be little financial or accounting information available with respect to issuers located in these countries, and it may be difficult as a result to assess the value or prospects of an investment in such issuers. FOREIGN CURRENCY TRANSACTIONS Unless otherwise specified in the prospectus or Part I of this SAI, the fund may engage without limit in currency exchange transactions, including purchasing and selling foreign currency, foreign currency options, foreign currency forward contracts and foreign currency futures contracts and related options, to protect against uncertainty in the level of future currency exchange rates. In addition, the fund may write covered call and put options on foreign currencies for the purpose of increasing its current return. Generally, the fund may engage in both "transaction hedging" and "position hedging." When it engages in transaction hedging, the fund enters into foreign currency transactions with respect to specific receivables or payables, generally arising in connection with the purchase or sale of portfolio securities. The fund will engage in transaction hedging when it desires to "lock in" the U.S. dollar price of a security it has agreed to purchase or sell, or the U.S. dollar equivalent of a dividend or interest payment in a foreign currency. By transaction hedging the fund will attempt to protect itself against a possible loss resulting from an adverse change in the relationship between the U.S. dollar and the applicable foreign currency during the period between the date on which the security is purchased or sold, or on which the dividend or interest payment is earned, and the date on which such payments are made or received. The fund may purchase or sell a foreign currency on a spot (or cash) basis at the prevailing spot rate in connection with the settlement of transactions in portfolio securities denominated in that foreign currency. The fund may also enter into contracts to purchase or sell foreign currencies at a future date ("forward contracts") and purchase and sell foreign currency futures contracts. For transaction hedging purposes the fund may also purchase exchange-listed and over-the-counter call and put options on foreign currency futures contracts and on foreign currencies. A put option on a futures contract gives the fund the right to assume a short position in the futures contract until the expiration of the option. A put option on a currency gives the fund the right to sell the currency at an exercise price until the expiration of the option. A call option on a futures contract gives the fund the right to assume a long position in the futures contract until the expiration of the option. A call option on a currency gives the fund the right to purchase the currency at the exercise price until the expiration of the option. When it engages in position hedging, the fund enters into foreign currency exchange transactions to protect against a decline in the values of the foreign currencies in which its portfolio securities are denominated (or an increase in the value of currency for securities which the fund expects to purchase). In connection with position hedging, the fund may purchase put or call options on foreign currency and on foreign currency futures contracts and buy or sell forward contracts and foreign currency futures contracts. The fund may also purchase or sell foreign currency on a spot basis. It is impossible to forecast with precision the market value of portfolio securities at the expiration or maturity of a forward or futures contract. Accordingly, it may be necessary for the fund to purchase additional foreign currency on the spot market (and bear the expense of such purchase) if the market value of the security or securities being hedged is less than the amount of foreign currency the fund is obligated to deliver and a decision is made to sell the security or securities and make delivery of the foreign currency. Conversely, it may be necessary to sell on the spot market some of the foreign currency received upon the sale of the portfolio security or securities if the market value of such security or securities exceeds the amount of foreign currency the fund is obligated to deliver. Transaction and position hedging do not eliminate fluctuations in the underlying prices of the securities which the fund owns or intends to purchase or sell. They simply establish a rate of exchange which one can achieve at some future point in time. Additionally, although these techniques tend to minimize the risk of loss due to a decline in the value of the hedged currency, they tend to limit any potential gain which might result from the increase in value of such currency. See "Risk factors in options transactions" above. The fund may seek to increase its current return or to offset some of the costs of hedging against fluctuations in current exchange rates by writing covered call options and covered put options on foreign currencies. The fund receives a premium from writing a call or put option, which increases the fund's current return if the option expires unexercised or is closed out at a net profit. The fund may terminate an option that it has written prior to its expiration by entering into a closing purchase transaction in which it purchases an option having the same terms as the option written. The fund's currency hedging transactions may call for the delivery of one foreign currency in exchange for another foreign currency and may at times not involve currencies in which its portfolio securities are then denominated. Putnam Management will engage in such "cross hedging" activities when it believes that such transactions provide significant hedging opportunities for the fund. Cross hedging transactions by the fund involve the risk of imperfect correlation between changes in the values of the currencies to which such transactions relate and changes in the value of the currency or other asset or liability which is the subject of the hedge. The value of any currency, including U.S. dollars and foreign currencies, may be affected by complex political and economic factors applicable to the issuing country. In addition, the exchange rates of foreign currencies (and therefore the values of foreign currency options, forward contracts and futures contracts) may be affected significantly, fixed, or supported directly or indirectly by U.S. and foreign government actions. Government intervention may increase risks involved in purchasing or selling foreign currency options, forward contracts and futures contracts, since exchange rates may not be free to fluctuate in response to other market forces. The value of a foreign currency option, forward contract or futures contract reflects the value of an exchange rate, which in turn reflects relative values of two currencies, the U.S. dollar and the foreign currency in question. Because foreign currency transactions occurring in the interbank market involve substantially larger amounts than those that may be involved in the exercise of foreign currency options, forward contracts and futures contracts, investors may be disadvantaged by having to deal in an odd-lot market for the underlying foreign currencies in connection with options at prices that are less favorable than for round lots. Foreign governmental restrictions or taxes could result in adverse changes in the cost of acquiring or disposing of foreign currencies. There is no systematic reporting of last sale information for foreign currencies and there is no regulatory requirement that quotations available through dealers or other market sources be firm or revised on a timely basis. Available quotation information is generally representative of very large round-lot transactions in the interbank market and thus may not reflect exchange rates for smaller odd-lot transactions (less than $1 million) where rates may be less favorable. The interbank market in foreign currencies is a global, around-the-clock market. To the extent that options markets are closed while the markets for the underlying currencies remain open, significant price and rate movements may take place in the underlying markets that cannot be reflected in the options markets. CURRENCY FORWARD AND FUTURES CONTRACTS. A forward foreign currency contract involves an obligation to purchase or sell a specific currency at a future date, which may be any fixed number of days from the date of the contract as agreed by the parties, at a price set at the time of the contract. In the case of a cancelable forward contract, the holder has the unilateral right to cancel the contract at maturity by paying a specified fee. The contracts are traded in the interbank market conducted directly between currency traders (usually large commercial banks) and their customers. A forward contract generally has no deposit requirement, and no commissions are charged at any stage for trades. A foreign currency futures contract is a standardized contract for the future delivery of a specified amount of a foreign currency at a price set at the time of the contract. Foreign currency futures contracts traded in the United States are designed by and traded on exchanges regulated by the CFTC, such as the New York Mercantile Exchange. Forward foreign currency exchange contracts differ from foreign currency futures contracts in certain respects. For example, the maturity date of a forward contract may be any fixed number of days from the date of the contract agreed upon by the parties, rather than a predetermined date in a given month. Forward contracts may be in any amounts agreed upon by the parties rather than predetermined amounts. Also, forward foreign exchange contracts are traded directly between currency traders so that no intermediary is required. A forward contract generally requires no margin or other deposit. At the maturity of a forward or futures contract, the fund either may accept or make delivery of the currency specified in the contract, or at or prior to maturity enter into a closing transaction involving the purchase or sale of an offsetting contract. Closing transactions with respect to forward contracts are usually effected with the currency trader who is a party to the original forward contract. Closing transactions with respect to futures contracts are effected on a commodities exchange; a clearing corporation associated with the exchange assumes responsibility for closing out such contracts. Positions in the foreign currency futures contracts may be closed out only on an exchange or board of trade which provides a secondary market in such contracts. Although the fund intends to purchase or sell foreign currency futures contracts only on exchanges or boards of trade where there appears to be an active secondary market, there is no assurance that a secondary market on an exchange or board of trade will exist for any particular contract or at any particular time. In such event, it may not be possible to close a futures position and, in the event of adverse price movements, the fund would continue to be required to make daily cash payments of variation margin. FOREIGN CURRENCY OPTIONS. In general, options on foreign currencies operate similarly to options on securities and are subject to many of the risks described above. Foreign currency options are traded primarily in the over-the-counter market, although options on foreign currencies are also listed on several exchanges. Options are traded not only on the currencies of individual nations, but also on the European Currency Unit ("ECU"). The ECU is composed of amounts of a number of currencies, and is the official medium of exchange of the European Community's European Monetary System. The fund will only purchase or write foreign currency options when Putnam Management believes that a liquid secondary market exists for such options. There can be no assurance that a liquid secondary market will exist for a particular option at any specific time. Options on foreign currencies are affected by all of those factors which influence foreign exchange rates and investments generally. SETTLEMENT PROCEDURES. Settlement procedures relating to the fund's investments in foreign securities and to the fund's foreign currency exchange transactions may be more complex than settlements with respect to investments in debt or equity securities of U.S. issuers, and may involve certain risks not present in the fund's domestic investments. For example, settlement of transactions involving foreign securities or foreign currencies may occur within a foreign country, and the fund may be required to accept or make delivery of the underlying securities or currency in conformity with any applicable U.S. or foreign restrictions or regulations, and may be required to pay any fees, taxes or charges associated with such delivery. Such investments may also involve the risk that an entity involved in the settlement may not meet its obligations. FOREIGN CURRENCY CONVERSION. Although foreign exchange dealers do not charge a fee for currency conversion, they do realize a profit based on the difference (the "spread") between prices at which they are buying and selling various currencies. Thus, a dealer may offer to sell a foreign currency to the fund at one rate, while offering a lesser rate of exchange should the fund desire to resell that currency to the dealer. RESTRICTED SECURITIES The SEC Staff currently takes the view that any delegation by the Trustees of the authority to determine that a restricted security is readily marketable (as described in the investment restrictions of the funds) must be pursuant to written procedures established by the Trustees. It is the present intention of the funds' Trustees that, if the Trustees decide to delegate such determinations to Putnam Management or another person, they would do so pursuant to written procedures, consistent with the Staff's position. Should the Staff modify its position in the future, the Trustees would consider what action would be appropriate in light of the Staff's position at that time. TAXES TAXATION OF THE FUND. The fund intends to qualify each year as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). In order so to qualify and to qualify for the special tax treatment accorded regulated investment companies and their shareholders, the fund must, among other things: (a) Derive at least 90% of its gross income from dividends, interest, payments with respect to certain securities loans, and gains from the sale of stock, securities and foreign currencies, or other income (including but not limited to gains from options, futures, or forward contracts) derived with respect to its business of investing in such stock, securities, or currencies; (b) derive less than 30% of its gross income from the sale or other disposition of certain assets (including stock or securities and certain options, futures contracts, forward contracts and foreign currencies) held for less than three months; (c) distribute with respect to each taxable year at least 90% of the sum of its taxable net investment income, its net tax-exempt income, and the excess, if any, of net short-term capital gains over net long-term capital losses for such year; and (d) diversify its holdings so that, at the end of each fiscal quarter, (i) at least 50% of the market value of the fund's assets is represented by cash and cash items, U.S. government securities, securities of other regulated investment companies, and other securities limited in respect of any one issuer to a value not greater than 5% of the value of the fund's total assets and to not more than 10% of the outstanding voting securities of such issuer, and (ii) not more than 25% of the value of its assets is invested in the securities (other than those of the U.S. Government or other regulated investment companies) of any one issuer or of two or more issuers which the fund controls and which are engaged in the same, similar, or related trades or businesses. If the fund qualifies as a regulated investment company that is accorded special tax treatment, the fund will not be subject to federal income tax on income paid to its shareholders in the form of dividends (including capital gain dividends). If the fund failed to qualify as a regulated investment company accorded special tax treatment in any taxable year, the fund would be subject to tax on its taxable income at corporate rates, and all distributions from earnings and profits, including any distributions of net tax-exempt income and net long-term capital gains, would be taxable to shareholders as ordinary income. In addition, the fund could be required to recognize unrealized gains, pay substantial taxes and interest and make substantial distributions before requalifying as a regulated investment company that is accorded special tax treatment. If the fund fails to distribute in a calendar year substantially all of its ordinary income for such year and substantially all of its capital gain net income for the one-year period ending October 31 (or later if the fund is permitted so to elect and so elects), plus any retained amount from the prior year, the fund will be subject to a 4% excise tax on the undistributed amounts. A dividend paid to shareholders by the fund in January of a year generally is deemed to have been paid by the fund on December 31 of the preceding year, if the dividend was declared and payable to shareholders of record on a date in October, November or December of that preceding year. The fund intends generally to make distributions sufficient to avoid imposition of the 4% excise tax. EXEMPT-INTEREST DIVIDENDS. The fund will be qualified to pay exempt-interest dividends to its shareholders only if, at the close of each quarter of the fund's taxable year, at least 50% of the total value of the fund's assets consists of obligations the interest on which is exempt from federal income tax. Distributions that the fund properly designates as exempt- interest dividends are treated as interest excludable from shareholders' gross income for federal income tax purposes but may be taxable for federal alternative minimum tax purposes and for state and local purposes. If the fund intends to be qualified to pay exempt-interest dividends, the fund may be limited in its ability to enter into taxable transactions involving forward commitments, repurchase agreements, financial futures and options contracts on financial futures, tax-exempt bond indices and other assets. Part or all of the interest on indebtedness, if any, incurred or continued by a shareholder to purchase or carry shares of a fund paying exempt-interest dividends is not deductible. The portion of interest that is not deductible is equal to the total interest paid or accrued on the indebtedness, multiplied by the percentage of the fund's total distributions (not including distributions from net long-term capital gains) paid to the shareholder that are exempt-interest dividends. Under rules used by the Internal Revenue Service for determining when borrowed funds are considered used for the purpose of purchasing or carrying particular assets, the purchase of shares may be considered to have been made with borrowed funds even though such funds are not directly traceable to the purchase of shares. In general, exempt-interest dividends, if any, attributable to interest received on certain private activity obligations and certain industrial development bonds will not be tax-exempt to any shareholders who are "substantial users" of the facilities financed by such obligations or bonds or who are "related persons" of such substantial users. A fund which is qualified to pay exempt-interest dividends will inform investors within 60 days of the fund's fiscal year-end of the percentage of its income distributions designated as tax-exempt. The percentage is applied uniformly to all distributions made during the year. The percentage of income designated as tax-exempt for any particular distribution may be substantially different from the percentage of the fund's income that was tax-exempt during the period covered by the distribution. HEDGING TRANSACTIONS. If the fund engages in hedging transactions, including hedging transactions in options, futures contracts, and straddles, or other similar transactions, it will be subject to special tax rules (including mark-to-market, straddle, wash sale, and short sale rules), the effect of which may be to accelerate income to the fund, defer losses to the fund, cause adjustments in the holding periods of the fund's securities, or convert short-term capital losses into long-term capital losses. These rules could therefore affect the amount, timing and character of distributions to shareholders. The fund will endeavor to make any available elections pertaining to such transactions in a manner believed to be in the best interests of the fund. Under the 30% of gross income test described above (see "Taxation of the fund"), the fund will be restricted in selling assets held or considered under Code rules to have been held for less than three months, and in engaging in certain hedging transactions (including hedging transactions in options and futures) that in some circumstances could cause certain fund assets to be treated as held for less than three months. Certain of the fund's hedging activities (including its transactions, if any, in foreign currencies or foreign currency-denominated instruments) are likely to produce a difference between its book income and its taxable income. If the fund's book income exceeds its taxable income, the distribution (if any) of such excess will be treated as (i) a dividend to the extent of the fund's remaining earnings and profits (including earnings and profits arising from tax-exempt income), (ii) thereafter as a return of capital to the extent of the recipient's basis in the shares, and (iii) thereafter as gain from the sale or exchange of a capital asset. If the fund's book income is less than its taxable income, the fund could be required to make distributions exceeding book income to qualify as a regulated investment company that is accorded special tax treatment. RETURN OF CAPITAL DISTRIBUTIONS. If the fund makes a distribution to you in excess of its current and accumulated "earnings and profits" in any taxable year, the excess distribution will be treated as a return of capital to the extent of your tax basis in your shares, and thereafter as capital gain. A return of capital is not taxable, but it reduces your tax basis in your shares, thus reducing any loss or increasing any gain on a subsequent taxable disposition by you of your shares. SECURITIES ISSUED OR PURCHASED AT A DISCOUNT. The fund's investment in securities issued at a discount and certain other obligations will (and investments in securities purchased at a discount may) require the fund to accrue and distribute income not yet received. In order to generate sufficient cash to make the requisite distributions, the fund may be required to sell securities in its portfolio that it otherwise would have continued to hold. CAPITAL LOSS CARRYOVER. Distributions from capital gains are made after applying any available capital loss carryovers. The amounts and expiration dates of any capital loss carryovers available to the fund are shown in Note 1 (Federal income taxes) to the financial statements included in Part I of this SAI or incorporated by reference into this SAI. FOREIGN CURRENCY-DENOMINATED SECURITIES AND RELATED HEDGING TRANSACTIONS. The fund's transactions in foreign currencies, foreign currency-denominated debt securities and certain foreign currency options, futures contracts and forward contracts (and similar instruments) may give rise to ordinary income or loss to the extent such income or loss results from fluctuations in the value of the foreign currency concerned. If more than 50% of the fund's assets at year end consists of the debt and equity securities of foreign corporations, the fund may elect to permit shareholders to claim a credit or deduction on their income tax returns for their pro rata portion of qualified taxes paid by the fund to foreign countries. In such a case, shareholders will include in gross income from foreign sources their pro rata shares of such taxes. A shareholder's ability to claim a foreign tax credit or deduction in respect of foreign taxes paid by the fund may be subject to certain limitations imposed by the Code, as a result of which a shareholder may not get a full credit or deduction for the amount of such taxes. Shareholders who do not itemize on their federal income tax returns may claim a credit (but no deduction) for such foreign taxes. Investment by the fund in "passive foreign investment companies" could subject the fund to a U.S. federal income tax or other charge on the proceeds from the sale of its investment in such a company; however, this tax can be avoided by making an election to mark such investments to market annually or to treat the passive foreign investment company as a "qualified electing fund." A "passive foreign investment company" is any foreign corporation: (i) 75 percent of more of the income of which for the taxable year is passive income, or (ii) the average percentage of the assets of which (generally by value, but by adjusted tax basis in certain cases) that produce or are held for the production of passive income is at least 50 percent. Generally, passive income for this purpose means dividends, interest (including income equivalent to interest), royalties, rents, annuities, the excess of gains over losses from certain property transactions and commodities transactions, and foreign currency gains. Passive income for this purpose does not include rents and royalties received by the foreign corporation from active business and certain income received from related persons. SALE OR REDEMPTION OF SHARES. The sale, exchange or redemption of fund shares may give rise to a gain or loss. In general, any gain or loss realized upon a taxable disposition of shares will be treated as long-term capital gain or loss if the shares have been held for more than 12 months, and otherwise as short-term capital gain or loss. However, if a shareholder sells shares at a loss within six months of purchase, any loss will be disallowed for Federal income tax purposes to the extent of any exempt- interest dividends received on such shares. In addition, any loss (not already disallowed as provided in the preceding sentence) realized upon a taxable disposition of shares held for six months or less will be treated as long-term, rather than short-term, to the extent of any long-term capital gain distributions received by the shareholder with respect to the shares. All or a portion of any loss realized upon a taxable disposition of fund shares will be disallowed if other shares of the same fund are purchased within 30 days before or after the disposition. In such a case, the basis of the newly purchased shares will be adjusted to reflect the disallowed loss. SHARES PURCHASED THROUGH TAX-QUALIFIED PLANS. Special tax rules apply to investments though defined contribution plans and other tax-qualified plans. Shareholders should consult their tax adviser to determine the suitability of shares of a fund as an investment through such plans and the precise effect of an investment on their particular tax situation. BACKUP WITHHOLDING. The fund generally is required to withhold and remit to the U.S. Treasury 31% of the taxable dividends and other distributions paid to any individual shareholder who fails to furnish the fund with a correct taxpayer identification number (TIN), who has under-reported dividends or interest income, or who fails to certify to the fund that he or she is not subject to such withholding. Shareholders who fail to furnish their correct TIN are subject to a penalty of $50 for each such failure unless the failure is due to reasonable cause and not wilful neglect. An individual's taxpayer identification number is his or her social security number. MANAGEMENT TRUSTEES NAME (AGE) *+GEORGE PUTNAM (69), Chairman and President. Chairman and Director of Putnam Management and Putnam Mutual Funds. Director, The Boston Company, Inc., Boston Safe Deposit and Trust Company, Freeport-McMoRan, Inc., Freeport Copper and Gold, Inc., McMoRan Oil and Gas, Inc., General Mills, Inc., Houghton Mifflin Company, Marsh & McLennan Companies, Inc. and Rockefeller Group, Inc. +WILLIAM F. POUNDS (68), Vice Chairman. Professor of Management, Alfred P. Sloan School of Management, Massachusetts Institute of Technology. Director of EG&G, Inc., IDEXX Laboratories, Inc., Perseptive Biosystems, Inc., Management Sciences for Health, Inc., and Sun Company, Inc. JAMESON A. BAXTER (52), Trustee. President, Baxter Associates, Inc. (a management and financial consultant). Director of Avondale Federal Savings Bank, ASHTA Chemicals, Inc. and Banta Corporation. Chairman Emeritus of the Board of Trustees, Mount Holyoke College. +HANS H. ESTIN (67), Trustee. Vice Chairman, North American Management Corp. (a registered investment adviser). Director of The Boston Company, Inc. and Boston Safe Deposit and Trust Company. JOHN A. HILL (54), Trustee. Chairman and Managing Director, First Reserve Corporation (a registered investment adviser). Director, Maverick Tube Corporation, PetroCorp Incorporated, Snyder Oil Corporation, Weatherford Enterra, Inc. (an oil field service company) and various First Reserve Funds. RONALD J. JACKSON (52), Trustee. Former Chairman, President and Chief Executive Officer of Fisher-Price, Inc. Trustee of Salem Hospital and Overseer of the Peabody Essex Museum. ELIZABETH T. KENNAN (58), Trustee. President Emeritus and Professor, Mount Holyoke College. Director, the Kentucky Home Life Insurance Companies, NYNEX Corporation, Northeast Utilities and Talbots. Trustee of the University of Notre Dame. *LAWRENCE J. LASSER (53), Trustee and Vice President. President, Chief Executive Officer and Director of Putnam Investments, Inc. and Putnam Investment Management, Inc. Director of Marsh & McLennan Companies, Inc. +ROBERT E. PATTERSON (51), Trustee. Executive Vice President and Director of Acquisitions, Cabot Partners Limited Partnership (a registered investment adviser). *DONALD S. PERKINS (69), Trustee. Director of various corporations, including AON Corp., Cummins Engine Company, Inc., Current Assets L.L.C., Illinova and Illinois Power Company, Inland Steel Industries, Inc., LaSalle Street Fund, Inc., Lucent Technologies Inc., Springs Industries, Inc. (a textile manufacturer), and Time Warner Inc. *#GEORGE PUTNAM III (44), Trustee. President, New Generation Research, Inc. (publisher of bankruptcy information) and New Generation Advisers, Inc. (a registered investment adviser). ELI SHAPIRO (79), Trustee. Alfred P. Sloan Professor of Management, Emeritus, Alfred P. Sloan School of Management, Massachusetts Institute of Technology. Director of Nomura Dividend Fund, Inc. (a privately held registered investment company managed by Putnam Management) and former Trustee of the Putnam funds (1984-1990). *A.J.C. SMITH (62), Trustee. Chairman and Chief Executive Officer, Marsh & McLennan Companies, Inc. Director, Trident Corp. W. NICHOLAS THORNDIKE (63), Trustee. Director of various corporations and charitable organizations, including Courier Corporation, Data General Corporation, Bradley Real Estate, Inc., and Providence Journal Co. OFFICERS NAME (AGE) CHARLES E. PORTER (57), Executive Vice President. Managing Director of Putnam Investments, Inc. and Putnam Management. PATRICIA C. FLAHERTY (49), Senior Vice President. Senior Vice President of Putnam Investments, Inc. and Putnam Management. WILLIAM N. SHIEBLER (54), Vice President. Director and Senior Managing Director of Putnam Investments, Inc. President and Director of Putnam Mutual Funds. GORDON H. SILVER (48), Vice President. Director and Senior Managing Director of Putnam Investments, Inc. and Putnam Management. JOHN R. VERANI (56), Vice President. Senior Vice President of Putnam Investments, Inc. and Putnam Management. PAUL M. O'NEIL (42), Vice President. Vice President of Putnam Investments, Inc. and Putnam Management. JOHN D. HUGHES (61), Vice President and Treasurer. BEVERLY MARCUS (51), Clerk and Assistant Treasurer. *Trustees who are or may be deemed to be "interested persons" (as defined in the Investment Company Act of 1940) of the fund, Putnam Management or Putnam Mutual Funds. +Members of the Executive Committee of the Trustees. The Executive Committee meets between regular meetings of the Trustees as may be required to review investment matters and other affairs of the fund and may exercise all of the powers of the Trustees. #George Putnam, III is the son of George Putnam. ----------------- Certain other officers of Putnam Management are officers of the fund. SEE "ADDITIONAL OFFICERS" IN PART I OF THIS SAI. The mailing address of each of the officers and Trustees is One Post Office Square, Boston, Massachusetts 02109. Except as stated below, the principal occupations of the officers and Trustees for the last five years have been with the employers as shown above, although in some cases they have held different positions with such employers. Prior to 1993, Mr. Jackson was Chairman of the Board, President and Chief Executive Officer of Fisher-Price, Inc. Prior to January, 1992, Ms. Baxter was Vice President and Principal, Regency Group, Inc. and Consultant, The First Boston Corporation. Prior to May, 1991, Dr. Pounds was Senior Advisor to the Rockefeller Family and Associates, Chairman of Rockefeller Trust Company and Director of Rockefeller Group, Inc. During the past five years Dr. Shapiro has provided economic and financial consulting services to various clients. Each Trustee of the fund receives an annual fee and an additional fee for each Trustees' meeting attended. Trustees who are not interested persons of Putnam Management and who serve on committees of the Trustees receive additional fees for attendance at certain committee meetings and for special services rendered in that connection. All of the Trustees are Trustees of all the Putnam funds and each receives fees for his or her services. FOR DETAILS OF TRUSTEES' FEES PAID BY THE FUND AND INFORMATION CONCERNING RETIREMENT GUIDELINES FOR THE TRUSTEES, SEE "CHARGES AND EXPENSES" IN PART I OF THIS SAI. The Agreement and Declaration of Trust of the fund provides that the fund will indemnify its Trustees and officers against liabilities and expenses incurred in connection with litigation in which they may be involved because of their offices with the fund, except if it is determined in the manner specified in the Agreement and Declaration of Trust that they have not acted in good faith in the reasonable belief that their actions were in the best interests of the fund or that such indemnification would relieve any officer or Trustee of any liability to the fund or its shareholders by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of his or her duties. The fund, at its expense, provides liability insurance for the benefit of its Trustees and officers. PUTNAM MANAGEMENT AND ITS AFFILIATES Putnam Management is one of America's oldest and largest money management firms. Putnam Management's staff of experienced portfolio managers and research analysts selects securities and constantly supervises the fund's portfolio. By pooling an investor's money with that of other investors, a greater variety of securities can be purchased than would be the case individually; the resulting diversification helps reduce investment risk. Putnam Management has been managing mutual funds since 1937. Today, the firm serves as the investment manager for the funds in the Putnam Family, with over $113 billion in assets in over 6.2 million shareholder accounts at June 30, 1996. An affiliate, The Putnam Advisory Company, Inc., manages domestic and foreign institutional accounts and mutual funds, including the accounts of many Fortune 500 companies. Another affiliate, Putnam Fiduciary Trust Company, provides investment advice to institutional clients under its banking and fiduciary powers. At June 30, 1996, Putnam Management and its affiliates managed nearly $149 billion in assets, including over $17 billion in tax- exempt securities and over $66 billion in retirement plan assets. Putnam Management, Putnam Mutual Funds and Putnam Fiduciary Trust Company are subsidiaries of Putnam Investments, Inc., a holding company which is in turn wholly owned by Marsh & McLennan Companies, Inc., a publicly-owned holding company whose principal operating subsidiaries are international insurance and reinsurance brokers, investment managers and management consultants. Trustees and officers of the fund who are also officers of Putnam Management or its affiliates or who are stockholders of Marsh & McLennan Companies, Inc. will benefit from the advisory fees, sales commissions, distribution fees, custodian fees and transfer agency fees paid or allowed by the fund. THE MANAGEMENT CONTRACT Under a Management Contract between the fund and Putnam Management, subject to such policies as the Trustees may determine, Putnam Management, at its expense, furnishes continuously an investment program for the fund and makes investment decisions on behalf of the fund. Subject to the control of the Trustees, Putnam Management also manages, supervises and conducts the other affairs and business of the fund, furnishes office space and equipment, provides bookkeeping and clerical services (including determination of the fund's net asset value, but excluding shareholder accounting services) and places all orders for the purchase and sale of the fund's portfolio securities. Putnam Management may place fund portfolio transactions with broker-dealers which furnish Putnam Management, without cost to it, certain research, statistical and quotation services of value to Putnam Management and its affiliates in advising the fund and other clients. In so doing, Putnam Management may cause the fund to pay greater brokerage commissions than it might otherwise pay. FOR DETAILS OF PUTNAM MANAGEMENT'S COMPENSATION UNDER THE MANAGEMENT CONTRACT, SEE "CHARGES AND EXPENSES" IN PART I OF THIS SAI. Putnam Management's compensation under the Management Contract may be reduced in any year if the fund's expenses exceed the limits on investment company expenses imposed by any statute or regulatory authority of any jurisdiction in which shares of the fund are qualified for offer or sale. The term "expenses" is defined in the statutes or regulations of such jurisdictions, and generally excludes brokerage commissions, taxes, interest, extraordinary expenses and, if the fund has a distribution plan, payments made under such plan. The only such limitation as of the date of this SAI (applicable to any fund registered for sale in California) was 2.5% of the first $30 million of average net assets, 2% of the next $70 million and 1.5% of any excess over $100 million. Under the Management Contract, Putnam Management may reduce its compensation to the extent that the fund's expenses exceed such lower expense limitation as Putnam Management may, by notice to the fund, declare to be effective. The expenses subject to this limitation are exclusive of brokerage commissions, interest, taxes, deferred organizational and extraordinary expenses and, if the fund has a distribution plan, payments required under such plan. For the purpose of determining any such limitation on Putnam Management's compensation, expenses of the fund shall not reflect the application of commissions or cash management credits that may reduce designated fund expenses. THE TERMS OF ANY EXPENSE LIMITATION FROM TIME TO TIME IN EFFECT ARE DESCRIBED IN EITHER THE PROSPECTUS OR PART I OF THIS SAI. In addition to the fee paid to Putnam Management, the fund reimburses Putnam Management for the compensation and related expenses of certain officers of the fund and their assistants who provide certain administrative services for the fund and the other Putnam funds, each of which bears an allocated share of the foregoing costs. The aggregate amount of all such payments and reimbursements is determined annually by the Trustees. THE AMOUNT OF THIS REIMBURSEMENT FOR THE FUND'S MOST RECENT FISCAL YEAR IS INCLUDED IN "CHARGES AND EXPENSES" IN PART I OF THIS SAI. Putnam Management pays all other salaries of officers of the fund. The fund pays all expenses not assumed by Putnam Management including, without limitation, auditing, legal, custodial, investor servicing and shareholder reporting expenses. The fund pays the cost of typesetting for its prospectuses and the cost of printing and mailing any prospectuses sent to its shareholders. Putnam Mutual Funds pays the cost of printing and distributing all other prospectuses. The Management Contract provides that Putnam Management shall not be subject to any liability to the fund or to any shareholder of the fund for any act or omission in the course of or connected with rendering services to the fund in the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of its duties on the part of Putnam Management. The Management Contract may be terminated without penalty by vote of the Trustees or the shareholders of the fund, or by Putnam Management, on 30 days' written notice. It may be amended only by a vote of the shareholders of the fund. The Management Contract also terminates without payment of any penalty in the event of its assignment. The Management Contract provides that it will continue in effect only so long as such continuance is approved at least annually by vote of either the Trustees or the shareholders, and, in either case, by a majority of the Trustees who are not "interested persons" of Putnam Management or the fund. In each of the foregoing cases, the vote of the shareholders is the affirmative vote of a "majority of the outstanding voting securities" as defined in the Investment Company Act of 1940. PERSONAL INVESTMENTS BY EMPLOYEES OF PUTNAM MANAGEMENT Employees of Putnam Management are permitted to engage in personal securities transactions, subject to requirements and restrictions set forth in Putnam Management's Code of Ethics. The Code of Ethics contains provisions and requirements designed to identify and address certain conflicts of interest between personal investment activities and the interests of investment advisory clients such as the funds. Among other things, the Code of Ethics, consistent with standards recommended by the Investment Company Institute's Advisory Group on Personal Investing, prohibits certain types of transactions absent prior approval, imposes time periods during which personal transactions may not be made in certain securities, and requires the submission of duplicate broker confirmations and quarterly reporting of securities transactions. Additional restrictions apply to portfolio managers, traders, research analysts and others involved in the investment advisory process. Exceptions to these and other provisions of the Code of Ethics may be granted in particular circumstances after review by appropriate personnel. PORTFOLIO TRANSACTIONS INVESTMENT DECISIONS. Investment decisions for the fund and for the other investment advisory clients of Putnam Management and its affiliates are made with a view to achieving their respective investment objectives. Investment decisions are the product of many factors in addition to basic suitability for the particular client involved. Thus, a particular security may be bought or sold for certain clients even though it could have been bought or sold for other clients at the same time. Likewise, a particular security may be bought for one or more clients when one or more other clients are selling the security. In some instances, one client may sell a particular security to another client. It also sometimes happens that two or more clients simultaneously purchase or sell the same security, in which event each day's transactions in such security are, insofar as possible, averaged as to price and allocated between such clients in a manner which in Putnam Management's opinion is equitable to each and in accordance with the amount being purchased or sold by each. There may be circumstances when purchases or sales of portfolio securities for one or more clients will have an adverse effect on other clients. BROKERAGE AND RESEARCH SERVICES. Transactions on U.S. stock exchanges, commodities markets and futures markets and other agency transactions involve the payment by the fund of negotiated brokerage commissions. Such commissions vary among different brokers. A particular broker may charge different commissions according to such factors as the difficulty and size of the transaction. Transactions in foreign investments often involve the payment of fixed brokerage commissions, which may be higher than those in the United States. There is generally no stated commission in the case of securities traded in the over-the-counter markets, but the price paid by the fund usually includes an undisclosed dealer commission or mark-up. In underwritten offerings, the price paid by the fund includes a disclosed, fixed commission or discount retained by the underwriter or dealer. It is anticipated that most purchases and sales of securities by funds investing primarily in tax-exempt securities and certain other fixed-income securities will be with the issuer or with underwriters of or dealers in those securities, acting as principal. Accordingly, those funds would not ordinarily pay significant brokerage commissions with respect to securities transactions. SEE "CHARGES AND EXPENSES" IN PART I OF THIS SAI FOR INFORMATION CONCERNING COMMISSIONS PAID BY THE FUND. It has for many years been a common practice in the investment advisory business for advisers of investment companies and other institutional investors to receive brokerage and research services (as defined in the Securities Exchange Act of 1934, as amended (the "1934 Act")) from broker-dealers that execute portfolio transactions for the clients of such advisers and from third parties with which such broker-dealers have arrangements. Consistent with this practice, Putnam Management receives brokerage and research services and other similar services from many broker-dealers with which Putnam Management places the fund's portfolio transactions and from third parties with which these broker-dealers have arrangements. These services include such matters as general economic and market reviews, industry and company reviews, evaluations of investments, recommendations as to the purchase and sale of investments, newspapers, magazines, pricing services, quotation services, news services and personal computers utilized by Putnam Management's managers and analysts. Where the services referred to above are not used exclusively by Putnam Management for research purposes, Putnam Management, based upon its own allocations of expected use, bears that portion of the cost of these services which directly relates to their non-research use. Some of these services are of value to Putnam Management and its affiliates in advising various of their clients (including the fund), although not all of these services are necessarily useful and of value in managing the fund. The management fee paid by the fund is not reduced because Putnam Management and its affiliates receive these services even though Putnam Management might otherwise be required to purchase some of these services for cash. Putnam Management places all orders for the purchase and sale of portfolio investments for the fund and buys and sells investments for the fund through a substantial number of brokers and dealers. In so doing, Putnam Management uses its best efforts to obtain for the fund the most favorable price and execution available, except to the extent it may be permitted to pay higher brokerage commissions as described below. In seeking the most favorable price and execution, Putnam Management, having in mind the fund's best interests, considers all factors it deems relevant, including, by way of illustration, price, the size of the transaction, the nature of the market for the security or other investment, the amount of the commission, the timing of the transaction taking into account market prices and trends, the reputation, experience and financial stability of the broker-dealer involved and the quality of service rendered by the broker-dealer in other transactions. As permitted by Section 28(e) of the 1934 Act, and by the Management Contract, Putnam Management may cause the fund to pay a broker-dealer which provides "brokerage and research services" (as defined in the 1934 Act) to Putnam Management an amount of disclosed commission for effecting securities transactions on stock exchanges and other transactions for the fund on an agency basis in excess of the commission which another broker-dealer would have charged for effecting that transaction. Putnam Management's authority to cause the fund to pay any such greater commissions is also subject to such policies as the Trustees may adopt from time to time. Putnam Management does not currently intend to cause the fund to make such payments. It is the position of the staff of the Securities and Exchange Commission that Section 28(e) does not apply to the payment of such greater commissions in "principal" transactions. Accordingly Putnam Management will use its best effort to obtain the most favorable price and execution available with respect to such transactions, as described above. The Management Contract provides that commissions, fees, brokerage or similar payments received by Putnam Management or an affiliate in connection with the purchase and sale of portfolio investments of the fund, less any direct expenses approved by the Trustees, shall be recaptured by the fund through a reduction of the fee payable by the fund under the Management Contract. Putnam Management seeks to recapture for the fund soliciting dealer fees on the tender of the fund's portfolio securities in tender or exchange offers. Any such fees which may be recaptured are likely to be minor in amount. Consistent with the Rules of Fair Practice of the National Association of Securities Dealers, Inc. and subject to seeking the most favorable price and execution available and such other policies as the Trustees may determine, Putnam Management may consider sales of shares of the fund (and, if permitted by law, of the other Putnam funds) as a factor in the selection of broker-dealers to execute portfolio transactions for the fund. PRINCIPAL UNDERWRITER Putnam Mutual Funds is the principal underwriter of shares of the fund and the other continuously offered Putnam funds. Putnam Mutual Funds is not obligated to sell any specific amount of shares of the fund and will purchase shares for resale only against orders for shares. SEE "CHARGES AND EXPENSES" IN PART I OF THIS SAI FOR INFORMATION ON SALES CHARGES AND OTHER PAYMENTS RECEIVED BY PUTNAM MUTUAL FUNDS. INVESTOR SERVICING AGENT AND CUSTODIAN Putnam Investor Services, a division of Putnam Fiduciary Trust Company ("PFTC"), is the fund's investor servicing agent (transfer, plan and dividend disbursing agent), for which it receives fees which are paid monthly by the fund as an expense of all its shareholders. The fee paid to Putnam Investor Services is determined on the basis of the number of shareholder accounts, the number of transactions and the assets of the fund. Putnam Investor Services has won the DALBAR Quality Tested Service Seal every year since the award's 1990 inception. Over 10,000 tests of 38 separate shareholder service components demonstrated that Putnam Investor Services tied for highest scores, with two other mutual fund companies, in all categories. PFTC is the custodian of the fund's assets. In carrying out its duties under its custodian contract, PFTC may employ one or more subcustodians whose responsibilities include safeguarding and controlling the fund's cash and securities, handling the receipt and delivery of securities and collecting interest and dividends on the fund's investments. PFTC and any subcustodians employed by it have a lien on the securities of the fund (to the extent permitted by the fund's investment restrictions) to secure charges and any advances made by such subcustodians at the end of any day for the purpose of paying for securities purchased by the fund. The fund expects that such advances will exist only in unusual circumstances. Neither PFTC nor any subcustodian determines the investment policies of the fund or decides which securities the fund will buy or sell. PFTC pays the fees and other charges of any subcustodians employed by it. The fund may from time to time pay custodial expenses in full or in part through the placement by Putnam Management of the fund's portfolio transactions with the subcustodians or with a third- party broker having an agreement with the subcustodians. The fund pays PFTC an annual fee based on the fund's assets, securities transactions and securities holdings and reimburses PFTC for certain out-of-pocket expenses incurred by it or any subcustodian employed by it in performing custodial services. SEE "CHARGES AND EXPENSES" IN PART I OF THIS SAI FOR INFORMATION ON FEES AND REIMBURSEMENTS FOR INVESTOR SERVICING AND CUSTODY RECEIVED BY PFTC. THE FEES MAY BE REDUCED BY CREDITS ALLOWED BY PFTC. DETERMINATION OF NET ASSET VALUE The fund determines the net asset value per share of each class of shares once each day the New York Stock Exchange (the "Exchange") is open. Currently, the Exchange is closed Saturdays, Sundays and the following holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day, the Fourth of July, Labor Day, Thanksgiving and Christmas. The fund determines net asset value as of the close of regular trading on the Exchange, currently 4:00 p.m. However, equity options held by the fund are priced as of the close of trading at 4:10 p.m., and futures contracts on U.S. government and other fixed-income securities and index options held by the fund are priced as of their close of trading at 4:15 p.m. Securities for which market quotations are readily available are valued at prices which, in the opinion of Putnam Management, most nearly represent the market values of such securities. Currently, such prices are determined using the last reported sale price or, if no sales are reported (as in the case of some securities traded over-the-counter), the last reported bid price, except that certain securities are valued at the mean between the last reported bid and asked prices. Short-term investments having remaining maturities of 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. Liabilities are deducted from the total, and the resulting amount is divided by the number of shares of the class outstanding. Reliable market quotations are not considered to be readily available for long-term corporate bonds and notes, certain preferred stocks, tax-exempt securities, and certain foreign securities. These investments are valued at fair value on the basis of valuations furnished by pricing services, which determine valuations for normal, institutional-size trading units of such securities using methods based on market transactions for comparable securities and various relationships between securities which are generally recognized by institutional traders. If any securities held by the fund are restricted as to resale, Putnam Management determines their fair value following procedures approved by the Trustees. The fair value of such securities is generally determined as the amount which the fund could reasonably expect to realize from an orderly disposition of such securities over a reasonable period of time. The valuation procedures applied in any specific instance are likely to vary from case to case. However, consideration is generally given to the financial position of the issuer and other fundamental analytical data relating to the investment and to the nature of the restrictions on disposition of the securities (including any registration expenses that might be borne by the fund in connection with such disposition). In addition, specific factors are also generally considered, such as the cost of the investment, the market value of any unrestricted securities of the same class, the size of the holding, the prices of any recent transactions or offers with respect to such securities and any available analysts' reports regarding the issuer. Generally, trading in certain securities (such as foreign securities) is substantially completed each day at various times prior to the close of the Exchange. The values of these securities used in determining the net asset value of the fund's shares are computed as of such times. Also, because of the amount of time required to collect and process trading information as to large numbers of securities issues, the values of certain securities (such as convertible bonds, U.S. government securities, and tax-exempt securities) are determined based on market quotations collected earlier in the day at the latest practicable time prior to the close of the Exchange. Occasionally, events affecting the value of such securities may occur between such times and the close of the Exchange which will not be reflected in the computation of the fund's net asset value. If events materially affecting the value of such securities occur during such period, then these securities will be valued at their fair value following procedures approved by the Trustees. Money market funds generally value their portfolio securities at amortized cost according to Rule 2a-7 under the Investment Company Act of 1940. HOW TO BUY SHARES GENERAL The prospectus contains a general description of how investors may buy shares of the fund and states whether the fund offers more than one class of shares. This SAI contains additional information which may be of interest to investors. Class A shares and class M shares are generally sold with a sales charge payable at the time of purchase (except for class A shares and class M shares of money market funds). As used in this SAI and unless the context requires otherwise, the term "class A shares" includes shares of funds that offer only one class of shares. The prospectus contains a table of applicable sales charges. For information about how to purchase class A or class M shares of a Putnam fund at net asset value through an employer's defined contribution plan, please consult your employer. Certain purchases of class A shares and class M shares may be exempt from a sales charge or, in the case of class A shares, may be subject to a contingent deferred sales charge ("CDSC"). See "General--Sales without sales charges or contingent deferred sales charges," "Additional Information About Class A and Class M shares," and "Contingent Deferred Sales Charges--Class A shares." Class B shares and class C shares are sold subject to a CDSC payable upon redemption within a specified period after purchase. The prospectus contains a table of applicable CDSCs. Class B shares will automatically convert into class A shares at the end of the month eight years after the purchase date. Class B shares acquired by exchanging class B shares of another Putnam fund will convert into class A shares based on the time of the initial purchase. Class B shares acquired through reinvestment of distributions will convert into Class A shares based on the date of the initial purchase to which such shares relate. For this purpose, class B shares acquired through reinvestment of distributions will be attributed to particular purchases of class B shares in accordance with such procedures as the Trustees may determine from time to time. The conversion of class B shares to class A shares is subject to the condition that such conversions will not constitute taxable events for Federal tax purposes. Class Y shares, which are not subject to sales charges or a CDSC, are available only to certain defined contribution plans. See the prospectus that offers class Y shares for more information. Certain purchase programs described below are not available to defined contribution plans. Consult your employer for information on how to purchase shares through your plan. The fund is currently making a continuous offering of its shares. The fund receives the entire net asset value of shares sold. The fund will accept unconditional orders for shares to be executed at the public offering price based on the net asset value per share next determined after the order is placed. In the case of class A shares and class M shares, the public offering price is the net asset value plus the applicable sales charge, if any. No sales charge is included in the public offering price of other classes of shares. In the case of orders for purchase of shares placed through dealers, the public offering price will be based on the net asset value determined on the day the order is placed, but only if the dealer receives the order before the close of regular trading on the Exchange. If the dealer receives the order after the close of the Exchange, the price will be based on the net asset value next determined. If funds for the purchase of shares are sent directly to Putnam Investor Services, they will be invested at the public offering price based on the net asset value next determined after receipt. Payment for shares of the fund must be in U.S. dollars; if made by check, the check must be drawn on a U.S. bank. Initial and subsequent purchases must satisfy the minimums stated in the prospectus, except that (i) individual investments under certain employee benefit plans or Tax Qualified Retirement Plans may be lower, (ii) persons who are already shareholders may make additional purchases of $50 or more by sending funds directly to Putnam Investor Services (see "Your investing account" below), and (iii) for investors participating in systematic investment plans and military allotment plans, the initial and subsequent purchases must be $25 or more. Information about these plans is available from investment dealers or from Putnam Mutual Funds. As a convenience to investors, shares may be purchased through a systematic investment plan. Pre-authorized monthly bank drafts for a fixed amount (at least $25) are used to purchase fund shares at the applicable public offering price next determined after Putnam Mutual Funds receives the proceeds from the draft (normally the 20th of each month, or the next business day thereafter). Further information and application forms are available from investment dealers or from Putnam Mutual Funds. Except for funds that declare a distribution daily, distributions to be reinvested are reinvested without a sales charge in shares of the same class as of the ex-dividend date using the net asset value determined on that date, and are credited to a shareholder's account on the payment date. Dividends for Putnam money market funds are credited to a shareholder's account on the payment date. Distributions for all other funds that declare a distribution daily are reinvested without a sales charge as of the next day following the period for which distributions are paid using the net asset value determined on that date, and are credited to a shareholder's account on the payment date. PAYMENT IN SECURITIES. In addition to cash, the fund may accept securities as payment for fund shares at the applicable net asset value. Generally, the fund will only consider accepting securities to increase its holdings in a portfolio security, or if Putnam Management determines that the offered securities are a suitable investment for the fund and in a sufficient amount for efficient management. While no minimum has been established, it is expected that the fund would not accept securities with a value of less than $100,000 per issue as payment for shares. The fund may reject in whole or in part any or all offers to pay for purchases of fund shares with securities, may require partial payment in cash for such purchases to provide funds for applicable sales charges, and may discontinue accepting securities as payment for fund shares at any time without notice. The fund will value accepted securities in the manner described in the section "Determination of Net Asset Value" for valuing shares of the fund. The fund will only accept securities which are delivered in proper form. The fund will not accept options or restricted securities as payment for shares. The acceptance of securities by certain funds in exchange for fund shares is subject to additional requirements. In the case of Putnam American Government Income Fund, Putnam Asia Pacific Growth Fund, Putnam Asset Allocation Funds, Putnam Capital Appreciation Fund, Putnam Diversified Equity Trust, Putnam Diversified Income Trust II, Putnam Equity Income Fund, Putnam Europe Growth Fund, The Putnam Fund for Growth & Income, Putnam Funds Trust, Putnam Global Governmental Income Trust, Putnam Growth and Income Fund II, Putnam High Yield Advantage Fund, Putnam Intermediate Tax Exempt Fund, Putnam Investment Funds, Putnam Intermediate U.S. Government Income Fund, Putnam Investment-Grade Bond Fund, Putnam Municipal Income Fund, Putnam Natural Resources Fund, Putnam OTC Emerging Growth Fund, Putnam Overseas Growth Fund, Putnam Preferred Income Fund, Putnam Tax Exempt Income Fund and Putnam Tax-Free Income Trust, transactions involving the issuance of fund shares for securities or assets other than cash will be limited to a bona-fide re- organization or statutory merger and to other acquisitions of portfolio securities that meet all the following conditions: (a) such securities meet the investment objective(s) and policies of the fund; (b) such securities are acquired for investment and not for resale; (c) such securities are liquid securities which are not restricted as to transfer either by law or liquidity of market; and (d) such securities have a value which is readily ascertainable, as evidenced by a listing on the American Stock Exchange, the New York Stock Exchange or The Nasdaq Stock Market, Inc. In addition, Putnam Global Governmental Income Trust may accept only investment grade bonds with prices regularly stated in publications generally accepted by investors, such as the London Financial Times and the Association of International Bond Dealers manual, or securities listed on the New York or American Stock Exchanges or on The Nasdaq Stock Market, Inc. Putnam Diversified Income Trust may accept only bonds with prices regularly stated in publications generally accepted by investors. For federal income tax purposes, a purchase of fund shares with securities will be treated as a sale or exchange of such securities on which the investor will realize a taxable gain or loss. The processing of a purchase of fund shares with securities involves certain delays while the fund considers the suitability of such securities and while other requirements are satisfied. For information regarding procedures for payment in securities, contact Putnam Mutual Funds. Investors should not send securities to the fund except when authorized to do so and in accordance with specific instructions received from Putnam Mutual Funds. SALES WITHOUT SALES CHARGES OR CONTINGENT DEFERRED SALES CHARGES. The fund may sell shares without a sales charge or CDSC to: (i) current and retired Trustees of the fund; officers of the fund; directors and current and retired U.S. full-time employees of Putnam Management, Putnam Mutual Funds, their parent corporations and certain corporate affiliates; family members of and employee benefit plans for the foregoing; and partnerships, trusts or other entities in which any of the foregoing has a substantial interest; (ii) employee benefit plans, for the repurchase of shares in connection with repayment of plan loans made to plan participants (if the sum loaned was obtained by redeeming shares of a Putnam fund sold with a sales charge) (not offered by tax-exempt funds); (iii) clients of administrators of tax-qualified employee benefit plans which have entered into agreements with Putnam Mutual Funds (not offered by tax-exempt funds); (iv) registered representatives and other employees of broker-dealers having sales agreements with Putnam Mutual Funds; employees of financial institutions having sales agreements with Putnam Mutual Funds or otherwise having an arrangement with any such broker-dealer or financial institution with respect to sales of fund shares; and their spouses and children under age 21 (Putnam Mutual Funds is regarded as the dealer of record for all such accounts); (v) investors meeting certain requirements who sold shares of certain Putnam closed-end funds pursuant to a tender offer by such closed-end fund; (vi) a trust department of any financial institution purchasing shares of the fund in its capacity as trustee of any trust, if the value of the shares of the fund and other Putnam funds purchased or held by all such trusts exceeds $1 million in the aggregate; and (vii) "wrap accounts" maintained for clients of broker- dealers, financial institutions or financial planners who have entered into agreements with Putnam Mutual Funds with respect to such accounts. In addition, the fund may issue its shares at net asset value without an initial sales charge or a CDSC in connection with the acquisition of substantially all of the securities owned by other investment companies or personal holding companies, and the CDSC will be waived on redemptions of shares arising out of death or disability or in connection with certain withdrawals from IRA or other retirement plans. Up to 12% of the value of class B shares subject to a systematic withdrawal plan may also be redeemed each year without a CDSC. The fund may sell class M shares at net asset value to members of qualified groups. See "Group purchases of class A and class M shares" below. PAYMENTS TO DEALERS. Putnam Mutual Funds may, at its expense, pay concessions in addition to the payments disclosed in the prospectus to dealers which satisfy certain criteria established from time to time by Putnam Mutual Funds relating to increasing net sales of shares of the Putnam funds over prior periods, and certain other factors. ADDITIONAL INFORMATION ABOUT CLASS A AND CLASS M SHARES The underwriter's commission is the sales charge shown in the prospectus less any applicable dealer discount. Putnam Mutual Funds will give dealers ten days' notice of any changes in the dealer discount. Putnam Mutual Funds retains the entire sales charge on any retail sales made by it. Putnam Mutual Funds offers several plans by which an investor may obtain reduced sales charges on purchases of class A shares and class M shares. The variations in sales charges reflect the varying efforts required to sell shares to separate categories of purchasers. These plans may be altered or discontinued at any time. COMBINED PURCHASE PRIVILEGE. The following persons may qualify for the sales charge reductions or eliminations shown in the prospectus by combining into a single transaction the purchase of class A shares or class M shares with other purchases of any class of shares: (i) an individual, or a "company" as defined in Section 2(a)(8) of the Investment Company Act of 1940 (which includes corporations which are corporate affiliates of each other); (ii) an individual, his or her spouse and their children under twenty-one, purchasing for his, her or their own account; (iii) a trustee or other fiduciary purchasing for a single trust estate or single fiduciary account (including a pension, profit-sharing, or other employee benefit trust created pursuant to a plan qualified under Section 401 of the Internal Revenue Code of 1986, as amended (the "Code")); (iv) tax-exempt organizations qualifying under Section 501(c)(3) of the Internal Revenue Code (not including tax- exempt organizations qualifying under Section 403(b)(7) (a "403(b) plan") of the Code; and (v) employee benefit plans of a single employer or of affiliated employers, other than 403(b) plans. A combined purchase currently may also include shares of any class of other continuously offered Putnam funds (other than money market funds) purchased at the same time through a single investment dealer, if the dealer places the order for such shares directly with Putnam Mutual Funds. CUMULATIVE QUANTITY DISCOUNT (RIGHT OF ACCUMULATION). A purchaser of class A shares or class M shares may qualify for a cumulative quantity discount by combining a current purchase (or combined purchases as described above) with certain other shares of any class of Putnam funds already owned. The applicable sales charge is based on the total of: (i) the investor's current purchase; and (ii) the maximum public offering price (at the close of business on the previous day) of: (a) all shares held by the investor in all of the Putnam funds (except money market funds); and (b) any shares of money market funds acquired by exchange from other Putnam funds; and (iii) the maximum public offering price of all shares described in paragraph (ii) owned by another shareholder eligible to participate with the investor in a "combined purchase" (see above). To qualify for the combined purchase privilege or to obtain the cumulative quantity discount on a purchase through an investment dealer, when each purchase is made the investor or dealer must provide Putnam Mutual Funds with sufficient information to verify that the purchase qualifies for the privilege or discount. The shareholder must furnish this information to Putnam Investor Services when making direct cash investments. STATEMENT OF INTENTION. Investors may also obtain the reduced sales charges for class A shares or class M shares shown in the prospectus for investments of a particular amount by means of a written Statement of Intention, which expresses the investor's intention to invest that amount (including certain "credits," as described below) within a period of 13 months in shares of any class of the fund or any other continuously offered Putnam fund (excluding money market funds). Each purchase of class A shares or class M shares under a Statement of Intention will be made at the public offering price applicable at the time of such purchase to a single transaction of the total dollar amount indicated in the Statement of Intention. A Statement of Intention may include purchases of shares made not more than 90 days prior to the date that an investor signs a Statement; however, the 13-month period during which the Statement of Intention is in effect will begin on the date of the earliest purchase to be included. An investor may receive a credit toward the amount indicated in the Statement of Intention equal to the maximum public offering price as of the close of business on the previous day of all shares he or she owns on the date of the Statement of Intention which are eligible for purchase under a Statement of Intention (plus any shares of money market funds acquired by exchange of such eligible shares). Investors do not receive credit for shares purchased by the reinvestment of distributions. Investors qualifying for the "combined purchase privilege" (see above) may purchase shares under a single Statement of Intention. The Statement of Intention is not a binding obligation upon the investor to purchase the full amount indicated. The minimum initial investment under a Statement of Intention is 5% of such amount, and must be invested immediately. Class A shares or class M shares purchased with the first 5% of such amount will be held in escrow to secure payment of the higher sales charge applicable to the shares actually purchased if the full amount indicated is not purchased. When the full amount indicated has been purchased, the escrow will be released. If an investor desires to redeem escrowed shares before the full amount has been purchased, the shares will be released from escrow only if the investor pays the sales charge that, without regard to the Statement of Intention, would apply to the total investment made to date. To the extent that an investor purchases more than the dollar amount indicated on the Statement of Intention and qualifies for a further reduced sales charge, the sales charge will be adjusted for the entire amount purchased at the end of the 13-month period, upon recovery from the investor's dealer of its portion of the sales charge adjustment. Once received from the dealer, which may take a period of time or may never occur, the sales charge adjustment will be used to purchase additional shares at the then current offering price applicable to the actual amount of the aggregate purchases. These additional shares will not be considered as part of the total investment for the purpose of determining the applicable sales charge pursuant to the Statement of Intention. No sales charge adjustment will be made unless and until the investor's dealer returns any excess commissions previously received. To the extent that an investor purchases less than the dollar amount indicated on the Statement of Intention within the 13- month period, the sales charge will be adjusted upward for the entire amount purchased at the end of the 13-month period. This adjustment will be made by redeeming shares from the account to cover the additional sales charge, the proceeds of which will be paid to the investor's dealer and Putnam Mutual Funds in accordance with the prospectus. If the account exceeds an amount that would otherwise qualify for a reduced sales charge, that reduced sales charge will be applied. Statements of Intention are not available for certain employee benefit plans. Statement of Intention forms may be obtained from Putnam Mutual Funds or from investment dealers. Interested investors should read the Statement of Intention carefully. GROUP PURCHASES OF CLASS A AND CLASS M SHARES. Members of qualified groups may purchase class A shares of the fund at a group sales charge rate of 4.50% of the public offering price (4.71% of the net amount invested). The dealer discount on such sales is 3.75% of the offering price. Members of qualified groups may also purchase class M shares at net asset value. To receive the class A or class M group rate, group members must purchase shares through a single investment dealer designated by the group. The designated dealer must transmit each member's initial purchase to Putnam Mutual Funds, together with payment and completed application forms. After the initial purchase, a member may send funds for the purchase of shares directly to Putnam Investor Services. Purchases of shares are made at the public offering price based on the net asset value next determined after Putnam Mutual Funds or Putnam Investor Services receives payment for the shares. The minimum investment requirements described above apply to purchases by any group member. Only shares purchased under the class A group discount are included in calculating the purchased amount for the purposes of these requirements. Qualified groups include the employees of a corporation or a sole proprietorship, members and employees of a partnership or association, or other organized groups of persons (the members of which may include other qualified groups) provided that: (i) the group has at least 25 members of which, with respect to the class A discount only, at least 10 members participate in the initial purchase; (ii) the group has been in existence for at least six months; (iii) the group has some purpose in addition to the purchase of investment company shares at a reduced sales charge; (iv) the group's sole organizational nexus or connection is not that the members are credit card holders of a company, policy holders of an insurance company, customers of a bank or broker-dealer, clients of an investment adviser or security holders of a company; (v) with respect to the class A discount only, the group agrees to provide its designated investment dealer access to the group's membership by means of written communication or direct presentation to the membership at a meeting on not less frequently than an annual basis; (vi) the group or its investment dealer will provide annual certification in form satisfactory to Putnam Investor Services that the group then has at least 25 members and, with respect to the class A discount only, that at least ten members participated in group purchases during the immediately preceding 12 calendar months; and (vii) the group or its investment dealer will provide periodic certification in form satisfactory to Putnam Investor Services as to the eligibility of the purchasing members of the group. Members of a qualified group include: (i) any group which meets the requirements stated above and which is a constituent member of a qualified group; (ii) any individual purchasing for his or her own account who is carried on the records of the group or on the records of any constituent member of the group as being a good standing employee, partner, member or person of like status of the group or constituent member; or (iii) any fiduciary purchasing shares for the account of a member of a qualified group or a member's beneficiary. For example, a qualified group could consist of a trade association which would have as its members individuals, sole proprietors, partnerships and corporations. The members of the group would then consist of the individuals, the sole proprietors and their employees, the members of the partnerships and their employees, and the corporations and their employees, as well as the trustees of employee benefit trusts acquiring class A shares for the benefit of any of the foregoing. A member of a qualified group may, depending upon the value of class A shares of the fund owned or proposed to be purchased by the member, be entitled to purchase class A shares of the fund at non-group sales charge rates shown in the prospectus which may be lower than the group sales charge rate, if the member qualifies as a person entitled to reduced non-group sales charges. Such a group member will be entitled to purchase at the lower rate if, at the time of purchase, the member or his or her investment dealer furnishes sufficient information for Putnam Mutual Funds or Putnam Investor Services to verify that the purchase qualifies for the lower rate. Interested groups should contact their investment dealer or Putnam Mutual Funds. The fund reserves the right to revise the terms of or to suspend or discontinue group sales at any time. EMPLOYEE BENEFIT PLANS; INDIVIDUAL ACCOUNT PLANS. The term "employee benefit plan" means any plan or arrangement, whether or not tax-qualified, which provides for the purchase of class A shares. The term "affiliated employer" means employers who are affiliated with each other within the meaning of Section 2(a)(3)(C) of the Investment Company Act of 1940. The term "individual account plan" means any employee benefit plan whereby (i) class A shares are purchased through payroll deductions or otherwise by a fiduciary or other person for the account of participants who are employees (or their spouses) of an employer, or of affiliated employers, and (ii) a separate investing account is maintained in the name of such fiduciary or other person for the account of each participant in the plan. The table of sales charges in the prospectus applies to sales to employee benefit plans, except that the fund may sell class A shares at net asset value to employee benefit plans, including individual account plans, of employers or of affiliated employers which have at least 750 employees to whom such plan is made available, in connection with a payroll deduction system of plan funding (or other system acceptable to Putnam Investor Services) by which contributions or account information for plan participation are transmitted to Putnam Investor Services by methods acceptable to Putnam Investor Services. The fund may also sell class A shares at net asset value to participant- directed qualified retirement plans with at least 200 eligible employees, or prior to December 1, 1995, a plan sponsored by an employer or by affiliated employers which have at least 750 employees and, beginning December 1, 1995, the fund may sell class M shares at net asset value to participant-directed qualified retirement plans with at least 50 eligible employees. A participant-directed qualified retirement plan participating in a "multi-fund" program approved by Putnam Mutual Funds may include amounts invested in the other mutual funds participating in such program for purposes of determining whether the plan may purchase class A shares at net asset value based on the size of the purchase as described in the prospectus. These investments will also be included for purposes of the discount privileges and programs described above. Additional information about participant-directed qualified retirement plans and individual account plans is available from investment dealers or from Putnam Mutual Funds. CONTINGENT DEFERRED SALES CHARGES CLASS A SHARES. Class A shares purchased at net asset value by shareholders investing $1 million or more, including purchases pursuant to any Combined Purchase Privilege, Right of Accumulation or Statement of Intention, are subject to a CDSC of 1.00% or 0.50%, respectively, if redeemed within the first or second year after purchase. The class A CDSC is imposed on the lower of the cost and the current net asset value of the shares redeemed. The CDSC does not apply to shares sold without a sales charge through participant-directed qualified retirement plans and shares purchased by certain investors investing $1 million or more that have made arrangements with Putnam Mutual Funds and whose dealer of record waived the commission described in the next paragraph. Except as stated below, Putnam Mutual Funds pays investment dealers of record commissions on sales of class A shares of $1 million or more based on an investor's cumulative purchases of such shares, including purchases pursuant to any Combined Purchase Privilege, Right of Accumulation or Statement of Intention, during the one-year period beginning with the date of the initial purchase at net asset value and each subsequent one- year period beginning with the first net asset value purchase following the end of the prior period. Such commissions are paid at the rate of 1.00% of the amount under $3 million, 0.50% of the next $47 million and 0.25% thereafter. On sales at net asset value to a participant-directed qualified retirement plan initially investing less than $20 million in Putnam funds and other investments managed by Putnam Management or its affiliates (including a plan with at least 200 eligible employees, or prior to December 1, 1995, a plan sponsored by an employer with more than 750 employees), Putnam Mutual Funds pays commissions during each one-year measuring period, determined as described above, at the rate of 1.00% of the first $2 million, 0.80% of the next $1 million and 0.50% thereafter, except that commissions on sales prior to December 1, 1995 are based on cumulative purchases during the life of the account and are paid at the rate of 1.00% of the amount under $3 million and 0.50% thereafter. On sales at net asset value to all other participant-directed qualified retirement plans, Putnam Mutual Funds pays commissions on the initial investment and on subsequent net quarterly sales (gross sales minus gross redemptions during the quarter) at the rate of 0.15%. Money market fund shares are excluded from all commission calculations, except for determining the amount initially invested by a participant-directed qualified retirement plan. Commissions on sales at net asset value to such plans are subject to Putnam Mutual Funds' right to reclaim such commissions if the shares are redeemed within two years. Different CDSC and commission rates may apply to shares purchased before April 1, 1994. CLASS B AND CLASS C SHARES. Investors who set up an Automatic Cash Withdrawal Plan ("ACWP") for a class B and class C share account (see "Plans available to shareholders -- Automatic Cash Withdrawal Plan") may withdraw through the ACWP up to 12% of the net asset value of the account (calculated as set forth below) each year without incurring any CDSC. Shares not subject to a CDSC (such as shares representing reinvestment of distributions) will be redeemed first and will count toward the 12% limitation. If there are insufficient shares not subject to a CDSC, shares subject to the lowest CDSC liability will be redeemed next until the 12% limit is reached. The 12% figure is calculated on a pro rata basis at the time of the first payment made pursuant to an ACWP and recalculated thereafter on a pro rata basis at the time of each ACWP payment. Therefore, shareholders who have chosen an ACWP based on a percentage of the net asset value of their account of up to 12% will be able to receive ACWP payments without incurring a CDSC. However, shareholders who have chosen a specific dollar amount (for example, $100 per month from a fund that pays income distributions monthly) for their periodic ACWP payment should be aware that the amount of that payment not subject to a CDSC may vary over time depending on the net asset value of their account. For example, if the net asset value of the account is $10,000 at the time of payment, the shareholder will receive $100 free of the CDSC (12% of $10,000 divided by 12 monthly payments). However, if at the time of the next payment the net asset value of the account has fallen to $9,400, the shareholder will receive $94 free of any CDSC (12% of $9,400 divided by 12 monthly payments) and $6 subject to the lowest applicable CDSC. This ACWP privilege may be revised or terminated at any time. ALL SHARES. No CDSC is imposed on shares of any class subject to a CDSC ("CDSC Shares") to the extent that the CDSC Shares redeemed (i) are no longer subject to the holding period therefor, (ii) resulted from reinvestment of distributions on CDSC Shares, or (iii) were exchanged for shares of another Putnam fund, provided that the shares acquired in such exchange or subsequent exchanges (including shares of a Putnam money market fund) will continue to remain subject to the CDSC, if applicable, until the applicable holding period expires. In determining whether the CDSC applies to each redemption of CDSC Shares, CDSC Shares not subject to a CDSC are redeemed first. The fund will waive any CDSC on redemptions, in the case of individual, joint or Uniform Transfers to Minors Act accounts, in the event of death or post-purchase disability of a shareholder, for the purpose of paying benefits pursuant to tax-qualified retirement plans ("Benefit Payments"), or, in the case of living trust accounts, in the event of the death or post-purchase disability of the settlor of the trust). Benefit payments currently include, without limitation, (1) distributions from an IRA due to death or disability, (2) a return of excess contributions to an IRA or 401(k) plan, and (3) distributions from retirement plans qualified under Section 401(a) of the Code or from a 403(b) plan due to death, disability, retirement or separation from service. These waivers may be changed at any time. Additional waivers may apply to IRA accounts opened prior to February 1, 1994. DISTRIBUTION PLANS If the fund or a class of shares of the fund has adopted a distribution plan, the prospectus describes the principal features of the plan. This SAI contains additional information which may be of interest to investors. Continuance of a plan is subject to annual approval by a vote of the Trustees, including a majority of the Trustees who are not interested persons of the fund and who have no direct or indirect interest in the plan or related arrangements (the "Qualified Trustees"), cast in person at a meeting called for that purpose. All material amendments to a plan must be likewise approved by the Trustees and the Qualified Trustees. No plan may be amended in order to increase materially the costs which the fund may bear for distribution pursuant to such plan without also being approved by a majority of the outstanding voting securities of the fund or the relevant class of the fund, as the case may be. A plan terminates automatically in the event of its assignment and may be terminated without penalty, at any time, by a vote of a majority of the Qualified Trustees or by a vote of a majority of the outstanding voting securities of the fund or the relevant class of the fund, as the case may be. If plan payments are made to reimburse Putnam Mutual Funds for payments to dealers based on the average net asset value of fund shares attributable to shareholders for whom the dealers are designated as the dealer of record, "average net asset value" attributable to a shareholder account means the product of (i) the fund's average daily share balance of the account and (ii) the fund's average daily net asset value per share (or the average daily net asset value per share of the class, if applicable). For administrative reasons, Putnam Mutual Funds may enter into agreements with certain dealers providing for the calculation of "average net asset value" on the basis of assets of the accounts of the dealer's customers on an established day in each quarter. Financial institutions receiving payments from Putnam Mutual Funds as described above may be required to comply with various state and federal regulatory requirements, including among others those regulating the activities of securities brokers or dealers. INVESTOR SERVICES SHAREHOLDER INFORMATION Each time shareholders buy or sell shares, they will receive a statement confirming the transaction and listing their current share balance. (Under certain investment plans, a statement may only be sent quarterly.) Shareholders will receive a statement confirming reinvestment of distributions in additional fund shares (or in shares of other Putnam funds for Dividends Plus accounts) promptly following the quarter in which the reinvestment occurs. To help shareholders take full advantage of their Putnam investment, they will receive a Welcome Kit and a periodic publication covering many topics of interest to investors. The fund also sends annual and semiannual reports that keep shareholders informed about its portfolio and performance, and year-end tax information to simplify their recordkeeping. Easy-to-read, free booklets on special subjects such as the Exchange Privilege and IRAs are available from Putnam Investor Services. Shareholders may call Putnam Investor Services toll-free weekdays at 1-800-225-1581 between 8:30 a.m. and 7:00 p.m. Boston time for more information, including account balances. YOUR INVESTING ACCOUNT The following information provides more detail concerning the operation of a Putnam Investing Account. For further information or assistance, investors should consult Putnam Investor Services. Shareholders who purchase shares through a defined contribution plan should note that not all of the services or features described below may be available to them, and they should contact their employer for details. A shareholder may reinvest a cash distribution without a front-end sales charge or without the reinvested shares being subject to a CDSC, as the case may be, by delivering to Putnam Investor Services the uncashed distribution check, endorsed to the order of the fund. Putnam Investor Services must receive the properly endorsed check within 1 year after the date of the check. The Investing Account also provides a way to accumulate shares of the fund. In most cases, after an initial investment of $500, a shareholder may send checks to Putnam Investor Services for $50 or more, made payable to the fund, to purchase additional shares at the applicable public offering price next determined after Putnam Investor Services receives the check. Checks must be drawn on a U.S. bank and must be payable in U.S. dollars. Putnam Investor Services acts as the shareholder's agent whenever it receives instructions to carry out a transaction on the shareholder's account. Upon receipt of instructions that shares are to be purchased for a shareholder's account, shares will be purchased through the investment dealer designated by the shareholder. Shareholders may change investment dealers at any time by written notice to Putnam Investor Services, provided the new dealer has a sales agreement with Putnam Mutual Funds. Shares credited to an account are transferable upon written instructions in good order to Putnam Investor Services and may be sold to the fund as described under "How to sell shares" in the prospectus. Money market funds and certain other funds will not issue share certificates. A shareholder may send to Putnam Investor Services any certificates which have been previously issued for safekeeping at no charge to the shareholder. Putnam Mutual Funds, at its expense, may provide certain additional reports and administrative material to qualifying institutional investors with fiduciary responsibilities to assist these investors in discharging their responsibilities. Institutions seeking further information about this service should contact Putnam Mutual Funds, which may modify or terminate this service at any time. Putnam Investor Services may make special services available to shareholders with investments exceeding $1,000,000. Contact Putnam Investor Services for details. The fund pays Putnam Investor Services' fees for maintaining Investing Accounts. REINSTATEMENT PRIVILEGE An investor who has redeemed shares of the fund may reinvest (within 1 year) the proceeds of such sale in shares of the same class of the fund, or may be able to reinvest (within 1 year) the proceeds in shares of the same class of one of the other continuously offered Putnam funds (through the Exchange Privilege described in the prospectus), including, in the case of shares subject to a CDSC, the amount of CDSC charged on the redemption. Any such reinvestment would be at the net asset value of the shares of the fund(s) the investor selects, next determined after Putnam Mutual Funds receives a Reinstatement Authorization. The time that the previous investment was held will be included in determining any applicable CDSC due upon redemptions and, in the case of class B shares, the eight-year period for conversion to class A shares. Shareholders will receive from Putnam Mutual Funds the amount of any CDSC paid at the time of redemption as part of the reinstated investment, which may be treated as capital gains to the shareholder for tax purposes. Exercise of the Reinstatement Privilege does not alter the federal income tax treatment of any capital gains realized on a sale of fund shares, but to the extent that any shares are sold at a loss and the proceeds are reinvested in shares of the fund, some or all of the loss may be disallowed as a deduction. Consult your tax adviser. Investors who desire to exercise the Reinstatement Privilege should contact their investment dealer or Putnam Investor Services. EXCHANGE PRIVILEGE Except as otherwise set forth in this section, by calling Putnam Investor Services, investors may exchange shares valued up to $500,000 between accounts with identical registrations, provided that no certificates are outstanding for such shares and no address change has been made within the preceding 15 days. During periods of unusual market changes and shareholder activity, shareholders may experience delays in contacting Putnam Investor Services by telephone to exercise the Telephone Exchange Privilege. Putnam Investor Services also makes exchanges promptly after receiving a properly completed Exchange Authorization Form and, if issued, share certificates. If the shareholder is a corporation, partnership, agent, or surviving joint owner, Putnam Investor Services will require additional documentation of a customary nature. Because an exchange of shares involves the redemption of fund shares and reinvestment of the proceeds in shares of another Putnam fund, completion of an exchange may be delayed under unusual circumstances if the fund were to suspend redemptions or postpone payment for the fund shares being exchanged, in accordance with federal securities laws. Exchange Authorization Forms and prospectuses of the other Putnam funds are available from Putnam Mutual Funds or investment dealers having sales contracts with Putnam Mutual Funds. The prospectus of each fund describes its investment objective(s) and policies, and shareholders should obtain a prospectus and consider these objectives and policies carefully before requesting an exchange. Shares of certain Putnam funds are not available to residents of all states. The fund reserves the right to change or suspend the Exchange Privilege at any time. Shareholders would be notified of any change or suspension. Additional information is available from Putnam Investor Services. Shares of the fund must be held at least 15 days by the shareholder requesting an exchange. There is no holding period if the shareholder acquired the shares to be exchanged through reinvestment of distributions, transfer from another shareholder, prior exchange or certain employer-sponsored defined contribution plans. In all cases, the shares to be exchanged must be registered on the records of the fund in the name of the shareholder requesting the exchange. Shareholders of other Putnam funds may also exchange their shares at net asset value for shares of the fund, as set forth in the current prospectus of each fund. For federal income tax purposes, an exchange is a sale on which the investor generally will realize a capital gain or loss depending on whether the net asset value at the time of the exchange is more or less than the investor's basis. The Exchange Privilege may be revised or terminated at any time. Shareholders would be notified of any such change or suspension. DIVIDENDS PLUS Shareholders may invest the fund's distributions of net investment income or distributions combining net investment income and short-term capital gains in shares of the same class of another continuously offered Putnam fund (the "receiving fund") using the net asset value per share of the receiving fund determined on the date the fund's distribution is payable. No sales charge or CDSC will apply to the purchased shares unless the fund paying the distribution is a money market fund. The prospectus of each fund describes its investment objective(s) and policies, and shareholders should obtain a prospectus and consider these objective(s) and policies carefully before investing their distributions in the receiving fund. Shares of certain Putnam funds are not available to residents of all states. The minimum account size requirement for the receiving fund will not apply if the current value of your account in the fund paying the distribution is more than $5,000. Shareholders of other Putnam funds (except for money market funds, whose shareholders must pay a sales charge or become subject to a CDSC) may also use their distributions to purchase shares of the fund at net asset value. For federal tax purposes, distributions from the fund which are reinvested in another fund are treated as paid by the fund to the shareholder and invested by the shareholder in the receiving fund and thus, to the extent comprised of taxable income and deemed paid to a taxable shareholder, are taxable. The Dividends PLUS program may be revised or terminated at any time. PLANS AVAILABLE TO SHAREHOLDERS The plans described below are fully voluntary and may be terminated at any time without the imposition by the fund or Putnam Investor Services of any penalty. All plans provide for automatic reinvestment of all distributions in additional shares of the fund at net asset value. The fund, Putnam Mutual Funds or Putnam Investor Services may modify or cease offering these plans at any time. AUTOMATIC CASH WITHDRAWAL PLAN ("ACWP"). An investor who owns or buys shares of the fund valued at $10,000 or more at the current public offering price may open an ACWP plan and have a designated sum of money ($50 or more) paid monthly, quarterly, semi-annually or annually to the investor or another person. (Payments from the fund can be combined with payments from other Putnam funds into a single check through a designated payment plan.) Shares are deposited in a plan account, and all distributions are reinvested in additional shares of the fund at net asset value (except where the plan is utilized in connection with a charitable remainder trust). Shares in a plan account are then redeemed at net asset value to make each withdrawal payment. Payment will be made to any person the investor designates; however, if shares are registered in the name of a trustee or other fiduciary, payment will be made only to the fiduciary, except in the case of a profit-sharing or pension plan where payment will be made to a designee. As withdrawal payments may include a return of principal, they cannot be considered a guaranteed annuity or actual yield of income to the investor. The redemption of shares in connection with a plan generally will result in a gain or loss for tax purposes. Some or all of the losses realized upon redemption may be disallowed pursuant to the so-called wash sale rules if shares of the same fund from which shares were redeemed are purchased (including through the reinvestment of fund distributions) within a period beginning 30 days before, and ending 30 days after, such redemption. In such a case, the basis of the replacement shares will be increased to reflect the disallowed loss. Continued withdrawals in excess of income will reduce and possibly exhaust invested principal, especially in the event of a market decline. The maintenance of a plan concurrently with purchases of additional shares of the fund would be disadvantageous to the investor because of the sales charge payable on such purchases. For this reason, the minimum investment accepted while a plan is in effect is $1,000, and an investor may not maintain a plan for the accumulation of shares of the fund (other than through reinvestment of distributions) and a plan at the same time. The cost of administering these plans for the benefit of those shareholders participating in them is borne by the fund as an expense of all shareholders. The fund, Putnam Mutual Funds or Putnam Investor Services may terminate or change the terms of the plan at any time. A plan will be terminated if communications mailed to the shareholder are returned as undeliverable. Investors should consider carefully with their own financial advisers whether the plan and the specified amounts to be withdrawn are appropriate in their circumstances. The fund and Putnam Investor Services make no recommendations or representations in this regard. TAX QUALIFIED RETIREMENT PLANS; 403(B) AND SEP PLANS. (NOT OFFERED BY FUNDS INVESTING PRIMARILY IN TAX-EXEMPT SECURITIES.) Investors may purchase shares of the fund through the following Tax Qualified Retirement Plans, available to qualified individuals or organizations: Standard and variable profit-sharing (including 401(k)) and money purchase pension plans; and Individual Retirement Account Plans (IRAs). Each of these Plans has been qualified as a prototype plan by the Internal Revenue Service. Putnam Investor Services will furnish services under each plan at a specified annual cost. Putnam Fiduciary Trust Company serves as trustee under each of these Plans. Forms and further information on these Plans are available from investment dealers or from Putnam Mutual Funds. In addition, specialized professional plan administration services are available on an optional basis; contact Putnam Defined Contribution Plan Services at 1-800-225-2465, extension 8600. A 403(b) Retirement Plan is available for employees of public school systems and organizations which meet the requirements of Section 501(c)(3) of the Internal Revenue Code. Forms and further information on the 403(b) Plan are also available from investment dealers or from Putnam Mutual Funds. Shares of the fund may also be used in simplified employee pension (SEP) plans. For further information on the Putnam prototype SEP plan, contact an investment dealer or Putnam Mutual Funds. Consultation with a competent financial and tax adviser regarding these Plans and consideration of the suitability of fund shares as an investment under the Employee Retirement Income Security Act of 1974, or otherwise, is recommended. SIGNATURE GUARANTEES Redemption requests for shares having a net asset value of $100,000 or more must be signed by the registered owners or their legal representatives and must be guaranteed by a bank, broker/dealer, municipal securities dealer or broker, government securities dealer or broker, credit union, national securities exchange, registered securities association, clearing agency, savings association or trust company, provided such institution is acceptable under and conforms with Putnam Fiduciary Trust Company's signature guarantee procedures. A copy of such procedures is available upon request. If you want your redemption proceeds sent to an address other than your address as it appears on Putnam's records, you must provide a signature guarantee. Putnam Investor Services usually requires additional documentation for the sale of shares by a corporation, partnership, agent or fiduciary, or a surviving joint owner. Contact Putnam Investor Services for details. SUSPENSION OF REDEMPTIONS The fund may not suspend shareholders' right of redemption, or postpone payment for more than seven days, unless the New York Stock Exchange is closed for other than customary weekends or holidays, or if permitted by the rules of the Securities and Exchange Commission during periods when trading on the Exchange is restricted or during any emergency which makes it impracticable for the fund to dispose of its securities or to determine fairly the value of its net assets, or during any other period permitted by order of the Commission for protection of investors. SHAREHOLDER LIABILITY Under Massachusetts law, shareholders could, under certain circumstances, be held personally liable for the obligations of the fund. However, the Agreement and Declaration of Trust disclaims shareholder liability for acts or obligations of the fund and requires that notice of such disclaimer be given in each agreement, obligation, or instrument entered into or executed by the fund or the Trustees. The Agreement and Declaration of Trust provides for indemnification out of fund property for all loss and expense of any shareholder held personally liable for the obligations of the fund. Thus, the risk of a shareholder incurring financial loss on account of shareholder liability is limited to circumstances in which the fund would be unable to meet its obligations. The likelihood of such circumstances is remote. STANDARD PERFORMANCE MEASURES Yield and total return data for the fund may from time to time be presented in Part I of this SAI and in advertisements. In the case of funds with more than one class of shares, all performance information is calculated separately for each class. The data is calculated as follows. Total return for one-, five- and ten-year periods (or for such shorter periods as the fund has been in operation or shares of the relevant class have been outstanding) is determined by calculating the actual dollar amount of investment return on a $1,000 investment in the fund made at the beginning of the period, at the maximum public offering price for class A shares and class M shares and net asset value for other classes of shares, and then calculating the annual compounded rate of return which would produce that amount. Total return for a period of one year is equal to the actual return of the fund during that period. Total return calculations assume deduction of the fund's maximum sales charge or CDSC, if applicable, and reinvestment of all fund distributions at net asset value on their respective reinvestment dates. The fund's yield is presented for a specified thirty-day period (the "base period"). Yield is based on the amount determined by (i) calculating the aggregate amount of dividends and interest earned by the fund during the base period less expenses for that period, and (ii) dividing that amount by the product of (A) the average daily number of shares of the fund outstanding during the base period and entitled to receive dividends and (B) the per share maximum public offering price for class A shares or class M shares, as appropriate, and net asset value for other classes of shares on the last day of the base period. The result is annualized on a compounding basis to determine the yield. For this calculation, interest earned on debt obligations held by the fund is generally calculated using the yield to maturity (or first expected call date) of such obligations based on their market values (or, in the case of receivables-backed securities such as the Government National Mortgage Association ("GNMAs"), based on cost). Dividends on equity securities are accrued daily at their stated dividend rates. The amount of expenses used in determining the fund's yield includes, in addition to expenses actually accrued by the fund, an estimate of the amount of expenses that the fund would have incurred if brokerage commissions had not been used to reduce such expenses. If the fund is a money market fund, yield is computed by determining the percentage net change, excluding capital changes, in the value of an investment in one share over the seven-day period for which yield is presented (the "base period"), and multiplying the net change by 365/7 (or approximately 52 weeks). Effective yield represents a compounding of the yield by adding 1 to the number representing the percentage change in value of the investment during the base period, raising that sum to a power equal to 365/7, and subtracting 1 from the result. If the fund is a tax-exempt fund, the tax-equivalent yield during the base period may be presented for shareholders in one or more stated tax brackets. Tax-equivalent yield is calculated by adjusting the tax-exempt yield by a factor designed to show the approximate yield that a taxable investment would have to earn to produce an after-tax yield equal, for that shareholder, to the tax-exempt yield. The tax-equivalent yield will differ for shareholders in other tax brackets. At times, Putnam Management may reduce its compensation or assume expenses of the fund in order to reduce the fund's expenses. The per share amount of any such fee reduction or assumption of expenses during the fund's past ten fiscal years (or for the life of the fund, if shorter) is reflected in the table in the section entitled "Financial highlights" in the prospectus. Any such fee reduction or assumption of expenses would increase the fund's yield and total return during the period of the fee reduction or assumption of expenses. All data are based on past performance and do not predict future results. COMPARISON OF PORTFOLIO PERFORMANCE Independent statistical agencies measure the fund's investment performance and publish comparative information showing how the fund, and other investment companies, performed in specified time periods. Three agencies whose reports are commonly used for such comparisons are set forth below. From time to time, the fund may distribute these comparisons to its shareholders or to potential investors. THE AGENCIES LISTED BELOW MEASURE PERFORMANCE BASED ON THEIR OWN CRITERIA RATHER THAN ON THE STANDARDIZED PERFORMANCE MEASURES DESCRIBED IN THE PRECEDING SECTION. LIPPER ANALYTICAL SERVICES, INC. distributes mutual fund rankings monthly. The rankings are based on total return performance calculated by Lipper, generally reflecting changes in net asset value adjusted for reinvestment of capital gains and income dividends. They do not reflect deduction of any sales charges. Lipper rankings cover a variety of performance periods, including year-to-date, 1-year, 5-year, and 10-year performance. Lipper classifies mutual funds by investment objective and asset category. MORNINGSTAR, INC. distributes mutual fund ratings twice a month. The ratings are divided into five groups: highest, above average, neutral, below average and lowest. They represent a fund's historical risk/reward ratio relative to other funds in its broad investment class as determined by Morningstar, Inc. Morningstar ratings cover a variety of performance periods, including 3-year, 5- year, 10-year and overall performance. The performance factor for the overall rating is a weighted-average assessment of the fund's 3-year, 5-year, and 10-year total return performance (if available) reflecting deduction of expenses and sales charges. Performance is adjusted using quantitative techniques to reflect the risk profile of the fund. The ratings are derived from a purely quantitative system that does not utilize the subjective criteria customarily employed by rating agencies such as Standard & Poor's and Moody's Investor Service, Inc. CDA/WIESENBERGER'S MANAGEMENT RESULTS publishes mutual fund rankings and is distributed monthly. The rankings are based entirely on total return calculated by Weisenberger for periods such as year-to-date, 1-year, 3-year, 5-year and 10-year. Mutual funds are ranked in general categories (e.g., international bond, international equity, municipal bond, and maximum capital gain). Weisenberger rankings do not reflect deduction of sales charges or fees. Independent publications may also evaluate the fund's performance. The fund may from time to time refer to results published in various periodicals, including Barrons, Financial World, Forbes, Fortune, Investor's Business Daily, Kiplinger's Personal Finance Magazine, Money, U.S. News and World Report and The Wall Street Journal. Independent, unmanaged indexes, such as those listed below, may be used to present a comparative benchmark of fund performance. The performance figures of an index reflect changes in market prices, reinvestment of all dividend and interest payments and, where applicable, deduction of foreign withholding taxes, and do not take into account brokerage commissions or other costs. Because the fund is a managed portfolio, the securities it owns will not match those in an index. Securities in an index may change from time to time. THE CONSUMER PRICE INDEX, prepared by the U.S. Bureau of Labor Statistics, is a commonly used measure of the rate of inflation. The index shows the average change in the cost of selected consumer goods and services and does not represent a return on an investment vehicle. THE DOW JONES INDUSTRIAL AVERAGE is an index of 30 common stocks frequently used as a general measure of stock market performance. THE DOW JONES UTILITIES AVERAGE is an index of 15 utility stocks frequently used as a general measure of stock market performance. CS FIRST BOSTON HIGH YIELD INDEX is a market-weighted index including publicly traded bonds having a rating below BBB by Standard & Poor's and Baa by Moody's. THE LEHMAN BROTHERS AGGREGATE BOND INDEX is an index composed of securities from The Lehman Brothers Government/Corporate Bond Index, The Lehman Brothers Mortgage-Backed Securities Index and The Lehman Brothers Asset-Backed Securities Index and is frequently used as a broad market measure for fixed-income securities. THE LEHMAN BROTHERS ASSET-BACKED SECURITIES INDEX is an index composed of credit card, auto, and home equity loans. Included in the index are pass-through, bullet (noncallable), and controlled amortization structured debt securities; no subordinated debt is included. All securities have an average life of at least one year. THE LEHMAN BROTHERS CORPORATE BOND INDEX is an index of publicly issued, fixed-rate, non-convertible investment-grade domestic corporate debt securities frequently used as a general measure of the performance of fixed-income securities. THE LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX is an index of publicly issued U.S. Treasury obligations, debt obligations of U.S. government agencies (excluding mortgage-backed securities), fixed-rate, non-convertible, investment-grade corporate debt securities and U.S. dollar-denominated, SEC-registered non-convertible debt issued by foreign governmental entities or international agencies used as a general measure of the performance of fixed-income securities. THE LEHMAN BROTHERS INTERMEDIATE TREASURY BOND INDEX is an index of publicly issued U.S. Treasury obligations with maturities of up to ten years and is used as a general gauge of the market for intermediate-term fixed-income securities. THE LEHMAN BROTHERS LONG-TERM TREASURY BOND INDEX is an index of publicly issued U.S. Treasury obligations (excluding flower bonds and foreign-targeted issues) that are U.S. dollar-denominated and have maturities of 10 years or greater. THE LEHMAN BROTHERS MORTGAGE-BACKED SECURITIES INDEX includes 15- and 30-year fixed rate securities backed by mortgage pools of the Government National Mortgage Association, Federal Home Loan Mortgage Corporation, and Federal National Mortgage Association. THE LEHMAN BROTHERS MUNICIPAL BOND INDEX is an index of approximately 20,000 investment-grade, fixed-rate tax-exempt bonds. THE LEHMAN BROTHERS TREASURY BOND INDEX is an index of publicly issued U.S. Treasury obligations (excluding flower bonds and foreign-targeted issues) that are U.S. dollar denominated, have a minimum of one year to maturity, and are issued in amounts over $100 million. THE MORGAN STANLEY CAPITAL INTERNATIONAL WORLD INDEX is an index of approximately 1,482 equity securities listed on the stock exchanges of the United States, Europe, Canada, Australia, New Zealand and the Far East, with all values expressed in U.S. dollars. THE MORGAN STANLEY CAPITAL INTERNATIONAL EAFE INDEX is an index of approximately 1,045 equity securities issued by companies located in 18 countries and listed on the stock exchanges of Europe, Australia, and the Far East. All values are expressed in U.S. dollars. THE MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE INDEX is an index of approximately 627 equity securities issued by companies located in one of 13 European countries, with all values expressed in U.S. dollars. THE MORGAN STANLEY CAPITAL INTERNATIONAL PACIFIC INDEX is an index of approximately 418 equity securities issued by companies located in 5 countries and listed on the exchanges of Australia, New Zealand, Japan, Hong Kong, Singapore/Malaysia. All values are expressed in U.S. dollars. THE NASDAQ INDUSTRIAL AVERAGE is an index of stocks traded in The Nasdaq Stock Market, Inc. National Market System. THE RUSSELL 2000 INDEX is composed of the 2,000 smallest securities in the Russell 3000 Index, representing approximately 7% of the Russell 3000 total market capitalization. The Russell 3000 Index is composed of 3,000 large U.S. companies ranked by market capitalization, representing approximately 98% of the U.S. equity market. THE SALOMON BROTHERS LONG-TERM HIGH-GRADE CORPORATE BOND INDEX is an index of publicly traded corporate bonds having a rating of at least AA by Standard & Poor's or Aa by Moody's and is frequently used as a general measure of the performance of fixed-income securities. THE SALOMON BROTHERS LONG-TERM TREASURY INDEX is an index of U.S. government securities with maturities greater than 10 years. THE SALOMON BROTHERS WORLD GOVERNMENT BOND INDEX is an index that tracks the performance of the 14 government bond markets of Australia, Austria, Belgium Canada, Denmark, France, Germany, Italy, Japan, Netherlands, Spain, Sweden, United Kingdom and the United States. Country eligibility is determined by market capitalization and investability criteria. THE SALOMON BROTHERS WORLD GOVERNMENT BOND INDEX (non $U.S.) is an index of foreign government bonds calculated to provide a measure of performance in the government bond markets outside of the United States. STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX is an index of common stocks frequently used as a general measure of stock market performance. STANDARD & POOR'S 40 UTILITIES INDEX is an index of 40 utility stocks. STANDARD & POOR'S/BARRA VALUE INDEX is an index constructed by ranking the securities in the Standard & Poor's 500 Composite Stock Price Index by price-to-book ratio and including the securities with the lowest price- to-book ratios that represent approximately half of the market capitalization of the Standard & Poor's 500 Composite Stock Price Index. In addition, Putnam Mutual Funds may distribute to shareholders or prospective investors illustrations of the benefits of reinvesting tax-exempt or tax-deferred distributions over specified time periods, which may include comparisons to fully taxable distributions. These illustrations use hypothetical rates of tax-advantaged and taxable returns and are not intended to indicate the past or future performance of any fund. DEFINITIONS "Putnam Management" -- Putnam Investment Management, Inc., the fund's investment manager. "Putnam Mutual Funds" -- Putnam Mutual Funds Corp., the fund's principal underwriter. "Putnam Fiduciary Trust -- Putnam Fiduciary Trust Company, Company" the fund's custodian. "Putnam Investor Services" -- Putnam Investor Services, a division of Putnam Fiduciary Trust Company, the fund's investor servicing agent. PUTNAM ARIZONA TAX EXEMPT INCOME FUND ("ARIZONA") PUTNAM FLORIDA TAX EXEMPT INCOME FUND ("FLORIDA") PUTNAM MASSACHUSETTS TAX EXEMPT INCOME FUND ("MASSACHUSETTS") PUTNAM MICHIGAN TAX EXEMPT INCOME FUND ("MICHIGAN") PUTNAM MINNESOTA TAX EXEMPT INCOME FUND ("MINNESOTA") PUTNAM NEW JERSEY TAX EXEMPT INCOME FUND ("NEW JERSEY") PUTNAM OHIO TAX EXEMPT INCOME FUND ("OHIO") PUTNAM PENNSYLVANIA TAX EXEMPT INCOME FUND ("PENNSYLVANIA") (collectively, the "funds") FORM N-1A PART C OTHER INFORMATION ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS (a) Index to Financial Statements and Supporting Schedule: (1) Financial Statements for the funds: Statement of assets and liabilities -- May 31, 1996 (a). Statement of operations -- year ended May 31, 1996 (a). Statement of changes in net assets -- years ended May 31, 1996 and May 31, 1995 for Massachusetts, Michigan, Minnesota and Ohio (a). Statement of changes in net assets -- years ended May 31, 1996 and periods ended May 31, 1995 for Arizona, Florida , New Jersey and Pennsylvania (a). Financial highlights (a)(b). Notes to financial statements (a). (2) Supporting Schedules for the funds : Schedule I -- Portfolio of investments owned -- May 31, 1996 (a) . Schedules through IX omitted because the required matter is not present. (a) Incorporated by reference into Parts A and B. (b) Included in Part A. ----------------------- (b) Exhibits: 1. Agreement and Declaration of Trust for Arizona dated November 9, 1990 -- Incorporated by reference to the Registrant's Initial Registration Statement. Agreement and Declaration of Trust, dated June 27, 1990 for Florida -- Incorporated by reference to the Registrant's Initial Registration Statement. Agreement and Declaration of Trust, as amended September 15, 1995 for Massachusetts -- Incorporated by reference to Post- Effective Amendment No. 15 to the Registrant's Registration Statement. Agreements and Declarations of Trust, as amended September 15, 1995 for Michigan, Minnesota and Ohio -- Incorporated by reference to Post-Effective Amendment No. 15 to the Registrant's Registration Statement. Agreement and Declaration of Trust for New Jersey dated November 17, 1989 -- Incorporated by reference to the Registrant's Initial Registration Statement. Agreement and Declaration of Trust dated April 1, 1989 for Pennsylvania --Incorporated by reference to the Registrant's Initial Registration Statement. By-Laws , as amended through February 1, 1994 for Arizona -- Incorporated by reference to Post-Effective Amendment No. 5 to the Registrant's Registration Statement. By-Laws , as amended through February 1, 1994 for Florida -- Incorporated by reference to Post-Effective Amendment No. 5 to the Registrant's Registration Statement. By-Laws , as amended through February 1, 1994 for New Jersey -- Incorporated by reference to Post-Effective Amendment No. 5 to the Registrant's Registration Statement. By-Laws , as amended through February 1, 1994 for Pennsylvania -- Incorporated by reference to Post-Effective Amendment No. 6 to the Registrant's Registration Statement. 2. By-Laws , as amended through February 1, 1994 for Massachusetts, Michigan, Minnesota and Ohio -- Incorporated by reference to Post-Effective Amendment No. 14 to the Registrants' Registration Statement. 3. Not applicable. 4a. Class A Specimen share certificate for Arizona -- Incorporated by reference to Post- Effective Amendment No. 4 to the Registrant's Registration Statement. Class A Specimen share certificate for Florida -- Incorporated by reference to Post- Effective Amendment No. 3 to the Registrant's Registration Statement. Class A Specimen share certificate for New Jersey -- Incorporated by reference to Post- Effective Amendment No. 3 to the Registrant's Registration Statement. Class A Specimen share certificate for Pennsylvania -- Incorporated by reference to Post-Effective Amendment No. 6 to the Registrant's Registration Statement. Class A Specimen share certificates for Massachusetts, Michigan, Minnesota and Ohio - - Incorporated by reference to Post-Effective Amendment No. 13 to the Registrants' Registration Statement. 4b. Class B Specimen share certificate for Arizona --Incorporated by reference to Post- Effective Amendment No. 4 to the Registrant's Registration Statement. Class B Specimen share certificate for Florida --Incorporated by reference to Post- Effective Amendment No. 3 to the Registrant's Registration Statement. Class B Specimen share certificate for New Jersey --Incorporated by reference to Post- Effective Amendment No. 3 to the Registrant's Registration Statement. Class B Specimen share certificate for Pennsylvania --Incorporated by reference to Post-Effective Amendment No. 6 to the Registrant's Registration Statement. Class B Specimen share certificates for Massachusetts, Michigan, Minnesota and Ohio - -Incorporated by reference to Post- Effective Amendment No. 13 to the Registrants' Registration Statement. 4c. Class M Specimen share certificates for Florida, Massachusetts, Michigan, Minnesota, New Jersey, and Ohio funds -- Incorporated by reference to Post-Effective Amendment No. 15 to the Registrant's Registration Statement. 4d. Portions of Agreement and Declaration of Trust relating to shareholder rights for Arizona -- Incorporated by reference to Post- Effective Amendment No. 4 to the Registrant's Registration Statement. Portions of Agreement and Declaration of Trust relating to shareholder rights for Florida -- Incorporated by reference to Post- Effective Amendment No. 4 to the Registrant's Registration Statement. Portions of Agreement and Declaration of Trust relating to shareholder rights for New Jersey -- Incorporated by reference to Post-Effective Amendment No. 4 to the Registrant's Registration Statement. Portions of Agreement and Declaration of Trust relating to shareholder rights for Pennsylvania -- Incorporated by reference to Post-Effective Amendment No. 6 to the Registrant's Registration Statement. Portions of Agreements and Declarations of Trust relating to shareholder rights for Massachusetts, Michigan, Minnesota and Ohio -- Incorporated by reference to Post- Effective Amendment No. 13 to the Registrants' Registration Statement. 4e. Portions of Bylaws relating to shareholder rights for Arizona -- Incorporated by reference to Post-Effective Amendment No. 5 to the Registrant's Registration Statement. Portions of Bylaws relating to shareholder rights for Florida -- Incorporated by reference to Post-Effective Amendment No. 5 to the Registrant's Registration Statement. Portions of Bylaws relating to shareholder rights for New Jersey -- Incorporated by reference to Post-Effective Amendment No. 5 to the Registrant's Registration Statement. Portions of Bylaws relating to shareholder rights for Pennsylvania -- Incorporated by reference to Post-Effective Amendment No. 6 to the Registrant's Registration Statement. Portions of Bylaws relating to shareholder rights for Massachusetts, Michigan, Minnesota and Ohio -- Incorporated by reference to Post-Effective Amendment No. 14 to the Registrants' Registration Statement. 5. Management Contract for Arizona dated September 20, 1996 -- Exhibit 1. Management Contract for Florida dated September 20, 1996-- Exhibit 2. Management Contract for Massachusetts dated September 20, 1996 -- Exhibit 3. Management Contract for Michigan dated September 20, 1996 -- Exhibit 4. Management Contract for Minnesota dated September 20, 1996 -- Exhibit 5. Management Contract for New Jersey dated September 20, 1996-- Exhibit 6 Management Contract for Ohio dated September 20, 1996 -- Exhibit 7 Management Contract for Pennsylvania dated September 20, 1996. -- Exhibit 8 . 6a. Distributor's Contract dated May 6, 1994 for Arizona -- Incorporated by reference to Post-Effective Amendment No. 5 to the Registrant's Registration Statement. Distributor's Contract dated May 6, 1994 for Florida -- Incorporated by reference to Post-Effective Amendment No. 5 to the Registrant's Registration Statement. Distributor's Contract dated May 6, 1994 for New Jersey -- Incorporated by reference to Post-Effective Amendment No. 5 to the Registrant's Registration Statement. Distributor's Contract dated May 6, 1994 for Pennsylvania -- Incorporated by reference to Post-Effective Amendment No. 7 to the Registrant's Registration Statement. Distributor's Contracts dated May 6, 1994 for Massachusetts, Michigan, Minnesota and Ohio -- Incorporated by reference to Post-Effective Amendment No. 14 to the Registrants' Registration Statement. 6b. Form of Specimen Dealer Sales Contract for Arizona -- Incorporated by reference to Post- Effective Amendment No. 4 to the Registrant's Registration Statement. Form of Specimen Dealer Sales Contract for Florida -- Incorporated by reference to Post- Effective Amendment No. 2 to the Registrant's Registration Statement. Form of Specimen Dealer Sales Contract for New Jersey -- Incorporated by reference to Post-Effective Amendment No. 2 to the Registrant's Registration Statement. Form of Specimen Dealer Sales Contract for Pennsylvania -- Incorporated by reference to Post-Effective Amendment No. 6 to the Registrant's Registration Statement. Form of Specimen Dealer Sales Contract for Massachusetts, Michigan, Minnesota and Ohio -- Incorporated by reference to Post- Effective Amendment No. 13 to the Registrants' Registration Statement. 6c. Form of Specimen Financial Institution Sales Contract for Arizona -- Incorporated by reference to Post-Effective Amendment No. 4 to the Registrant's Registration Statement. Form of Specimen Financial Institution Sales Contract for Florida -- Incorporated by reference to Post-Effective Amendment No. 2 to the Registrant's Registration Statement. Form of Specimen Financial Institution Sales Contract for New Jersey -- Incorporated by reference to Post-Effective Amendment No. 2 to the Registrant's Registration Statement. Form of Specimen Financial Institution Sales Contract for Pennsylvania -- Incorporated by reference to Post-Effective Amendment No. 6 to the Registrant's Registration Statement. Form of Specimen Financial Institution Sales Contract for Massachusetts, Michigan, Minnesota and Ohio -- Incorporated by reference to Post-Effective Amendment No. 13 to the Registrants' Registration Statement. 7. Not applicable. 8. Custodian Agreement dated May 3, 1991 as amended July 13, 1992 for Arizona -- Incorporated by reference to Post-Effective Amendment No. 4 to the Registrant's Registration Statement. Custodian Agreement dated May 3, 1991, as amended July 13, 1992 for Florida -- Incorporated by reference to Post-Effective Amendment No. 2 to the Registrant's Registration Statement. Custodian Agreement dated May 3, 1991 as amended July 13, 1992 for New Jersey -- Incorporated by reference to Post-Effective Amendment No. 4 to the Registrant's Registration Statement. Custodian Agreement dated May 3, 1991 as amended July 13, 1992 for Pennsylvania -- Incorporated by reference to Post-Effective Amendment No. 6 to the Registrant's Registration Statement. Custodian Agreement dated May 3, 1991 as amended July 13, 1992 for Massachusetts, Michigan, Minnesota and Ohio --Incorporated by reference to Post-Effective Amendment No. 14 to the Registrants' Registration Statement. 9. Investor Servicing Agreement dated June 3, 1991 for Arizona -- Incorporated by reference to Post-Effective Amendment No. 1 to the Registrant's Registration Statement. Investor Servicing Agreement dated June 3, 1991 for Florida -- Incorporated by reference to Post-Effective Amendment No. 2 to the Registrant's Registration Statement. Investor Servicing Agreement dated June 3, 1991 for New Jersey -- Incorporated by reference to Post-Effective Amendment No. 2 to the Registrant's Registration Statement. Investor Servicing Agreement dated June 3, 1991 for Pennsylvania -- Incorporated by reference to Post-Effective Amendment No. 4 to the Registrant's Registration Statement. Investor Servicing Agreement dated June 3, 1991 for Massachusetts, Michigan, Minnesota and Ohio -- Incorporated by reference to Post-Effective Amendment No. 10 to the Registrants' Registration Statement. 10. Opinion of Ropes & Gray, including consent for Arizona -- Exhibit 9 . Opinion of Ropes & Gray, including consent for Florida -- Exhibit 10 . Opinion of Ropes & Gray, including consent for New Jersey -- Incorporated by reference to Post-Effective Amendment No. 6 to the Registrant's Registration Statement. Opinion of Ropes & Gray, including consent for Pennsylvania -- Incorporated by reference to Pre-Effective Amendment No. 1 to the Registrants' Registration Statement. Opinions of Ropes & Gray, including consents for Massachusetts and Ohio -- Incorporated by reference to Post-Effective Amendment 10 to the Registrants' Registration Statement. Opinions of Ropes & Gray, including consents for Michigan and Minnesota -- Incorporated by reference to the Registrants' Initial Registration Statement. 11. Not applicable. 12. Not applicable. 13. Investment Letters from Putnam Investments, Inc. , dated March 31, 1995 to Massachusetts, Michigan, Minnesota and Ohio for Class M shares -- Incorporated by reference to Post-Effective Amendment No. 15 to the Registrant's Registration Statement. Investment Letters from Putnam Investments, Inc. dated April 30, 1995 to Florida and New Jersey for Class M shares -- Incorporated by reference to Post-Effective Amendment No. 6 to the Registrant's Registration Statement. Investment Letter from Putnam Investments, Inc. to Arizona for Class B shares -- Incorporated by reference to Post-Effective Amendment No. 4 to the Registrant's Registration Statement. Investment Letter for Class A shares from Putnam Investments, Inc. to Pennsylvania - Incorporated by reference to Pre-Effective Amendment No. 1 to the Registrant's Registration Statement . 14. Not applicable. 15a. Class A Distribution Plan and Agreement dated March 5, 1992, as amended July 15, 1993 for Arizona -- Incorporated by reference to Post- Effective Amendment No. 4 to the Registrant's Registration Statement. Class A Distribution Plan and Agreement dated July 8, 1993 for Florida -- Incorporated by reference to Post-Effective Amendment No. 4 to the Registrant's Registration Statement. Class A Distribution Plan and Agreement dated July 9, 1993, as amended July 15, 1993 for Massachusetts -- Incorporated by reference to Post-Effective Amendment No. 13 to the Registrant's Registration Statement. Class A Distribution Plans dated May 7, 1992, as amended July 15, 1993 for Michigan, Minnesota and Ohio -- Incorporated by reference to Post-Effective Amendment No. 13 to the Registrants' Registration Statement. Class A Distribution Plan and Agreement dated September 10, 1992, as amended January 1, 1993 for New Jersey -- Incorporated by reference to Post-Effective Amendment No. 4 to the Registrant's Registration Statement. Class A Distribution Plan and Agreement dated July 8, 1993 for Pennsylvania -- Incorporated by reference to Post-Effective Amendment No. 6 to the Registrant's Registration Statement. 15b. Class B Distribution Plan and Agreement dated July 15, 1993 for Arizona -- Incorporated by reference to Post-Effective Amendment No. 4 to the Registrant's Registration Statement. Class B Distribution Plan dated July 8, 1993 for Florida -- Incorporated by reference to Post-Effective Amendment No. 3 to the Registrant's Registration Statement. Class B Distribution Plan dated January 1, 1993 for New Jersey -- Incorporated by reference to Post-Effective Amendment No. 4 to the Registrant's Registration Statement. Class B Distribution Plan and Agreement dated July 15, 1993 for Pennsylvania -- Incorporated by reference to Post-Effective Amendment No. 6 to the Registrant's Registration Statement. Class B Distribution Plans and Agreements dated July 14, 1993 for Massachusetts, Michigan Minnesota and Ohio -- Incorporated by reference to Post-Effective Amendment No. 13 to the Registrants' Registration Statement. 15c. Class M Distribution Plan dated June 30, 1995 for Arizo na -- Exhib it 11. Class M Distribution Plan dated April 28, 1995 for Florida -- Incorporated by reference to Post-Effective Amendment No. 6 to the Registrant's Registration Statement. Class M Distribution Plan and Agreement dated April 28, 1995 for New Jersey -- Incorporated by reference to Post- Effective Amendment No. 6 to the Registrant's Registration Statement. Class M Distribution Plans and Agreements dated March 31, 1995 for Massachusetts , Michigan, Minnesota and Ohio -- Incorporated by reference to Post-Effective Amendment No. 15 to the Registrants' Registration Statement. Class M Distribution Plan and Agreement dated June 30, 1995 for Pennsylvania --Exhibit 12. 15d. Form of Specimen Dealer Service Agreement for Arizona -- Incorporated by reference to Post-Effective Amendment No. 5 to the Registrant's Registration Statement. Form of Specimen Dealer Service Agreement for Florida -- Incorporated by reference to Post-Effective Amendment No. 3 to the Registrant's Registration Statement. Form of Specimen Dealer Service Agreement for New Jersey -- Incorporated by reference to Post-Effective Amendment No. 3 to the Registrant's Registration Statement. Form of Specimen Dealer Service Agreement for Pennsylvania -- Incorporated by reference to Post-Effective Amendment No. 7 to the Registrant's Registration Statement. Form of Specimen Dealer Service Agreement for Massachusetts, Michigan, Minnesota and Ohio -- Incorporated by reference to Post- Effective Amendment No. 13 to the Registrants' Registration Statement. 15e. Form of Specimen Financial Institution Service Agreement for Arizona - --Incorporated by reference to Post-Effective Amendment No. 5 to the Registrant's Registration Statement. Form of Specimen Financial Institution Service Agreement for Florida -- Incorporated by reference to Post-Effective Amendment No. 3 to the Registrant's Registration Statement. Form of Specimen Financial Institution Service Agreement for New Jersey -- Incorporated by reference to Post-Effective Amendment No. 3 to the Registrant's Registration Statement. Form of Specimen Financial Institution Service Agreement for Pennsylvania -- Incorporated by reference to Post-Effective Amendment No. 7 to the Registrant's Registration Statement. Form of Specimen Financial Institution Service Agreement for Massachusetts, Michigan, Minnesota and Ohio --Incorporated by reference to Post-Effective Amendment No. 13 to the Registrant's Registration Statement. 16. Schedules for computation of performance quotations for Arizona -- Exhibit 13 . Schedules for computation of performance quotations for Florida -- Exhibit 14 . Schedules for computation of performance quotations for Massachusetts -- Exhibit 15 . Schedules for computation of performance quotations for Michigan -- Exhibit 16 . Schedules for computation of performance quotations for Minnesota -- Exhibit 17 . Schedules for computation of performance quotations for New Jersey -- Exhibit 18 . Schedules for computation of performance quotations for Ohio -- Exhibit 19 . Schedules for computation of performance quotations for Pennsylvania -- Exhibit 20 . 17a. Financial Data Schedules for Class A shares for Arizona -- Exhibit 21 . Financial Data Schedules for Class A shares for Florida -- Exhibit 22 . Financial Data Schedules for Class A shares for Massachusetts -- Exhibit 23 . Financial Data Schedules for Class A shares for Michigan --Exhibit 24 . Financial Data Schedules for Class A shares for Minnesota -- Exhibit 25 . Financial Data Schedules for Class A shares for New Jersey -- Exhibit 26 . Financial Data Schedules for Class A shares for Ohio -- Exhibit 27 . Financial Data Schedules for Class A shares for Pennsylvania --Exhibit 28 . 17b. Financial Data Schedules for Class B shares for Arizona -- Exhibit 29 . Financial Data Schedules for Class B shares for Florida -- Exhibit 30 . Financial Data Schedules for Class B shares for Massachusetts -- Exhibit 31 . Financial Data Schedules for Class B shares for Michigan --Exhibit 32 . Financial Data Schedules for Class B shares for Minnesota -- Exhibit 33 . Financial Data Schedules for Class B shares for New Jersey -- Exhibit 34 . Financial Data Schedules for Class B shares for Ohio -- Exhibit 35 . Financial Data Schedules for Class B shares for Pennsylvania --Exhibit 36 . 17c. Financial Data Schedules for Class M shares for Arizona -- Exhibit 37. Financial Data Schedules for Class M shares for Florida -- Exhibit 38 . Financial Data Schedules for Class M shares for Massachusetts -- Exhibit 39 . Financial Data Schedules for Class M shares for Michigan -- Exhibit 40 . Financial Data Schedules for Class M shares for Minnesota --Exhibit 41 . Financial Data Schedules for Class M shares for New Jersey -- Exhibit 42 . Financial Data Schedules for Class M shares for Ohio -- Exhibit 43 . Financial Data Schedules for Class M shares for Pennsylvania -- Exhibit 44. 18. Rule 18f-3 Plan -- Incorporated by reference to Post-Effective Amendment No. 15 for Massachusetts, Michigan, Minnesota and Ohio, incorporated by reference to Post- Effective Amendment No. 6 for Arizona, incorporated by reference to Post-Effective Amendment No. 6 for Florida, incorporated by reference to Post-Effective Amendment No. 6 for New Jersey and incorporated by reference to Post-Effective Amendment No. 8 for Pennsylvania, to the Registrants' Registration Statements . ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANTS None. ITEM 26. NUMBER OF HOLDERS OF SECURITIES As of August 31, 1996 the number of shareholders of each Registrant's shares of beneficial interest were as follows: FUND NAME CLASS A CLASS B CLASS M Arizona 2,936 672 12 Florida 4,760 1,269 20 Massachusetts 6,425 2,045 39 Michigan 4,208 1,043 20 Minnesota 3,556 1,516 23 New Jersey 6,169 2,182 13 Ohio 5,899 1,433 23 Pennsylvania 5,215 2,501 37 ITEM 27. INDEMNIFICATION The information required by this item is incorporated by reference to each Registrant's initial Registration Statement on Form N-1A under the Investment Company Act of 1940 File No. 811- 4531, 811-6129, 811-4518, 811-4529, 811-4527, 811-5977, 811-4528 and 811-5802 for the Arizona, Florida, Massachusetts, Michigan, Minnesota, New Jersey, Ohio and Pennslyvania Funds, respectively. Item 28. Business and Other Connections of Investment Adviser Except as set forth below, the directors and officers of the Registrant's investment adviser have been engaged during the past two fiscal years in no business, vocation or employment of a substantial nature other than as directors or officers of the investment adviser or certain of its corporate affiliates. Certain officers of the investment adviser serve as officers of some or all of the Putnam funds. The address of the investment adviser, its corporate affiliates and the Putnam Funds is One Post Office Square, Boston, Massachusetts 02109. NAME NON-PUTNAM BUSINESS AND OTHER CONNECTIONS Manjit S. Bakshi Prior to October, 1995, Fidelity Vice President Management & Research Company, 82 Devonshire St., Boston, MA 02110 Robert K. Baumbach Prior to August, 1994, Vice President Vice President and Analyst, Keystone Custodian Funds, 200 Berkeley St., Boston, MA 02110 Robert R. Beck Director, Charles Bridge Publishing, Senior Vice President 85 Main St., Watertown, MA 02172 Janet S. Becker Prior to July, 1995, National Account Assistant Vice President Manager for Booz-Allen & Hamilton, American Express Travel Management Services, 100 Cambridge Park Drive, 02140; Prior to August, 1994, Account Manager, Hilton at Dedham Place, Dedham, MA 02026 Matthew G. Bevin Prior to February, 1995, Consultant, Assistant Vice President SEI Corporation, 680 East Swedesford Road, Wayne, PA 19807 Thomas Bogan Prior to November, 1994, Analyst Senior Vice President Lord, Abbett & Co., 767 Fifth Avenue, New York, NY 10153 John A. Boselli Prior to April, 1996, Senior Manager, Vice President Price Waterhouse LLP, 200 E. Randolph Drive, Chicago, IL 60601 Susan M. Braid Prior to October, 1995, Manager, Vice President Pioneer Group, Inc., 60 State St., Boston, MA 02109 Brian E. Broyles Prior to September, 1995, Accounts Assistant Vice President Payable Manager, Entex Information Services, Six International Drive, Rye Brook, NY 10573 Andrea Burke Prior to August, 1994, Vice President Vice President and Portfolio Manager, Back Bay Advisors, 399 Boylston St., Boston, MA 02116 Robert W. Burke Member-Executive Committee, The Ridge Senior Managing Director Club, Country Club Road, Sandwich, MA 02563; Member-Advisory Board, Cathedral High School, 74 Union Park St., So. Boston, MA 02118 Peter A. Capodilupo Prior to June, 1996, Chief Human Vice President Resources Officer, Harvard Business School, Soldiers Field Rd., Boston, MA 02163 Susan Chapman Prior to June, 1995, Vice President, Senior Vice President Forbes, Walsh, Kelly & Company, Inc., 17 Battery Place, New York, NY 10004 Louis F. Chrostowski Prior to August, 1995, Manager of Vice President Compensation and Benefits, Itek Optical Systems, 10 MacGuire Rd., Lexington, MA 02173 C. Beth Cotner Director, The Lyric Stage Theater, 140 Senior Vice President Clarendon St., Boston, MA; Prior to September, 1995, Executive Vice President, Director of U.S. Equity Funds, Kemper Financial Services, 120 S. LaSalle St., Chicago, IL 60603 Peter J. Curran Prior to January, 1996, Vice President Senior Vice President ITT Sheraton Director Worldwide Staffing, ITT Sheraton Corporation, 60 State St., Boston, MA 02109 Judith S. Deming Prior to May, 1995, Asset Manager, Assistant Vice President Fidelity Management & Research Company, 82 Devonshire St., Boston, MA 02109 Theodore J. Deutz Prior to January, 1995, Senior Vice Vice President President, Metropolitan West Securities, Inc. 10880 Wilshire Blvd., Suite 200, Los Angeles, CA 90024 Michael G. Dolan Chairman-Finance Council, St. Mary's Assistant Vice President Parish, 44 Myrtle St., Melrose, MA 02176; Member, School Advisory Board, St. Mary's School, 44 Myrtle St., Melrose, MA 02176 Andrea Donnelly Prior to March, 1996, Equity Trader, Assistant Vice President Hellman Jordan Management Company, Inc., 75 State St., Suite 2420, Boston, MA 02109 Joseph J. Eagleeye Prior to August, 1994, Associate, Assistant Vice President David Taussig & Associates, 424 University Ave., Sacramento, CA 95813 Ian C. Ferguson Senior Managing Director Prior to April, 1996, Chief Executive Officer, HSBC Asset Management, Ltd., 6 Bevis Marks, London, England Michael T. Fitzgerald Prior to September, 1994, Senior Senior Vice President Vice President, Vantage Global Advisers, 1201 Morningside Dr., Manhattan Beach, CA 90266 Brian J. Fullterton Prior to November, 1995, Vice Senior Vice President President, Pension and 401(k) Derivatives Marketing, J.P. Morgan, 60 Wall Street, New York, NY 10260 Roland Gillis Prior to March, 1995, Vice President Senior Vice President and Senior Portfolio Manager, Keystone Group, Inc., 200 Berkeley St., Boston, MA 02116 C. Kim Goodwin Prior to May, 1996, Vice President Senior Vice President Prudential Mutual Fund Investment Management, 751 Broad St., Newark, NJ 07101 J. Peter Grant Trustee, The Dover Church, Dover, MA Senior Vice President 02030 Jill Grossberg Prior to March, 1995, Associate Assistant Vice President Counsel, 440 Financial Group of and Associate Counsel Worcester, Inc., 440 Lincoln St., Worcester, MA 01653 Paul E. Haagensen Director, Haagensen Research Senior Vice President Foundation, 630 West 168th St., New York, NY 10032 Matthew C. Halperin Prior to April, 1996, Portfolio Senior Vice President Manager, Allstate Insurance, 3075 Sanders Road, Northbrook, IL 60062 Richard Harris Prior to October, 1995, Senior Vice Vice President President, Smith Mitchell Investment Group, 135 Main St., San Francisco, CA 94105; Prior to January, 1995, Managing Director, Dean Witter Reynolds, Inc., 101 California St., San Francisco, CA 94941 Deborah R. Healey Director and Secretary, Edwin Warren, Senior Vice President Inc., Rte. 100, Waitsfield, VT 05673 Daniel Herbert Prior to April, 1996, Vice President Vice President and Analyst, Keystone Group, Inc., 200 Berkeley St., Boston, MA 02116 Pamela Holding Prior to May, 1995, Senior Securities Vice President Analyst, Kemper Financial Services, Inc., 120 South LaSalle St., Chicago, IL 60603 Thomas J. Hoey Prior to April, 1996, Securities Vice President Analyst, Driehaus Capital Management, Inc., 25 East Erie St., Chicago, IL 60610 Joseph Joseph Prior to October, 1994, Managing Vice President Director, Vert Independent Capital Research, 53 Wall St., New York, NY 10052 Omid Kamshad Prior to January, 1996, Investment Senior Vice President Director, Lombard Odier, 13 Southampton Place, London, England, WC1; Prior to May, 1995, Director, Baring Asset Management, 155 Bishopsgate, London, England EC23XY Mary E. Kearney Trustee, Massachusetts Eye and Ear Managing Director Infirmary, 243 Charles St., Boston, MA 02114; Prior to February, 1995, Partner, Price Waterhouse, 160 Federal St., Boston, MA 02110 Paula Kienert Prior to June, 1995, Senior Reference Assistant Vice President Librarian, Fidelity Investments, 82 Devonshire Street, Boston, MA 02109 John P. Kihn Prior to April, 1996, Associate Vice President Portfolio Manager, Colonial Management Associates, Inc., One Financial Center, Boston, MA 02110 Chief Financial Officer, Bergman Research Group, Inc., 640 Bailey Road, Pittsburg, CA 94565 D. William Kohli Prior to September, 1994, Executive Managing Director Vice President and Co-Director of Global Bond Management, Franklin Advisors/Templeton Investment Counsel, 777 Mariners Island Blvd., San Mateo, CA 94404 Peter B. Krug Prior to January, 1995, Owner and Vice President Director, Griswold Special Care, 42 Ethan Allen Drive, Acton, MA 01720 Catherine A. Latham Prior to August, 1995, Director of Vice President Human Resources, Electronic Data Systems, 1601 Trapello Rd., Waltham, MA 02254 Kevin Lemire Prior to March, 1995, Corporate Assistant Vice President Facilities Manager, Bose Corporation, The Mountain, Framingham, MA 01701; Prior to June, 1994, Facilities Manager, The Pioneer Group, 60 State St., Boston, MA 02109 Lawrence J. Lasser Director, Marsh & McLennan Companies, President, Director Inc., 1221 Avenue of the Americas, and Chief Executive New York, NY 10020; Board Member, Artery Business Committee, One Beacon Street, Boston, MA 02108; Board of Managers, Investment and Finance Committees, Beth Israel Hospital, 330 Brookline Avenue, Boston, MA 02215; Board of Governors, Executive Committee, Investment Company Institute, 1401 H. St., N.W., Suite 1200, Washington, DC 20005; Board of Overseers, Museum of Fin Arts, 465 Huntington Ave., Boston, MA 02115; Board Member, Trust for City Hall Plaza, Three Center Plaza, Boston, MA 02108; Board Member, The Vault Coordinating Committee, c/o John Hancock Mutual Life Insurance Company, Law Sector, T-55, P.O. Box 111, Boston, MA 02117 James W. Lukens Prior to February, 1995, Vice Senior Vice President President of Institutional Marketing, Keystone Group, Inc., 200 Berkeley St., Boston, MA 02116 Kevin Maloney Trustee, Town of Hanover, NH, Trustee Managing Director of Trust Funds, Hanover, NH 03755; President and Board Member, Hampshire Cooperative Nursery School, Dartmouth College Highway, Hanover, NH 03755; Prior to April, 1995, Associate Professor, Amos Tuck School of Business, Dartmouth College, Hanover, NH 03255 Helen Mazareas Prior to May, 1995, Librarian, Assistant Vice President Scudder, Stevens & Clark, 2 International Place, Boston, MA 02110 Alexander J. McAuley Prior to June, 1995, Vice President, Senior Vice President Deutsche Bank Securities Corp. - Deutsche Asset Management, 1290 Avenue of the Americas, New York, NY 10019 William F. McGue Member, Advisory Committee, Academy Managing Director of Finance, 2 Oliver St., Boston, MA 02109 Carol McMullen Prior to June, 1995, Senior Vice, Managing Director President and Senior Portfolio Manager, Baring Asset Management, 125 High Street, Boston, MA 02110 Sandeep Mehta Prior to May, 1996, Vice President, Vice President Wellington Management Co., 100 Vanguard Blvd., Malvern, PA 19355 Darryl Mikami Prior to June, 1995, Vice President, Senior Vice President Fidelity Management & Research Company, 82 Devonshire St., Boston, MA 02109 Carol H. Miller Board Member, The Lyric Stage Theater, Assistant Vice President 140 Clarendon St., Boston, MA; Prior to July, 1995, Business Development Officer, Bank of Boston - Connecticut, 100 Pearl St., Hartford, CT 06101 Seung H. Minn Prior to June, 1995, Vice President Vice President Portfolio Management and Research, Templeton Quantitative Advisors, Inc., 31 W. 52nd St., New York, NY 10019 Maziar Minovi Prior to January, 1995, Associate Vice President Privatization Specialist, The International Bank for Reconstruction and Development, 1818 H St. N.W., Washington, DC 20433 Jeanne L. Mockard Trustee, The Bryn Mawr School, 109 Senior Vice President W. Melrose Avenue, Baltimore, MD 21210 Kenneth Mongtomery Prior to July, 1995, Senior Vice Managing Director President and Director of World Wide Sales, Chemcial Banking Corporation, Paul G. Murphy Prior to January, 1995, Section Assistant Vice President Manager, First Data Corp., 53 State Street, Boston, MA 02109 Lois O'Brien Prior to March, 1996, Director, Assistant Vice President Training and Development, J. Baker, Inc., 555 Turnpike St., Canton, MA 02021 C. Patrick O'Donnell, Jr. Prior to May, 1994, President, Managing Director Exeter Research, Inc., 163 Water Street, Exeter, New Hampshire, 03833 Keith Plapinger Vice Chairman and Trustee, Advent Vice President School, 17 Brimmer St., Boston, MA Jane E. Price Prior to February, 1995, Associate Assistant Vice President ERISA Attorney, Hale & Dorr, 60 State St., Boston, MA 02109 Charles E. Porter Director, The Boston Fulbright Executive Vice President Committee, 99 Garden St., Cambridge, MA; Trustee, Anatolia College and The American College of Thessaloniki, 555 10 Pycea, Thessaloniki, Greece George Putnam Chairman and Director, Putnam Mutual Chairman and Director Funds Corp.; Director, The Boston Company, Inc., One Boston Place, Boston, MA 02108; Director, Boston Safe Deposit and Trust Company, One Boston Place, Boston, MA 02108; Director, Freeport-McMoRan, Inc., 200 Park Avenue, New York, NY 10166; Director, General Mills, Inc., 9200 Wayzata Boulevard, Minneapolis, MN 55440; Director, Houghton Mifflin Company, One Beacon Street, Boston, MA 02108; Director, Marsh & McLennan Companies, Inc., 1221 Avenue of the Americas, New York, NY 10020; Director, Rockefeller Group, Inc., 1230 Avenue of the Americas, New York, NY 10020 Keith Quinton Director, Eleazar, Inc., West Wheelock Senior Vice President St., Hanover, NH 03755; Prior to July, 1995, Vice President, Falconwood Securities Corporation, 565 5th Avenue, New York, NY 10017 Paul T. Quistberg Prior to July, 1995, Assistant Assistant Vice President Investment Officer, The Travelers Insurance Group., One Tower Square, Hartford, CT 06101 Kimberly A. Raynor Prior to April, 1996, Principal, Vice President Principal, Scudder, Stevens & Clark, 2 International Place, Boston, MA 02110 Thomas Rosalanko Prior to February, 1995, Senior Senior Vice President Account Manager, SEI Corporation, 680 East Swedesford Road, Wayne, PA 19807 Michael Scanlon Prior to February, 1995, Senior Assistant Vice President Financial Analyst, Massachusetts Financial Services, 500 Boylston St., Boston, MA 02116 Justin M. Scott Director, DSI Properties (Neja) Ltd. Managing Director Epping Rd., Reydon, Essex CM19 5RD; Director, DSI Management (Neja) Ltd., Epping Rd., Reydon, Essex CM19 5RD Max S. Senter General Partner, M.S. Senter & Sons Senior Vice President Partnership, 4900 Fayetteville, Rd., Raleigh, NC 27611 Robert M. Shafto Prior to January, 1995, Account Assistant Vice President Manager, IBM Corporation, 404 Wyman St., Waltham, MA 02254 Gordon H. Silver Trustee, Wang Center for the Managing Director Performing Arts, 270 Tremont St., Boston, MA 02116 Diedre West-Smith Prior to January, 1995, Senior Finance Assistant Vice President Officer, BayBank, 3 Universal Office Park, Waltham, MA 02254 Margaret Smith Prior to September, 1995, Vice Senior Vice President President, State Street Research, One Financial Center, Boston, MA 02111 Erin J. Spatz Prior to May, 1996, Vice Vice President President, Pioneering Management Organization, 60 State St., Boston, MA 02109 Steven Spiegel Director, Ultra Corp., 29 East Senior Managing Director Madison St., Chicago, IL 60602; Trustee, Babson College, One College Drive, Wellesley, MA 02157; Prior to December, 1994, Managing Director/Retirement, Lehman Brothers, Inc., 200 Vesey St., World Financial Center, New York, NY 10285 George W. Stairs Prior to July, 1994, Equity Research Vice President Analyst, ValueQuest Limited, Roundy's Hill, Marblehead, MA 01945 James H. Steggall Prior to May, 1995, Senior Municipal Assistant Vice President Analyst, Colonial Management Associates, Inc., One Financial Center, Boston, MA 02111; Prior to May, 1994, Controller, Wheelabrator Environmental Systems, Libery Lane, Hampton, NH 03842 Karen Stewart Prior to May, 1995, Equity Research Assistant Vice President Analyst, Chancellor Capital Management, 1166 Avenue of the Americas, New York, NY 10036 Roger Sullivan Prior to December, 1994, Vice Senior Vice President President, State Street Research & Management Co., One Financial Center, Boston, MA 02111 Robert Swift Prior to August, 1995, Far East Team Senior Vice President Leader and Portfolio Manager, IAI International/Hill Samuel Investment Advisors, 10 Fleet Place, London, England Jerry H. Tempelman Prior to May, 1994, Senior Money Assistant Vice President Market Trader, State Street Bank & Trust Co., 225 Franklin, Street, Boston, MA 02110 Michael Temple Prior to June, 1995, Vice President, Vice President Duff & Phelps, 55 East Monroe, Chicago, IL 60613 John A. Thompson Prior to September, 1995, Senior Vice President Trader, John Hancock Mutual Life Insurance Company, 200 Clarendon St., Boston, MA 02117 Hillary F. Till Prior to May, 1994, Fixed-Income Vice President Derivative Trader, Bank of Boston, 100 Federal Street, Boston, MA 02109 Lisa L. Trubiano Prior to July, 1995, Senior Marketing Vice President Consultant, John Hancock Mutual Life Insurance Company, 200 Clarendon St., Boston, MA 02117 Elizabeth A. Underhill Prior to August, 1994, Vice President Senior Vice President and Senior Equity Analyst, State Street Bank and Trust Company, 225 Franklin St., Boston, MA 02110 Charles C. Van Vleet Prior to August, 1994, Vice President Senior Vice President and Fixed-Income Manager, Alliance Capital Management, 1345 Avenue of the Americas, New York, NY 10105 Herbert S. Wagner, III Prior to August, 1995, Investment Assistant Vice President The First National Bank of Chicago, One First National Plaza, Chicago, IL 60670 Francis P. Walsh Prior to November, 1994, Research Vice President Analyst, Furman, Selz, Inc. 230 Park Avenue, New York, NY 10169 Michael R. Weinstein Prior to March, 1994, Management Vice President Consultant, Arthur D. Little, Acorn Park, Cambridge, MA 02140 ITEM 29. PRINCIPAL UNDERWRITER (a) Putnam Mutual Funds Corp. is the principal underwriter for each of the following investment companies, including the Registrant: Putnam Adjustable Rate U.S. Government Fund, Putnam American Government Income Fund, Putnam Arizona Tax Exempt Income Fund, Putnam Asia Pacific Growth Fund, Putnam Asset Allocation Funds, Putnam Balanced Retirement Fund, Putnam California Tax Exempt Income Trust, Putnam California Tax Exempt Money Market Fund, Putnam Capital Appreciation Fund, Putnam Capital Manager Trust, Putnam Convertible Income-Growth Trust, Putnam Diversified Equity Trust, Putnam Diversified Income Trust, Putnam Diversified Income Trust II, Putnam Equity Income Fund, Putnam Europe Growth Fund, Putnam Federal Income Trust, Putnam Florida Tax Exempt Income Fund, Putnam Funds Trust, The George Putnam Fund of Boston, Putnam Global Governmental Income Trust, Putnam Global Growth Fund, Putnam Global Natural Resources Fund, Putnam Growth Fund, The Putnam Fund for Growth and Income, Putnam Growth and Income Fund II, Putnam Health Sciences Trust, Putnam High Yield Trust, Putnam High Yield Advantage Fund, Putnam High Yield Municipal Trust, Putnam Income Fund, Putnam Intermediate Tax Exempt Fund, Putnam Intermediate U.S. Government Income Fund, Putnam Investment Funds, Putnam Investors Fund, Putnam International Growth Fund, Putnam Massachusetts Tax Exempt Income Fund, Putnam Michigan Tax Exempt Income Fund, Putnam Minnesota Tax Exempt Income Fund, Putnam Money Market Fund, Putnam Municipal Income Fund, Putnam Natural Resources Fund, Putnam New Jersey Tax Exempt Income Fund, Putnam New Opportunities Fund, Putnam New York Tax Exempt Income Trust, Putnam New York Tax Exempt Money Market Fund, Putnam New York Tax Exempt Opportunities Fund, Putnam Ohio Tax Exempt Income Fund, Putnam OTC Emerging Growth Fund, Putnam Pennsylvania Tax Exempt Income Fund, Putnam Preferred Income Fund, Putnam Tax Exempt Income Fund, Putnam Tax Exempt Money Market Fund, Putnam Tax-Free Income Trust, Putnam U.S. Government Income Trust, Putnam Utilities Growth and Income Fund, Putnam Vista Fund, Putnam Voyager Fund, Putnam Voyager Fund II. (b) The directors and officers of the Registrant's principal underwriter are listed below. The principal business address of each person is One Post Office Square, Boston, MA 02109: Positions and Offices Positions and Offices Name with Underwriter with Registrant John V. Adduci Assistant Vice President None Christopher S. Alpaugh Vice President None Paulette C. Amisano Vice President None Ronald J. Anwar Vice President None Steven E. Asher Senior Vice President None Scott A. Avery Vice President None Christian E. Aymond Vice President None Hallie L. Baron Assistant Vice President None Ira G. Baron Senior Vice President None John L. Bartlett Senior Vice President None Dale Beardon Senior Vice President None Steven M. Beatty Vice President None Deborah A. Beaudette Assistant Vice President None Matthew F. Beaudry Vice President None John J. Bent Vice President None Thomas A. Beringer Vice President None Sharon A. Berka Vice President None Kathleen A. Blackman Vice President None Maureen L. Boisvert Vice President None John F. Boneparth Managing Director None Keith R. Bouchard Vice President None Linda M. Brady Assistant Vice President None Leslee R. Bresnahan Senior Vice President None James D. Brockelman Senior Vice President None Joel S. Brookman Assistant Vice President None Dale R.C. Brown Assistant Vice President None Brian E. Broyles Assistant Vice President None Gail D. Buckner Senior Vice President None Robert W. Burke Senior Managing Director None Susan D. Cabana Vice President None Ellen S. Callahan Vice President None Thomas C. Callahan Assistant Vice President None Peter J. Campagna Vice President None Peter A. Capodilupo Vice President None Robert Capone Vice President None Patricia A. Cartwright Assistant Vice President None Janet Casale-Sweeney Vice President None Stephen J. Chaput Assistant Vice President None Steven F. Charlton Assistant Vice President None Louis F. Chrostowski Vice President None Daniel J. Church Vice President None James E. Clinton Assistant Vice President None John C. Clinton Assistant Vice President None Kathleen M. Collman Managing Director None Mark L. Coneeny Vice President None Clare D. Connelly Vice President None Donald A. Connelly Senior Vice President None Karen E. Connolly Assistant Vice President None Barry M. Conyers Assistant Vice President None Anna Coppola Vice President None F. Nicholas Corvinus Senior Vice President None Thomas A. Cosmer Vice President None Michele A. Cranston Vice President None Chad H. Cristo Assistant Vice President None Peter J. Curran Senior Vice President None Jessica E. Dahill Vice President None Kenneth L. Daly Senior Vice President None Edward H. Dane Vice President None Nancy M. Days Assistant Vice President None Pamela De Oliveira-Smith Assistant Vice President None Lisa M. DeMont Assistant Vice President None Richard D. DeSalvo Vice President None Joseph C. DeSimone Assistant Vice President None Daniel J. Delianedis Vice President None Judith S. Deming Assistant Vice President None Teresa F. Dennehy Assistant Vice President None Karen E. DiStasio Vice President None Michael G. Dolan Assistant Vice President None Scott M. Donaldson Vice President None Emily J. Durbin Vice President None David B. Edlin Senior Vice President None James M. English Senior Vice President None Vincent Esposito Managing Director None Mary K. Farrell Assistant Vice President None Michael J. Fechter Vice President None Susan H. Feldman Vice President None Paul F. Fichera Senior Vice President None C. Nancy Fisher Senior Vice President None Mitchell B. Fishman Senior Vice President None Joseph C. Fiumara Vice President None Patricia C. Flaherty Senior Vice President None Brian J. Fullerton Senior Vice President None Samuel F. Gagliardi Vice President None Karen M. Gardner Assistant Vice President None Judy S. Gates Vice President None Richard W. Gauger Assistant Vice President None Joseph P. Gennaco Vice President None Stephen E. Gibson Managing Director None Mark P. Goodfellow Assistant Vice President None Robert Goodman Managing Director None Mark D. Goodwin Assistant Vice President None Anthony J. Grace Assistant Vice President None Linda K. Grace Assistant Vice President None Robert G. Greenly Vice President None Jill Grossberg Assistant Vice President None Denise Grove Assistant Vice President None Jeffrey P. Gubala Vice President None James E. Halloran Vice President None Thomas W. Halloran Vice President None Meghan C. Hannigan Assistant Vice President None Bruce D. Harrington Assistant Vice President None Craig W. Hartigan Vice President None Howard W. Hawkins, III Vice President None Deanna R. Hayes-Castro Vice President None Paul P. Heffernan Vice President None Susan M. Heimanson Vice President None Joanne Heyman Assistant Vice President None Bess J.M. Hochstein Vice President None Jeremiah K. Holly, Sr. Vice President None Maureen A. Holmes Assistant Vice President None Paula J. Hoyt Assistant Vice President None William J. Hurley Senior Vice President None Gregory E. Hyde Senior Vice President None Dwight D. Jacobsen Senior Vice President None Douglas B. Jamieson Senior Managing Director, Director None Jay M. Johnson Vice President None Kevin M. Joyce Senior Vice President None Karen R. Kay Senior Vice President None Mary E. Kearney Managing Director None John P. Keating Vice President None A. Siobahn Kelly Assistant Vice President None Brian J. Kelly Vice President None Anne Kinsman Assistnat Vice President None Deborah H. Kirk Senior Vice President None Jill A. Koontz Assistant Vice President None Linda G. Kraunelis Assistant Vice President None Howard H. Kreutzberg Senior Vice President None Marjorie B. Krieger Assistant Vice President None Charles Lacasia Assistant Vice President None Arthur B. Laffer, Jr. Vice President None Catherine A. Latham Vice President None James D. Lathrop Vice President None Charles C. Ledbetter Vice President None Kevin Lemire Assistant Vice President None Anthony J. Leonard Vice President None Eric S. Levy Vice President None Edward V. Lewandowski Senior Vice President None Edward V. Lewandowski, Jr. Vice President None Samuel L. Lieberman Vice President None David M. Lifsitz Assistant Vice President None David R. Lilien Vice President None Ann Marie Linehan Assistant Vice President None Lisa M. Litant Assistant Vice President None Thomas W. Littauer Managing Director None Maura A. Lockwood Vice President None Rufino R. Lomba Vice President None Peter V. Lucas Senior Vice President None Robert F. Lucey Senior Managing Director, Director None Kathryn A. Lucier Assistant Vice President None Ann Malatos Assistant Vice President None Bonnie Mallin Vice President None Frederick S. Marius Assistant Vice President None Anne B. McCarthy Assistant Vice President None Paul McConville Vice President None McDermott, Daniel E. Assistant Vice President None Walter S. McFarland Vice President None Mark J. McKenna Senior Vice President None Gregory J. McMillan Vice President None Claye A. Metelmann Vice President None Bart D. Miller Vice President None Jeffery M. Miller Senior Vice President None Trisha A. Miller Senior Vice President None Ronald K. Mills Vice President None Kimberly A. Monahan Vice President None John L. Moore, III Vice President None Peter M. Moore Assistant Vice President None Mitchell Moret Senior Vice President None Barry L. Mosher Assistant Vice President None Donald E. Mullen Vice President None Paul G. Murphy Assistant Vice President None Brendan R. Murray Vice President None Robert Nadherny Vice President None Alexander L. Nelson Managing Director None John P. Nickodemus Vice President None Kristen P. O'Brien Vice President None Kevin L. O'Shea Senior Vice President None Nathan D. O'Steen Assistant Vice President None Joseph R. Palombo Managing Director None Scott A. Papes Vice President None Cynthia O. Parr Vice President None Samuel W. Perry Vice President None John G. Phoenix Vice President None Joseph Phoenix Senior Vice President None Keith Plapinger Vice President None Douglas H. Powell Vice President None Howard B. Present Senior Vice President None Jane E. Price Assistant Vice President None Scott M. Pulkrabek Vice President None George Putnam Director Chairman & President Kimberly Raynor Vice President None Debra V. Rothman Vice President None Robert B. Rowe Vice President None Kevin A. Rowell Senior Vice President None Thomas C. Rowley Vice President None Charles A. Ruys de Perez Senior Vice President None Deborah A. Ryan Assistant Vice President None Louise I. Santosuosso Assistant Vice President None Debra J. Sarkisian Assistant Vice President None Catherine A. Saunders Senior Vice President None Robbin L. Saunders Assistant Vice President None Karl W. Saur Vice President None Michael Scanlon Assistant Vice President None Shannon D. Schofield Vice President None Christine A. Scordato Vice President None Joseph W. Scott Assistant Vice President None John B. Shamburg Vice President None Kathleen G. Sharpless Managing Director None William N. Shiebler Director and President Vice President Robert J. Shull, II Vice President None Mark J. Siebold Assistant Vice President None Gordon H. Silver Senior Managing Director Vice President John Skistimas, Jr. Assistant Vice President None Steven Spiegel Senior Managing Director None Nicholas T. Stanojev Senior Vice President None Paul R. Stickney Vice President None John B. Stillwagon Assistant Vice President None Eric J. Studer Assistant Vice President None Brian L. Sullivan Vice President None Guy Sullivan Seniior Vice President None Kevin J. Sullivan Vice President None Moira Sullivan Vice President None Maureen C. Tallon Vice President None James S. Tambone Managing Director None B. Iris Tanner Assistant Vice President None Louis Tasiopoulos Managing Director None David S. Taylor Vice President None John R. Telling Vice President None Cynthia Tercha Vice President None Richard B. Tibbetts Senior Vice President None Patrice M. Tirado Vice President None Janet E. Tosi Assistant Vice President None Bonnie L. Troped Vice President None Christine M. Twigg Assistant Vice Presient None Larry R. Unger Vice President None Douglas J. Vander Linde Senior Vice President None Deirdre West-Smith Assistant Vice President None Edward F. Whalen Vice President None J. Bennett White Vice President None Kirk E. Williamson Senior Vice President None Leigh T. Williamson Vice President None Jane Wolfson Vice President None Benjamin I. Woloshin Vice President None William H. Woolverton Senior Vice President None Laura J. Zografos Vice President None ITEM 30. LOCATION OF ACCOUNTS AND RECORDS Persons maintaining physical possession of accounts, books and other documents required to be maintained by Section 31(a) of the Investment Company Act of 1940 and the Rules promulgated thereunder are Registrants' Clerk, Beverly Marcus; Registrants' investment adviser, Putnam Investment Management, Inc.; Registrants' principal underwriter, Putnam Mutual Funds Corp.; Registrants' custodian, Putnam Fiduciary Trust Company ("PFTC"); and Registrant's transfer and dividend disbursing agent, Putnam Investor Services, a division of PFTC. The address of the Clerk, investment adviser, principal underwriter, and custodian and transfer and dividend disbursing agent is One Post Office Square, Boston, Massachusetts 02109. ITEM 31. MANAGEMENT SERVICES None. ITEM 32. UNDERTAKINGS Each Registrant undertakes to furnish to each person to whom a prospectus of that Registrant is delivered a copy of that Registrant's latest annual report to shareholders, upon request and without charge. CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the the following Post-Effective Amendments, of our reports (as dated below) on our audits of the financial statements and "Financial highlights" of Putnam Arizona Tax Exempt Income Fund, Putnam Michigan Tax Exempt Income Fund, Putnam New Jersey Tax Exempt Income Fund and Putnam Ohio Tax Exempt Income Fund, which reports are included in the Annual Reports for each Fund for the year ended May 31, 1996 , which is incorporated by reference in the Registration Statements : Fund PEA # File # Date of Report Arizona 7 33-37992 July 12, 1996 Michigan 16 33-8923 July 12, 1996 New Jersey 7 33-32550 July 15, 1996 Ohio 16 33-8924 July 16, 1996 We also consent to the references to our Firm under the caption "Independent Accountants and Financial Statements" in the Statement of Additional Information and under the heading "Financial highlights" in such Prospectus. Coopers & Lybrand Coopers & Lybrand L.L.P. Boston, Massachusetts September 26, 1996 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectus and Statement of Additional Information constituting parts of the following Post-Effective Amendments (the "Registration Statements") on Form N-1A of our reports relating to the financial statements and financial highlights appearing in the May 31, 1996 Annual Reports of Putnam Florida Tax Exempt Income Fund (dated July 17, 1996) , Putnam Massachusetts Tax Exempt Income Fund (dated July 9, 1996) , Putnam Minnesota Tax Exempt Income Fund (dated July 8, 1996) and Putnam Pennsylvania Tax Exempt Income Fund (dated July 12, 1996) , which financial statements and financial highlights are also incorporated by reference into the Registration Statements : Fund PEA# File # Arizona 7 33-37992 Florida 7 33-35677 Massachusetts 16 33-5416 Michigan 16 33-8923 Minnesota 16 33-8916 New Jersey 7 33-32550 Ohio 16 33-8924 Pennsylvania 9 33-28321 We also consent to the references to us under the heading "Independent Accountants and Financial Statements" in such Statement of Additional Information and under the heading "Financial highlights" in such Prospectus. Price Waterhouse LLP Boston, Massachusetts September 26, 1996 NOTICE Copies of the Agreement and Declaration of Trust of each of 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 and Putnam Pennsylvania Tax Exempt Income Fund are on file with the Secretary of State of The Commonwealth of Massachusetts and notice is hereby given that this instrument is executed on behalf of each Registrant by an officer of such Registrant as an officer and not individually and the obligations of or arising out of this instrument are not binding upon any of the Trustees, officers or shareholders individually but are binding only upon the assets and property of the Registrants. POWER OF ATTORNEY I, the undersigned Trustee of Putnam Arizona Tax Exempt Income Fund, hereby severally constitute and appoint George Putnam, Charles E. Porter, Gordon H. Silver, Edward A. Benjamin, Timothy W. Diggins and John W. Gerstmayr, and each of them singly, my true and lawful attorneys, with full power to them and each of them, to sign for me, and in my name and in the capacity indicated below, the Registration Statement on Form N-1A of Putnam Arizona Tax Exempt Income Fund and any and all amendments (including post-effective amendments) to said Registration Statement and to file the same with all exhibits thereto, and other documents in connection thereunder, with the Securities and Exchange Commission, granting unto my said attorneys, and each of them acting alone, full power and authority to do and perform each and every act and thing requisite or necessary to be done in the premises, as fully to all intents and purposes as he or she might or could do in person, and hereby ratify and confirm all that said attorneys or any of them may lawfully do or cause to be done by virtue thereof. WITNESS my hand and seal on the date set forth below. Signature Title Date /s/ Ronald J. Jackson Ronald J.Jackson Trustee May 12, 1996 POWER OF ATTORNEY I, the undersigned Trustee of Putnam Florida Tax Exempt Income Fund, hereby severally constitute and appoint George Putnam, Charles E. Porter, Gordon H. Silver, Edward A. Benjamin, Timothy W. Diggins and John W. Gerstmayr, and each of them singly, my true and lawful attorneys, with full power to them and each of them, to sign for me, and in my name and in the capacity indicated below, the Registration Statement on Form N-1A of Putnam Florida Tax Exempt Income Fund and any and all amendments (including post-effective amendments) to said Registration Statement and to file the same with all exhibits thereto, and other documents in connection thereunder, with the Securities and Exchange Commission, granting unto my said attorneys, and each of them acting alone, full power and authority to do and perform each and every act and thing requisite or necessary to be done in the premises, as fully to all intents and purposes as he or she might or could do in person, and hereby ratify and confirm all that said attorneys or any of them may lawfully do or cause to be done by virtue thereof. WITNESS my hand and seal on the date set forth below. Signature Title Date /s/ Ronald J. Jackson Ronald J. Jackson Trustee May 12, 1996 POWER OF ATTORNEY I, the undersigned Trustee of Putnam Massachusetts Tax Exempt Income Fund, hereby severally constitute and appoint George Putnam, Charles E. Porter, Gordon H. Silver, Edward A. Benjamin, Timothy W. Diggins and John W. Gerstmayr, and each of them singly, my true and lawful attorneys, with full power to them and each of them, to sign for me, and in my name and in the capacity indicated below, the Registration Statement on Form N-1A of Putnam Massachusetts Tax Exempt Income Fund and any and all amendments (including post-effective amendments) to said Registration Statement and to file the same with all exhibits thereto, and other documents in connection thereunder, with the Securities and Exchange Commission, granting unto my said attorneys, and each of them acting alone, full power and authority to do and perform each and every act and thing requisite or necessary to be done in the premises, as fully to all intents and purposes as he or she might or could do in person, and hereby ratify and confirm all that said attorneys or any of them may lawfully do or cause to be done by virtue thereof. WITNESS my hand and seal on the date set forth below. Signature Title Date /s/ Ronald J. Jackson Ronald J. Jackson Trustee May 12, 1996 POWER OF ATTORNEY I, the undersigned Trustee of Putnam Michigan Tax Exempt Income Fund, hereby severally constitute and appoint George Putnam, Charles E. Porter, Gordon H. Silver, Edward A. Benjamin, Timothy W. Diggins and John W. Gerstmayr, and each of them singly, my true and lawful attorneys, with full power to them and each of them, to sign for me, and in my name and in the capacity indicated below, the Registration Statement on Form N-1A of Putnam Michigan Tax Exempt Income Fund and any and all amendments (including post-effective amendments) to said Registration Statement and to file the same with all exhibits thereto, and other documents in connection thereunder, with the Securities and Exchange Commission, granting unto my said attorneys, and each of them acting alone, full power and authority to do and perform each and every act and thing requisite or necessary to be done in the premises, as fully to all intents and purposes as he or she might or could do in person, and hereby ratify and confirm all that said attorneys or any of them may lawfully do or cause to be done by virtue thereof. WITNESS my hand and seal on the date set forth below. Signature Title Date /s/ Ronald J. Jackson Ronald J. Jackson Trustee May 12, 1996 POWER OF ATTORNEY I, the undersigned Trustee of Putnam Minnesota Tax Exempt Income Fund, hereby severally constitute and appoint George Putnam, Charles E. Porter, Gordon H. Silver, Edward A. Benjamin, Timothy W. Diggins and John W. Gerstmayr, and each of them singly, my true and lawful attorneys, with full power to them and each of them, to sign for me, and in my name and in the capacity indicated below, the Registration Statement on Form N-1A of Putnam Minnesota Tax Exempt Income Fund and any and all amendments (including post-effective amendments) to said Registration Statement and to file the same with all exhibits thereto, and other documents in connection thereunder, with the Securities and Exchange Commission, granting unto my said attorneys, and each of them acting alone, full power and authority to do and perform each and every act and thing requisite or necessary to be done in the premises, as fully to all intents and purposes as he or she might or could do in person, and hereby ratify and confirm all that said attorneys or any of them may lawfully do or cause to be done by virtue thereof. WITNESS my hand and seal on the date set forth below. Signature Title Date /s/ Ronald J. Jackson Ronald J. Jackson Trustee May 12, 1996 POWER OF ATTORNEY I, the undersigned Trustee of Putnam New Jersey Tax Exempt Income Fund, hereby severally constitute and appoint George Putnam, Charles E. Porter, Gordon H. Silver, Edward A. Benjamin, Timothy W. Diggins and John W. Gerstmayr, and each of them singly, my true and lawful attorneys, with full power to them and each of them, to sign for me, and in my name and in the capacity indicated below, the Registration Statement on Form N-1A of Putnam New Jersey Tax Exempt Income Fund and any and all amendments (including post-effective amendments) to said Registration Statement and to file the same with all exhibits thereto, and other documents in connection thereunder, with the Securities and Exchange Commission, granting unto my said attorneys, and each of them acting alone, full power and authority to do and perform each and every act and thing requisite or necessary to be done in the premises, as fully to all intents and purposes as he or she might or could do in person, and hereby ratify and confirm all that said attorneys or any of them may lawfully do or cause to be done by virtue thereof. WITNESS my hand and seal on the date set forth below. Signature Title Date /s/ Ronald J. Jackson Ronald J. Jackson Trustee May 12, 1996 POWER OF ATTORNEY I, the undersigned Trustee of Putnam Ohio Tax Exempt Income Fund, hereby severally constitute and appoint George Putnam, Charles E. Porter, Gordon H. Silver, Edward A. Benjamin, Timothy W. Diggins and John W. Gerstmayr, and each of them singly, my true and lawful attorneys, with full power to them and each of them, to sign for me, and in my name and in the capacity indicated below, the Registration Statement on Form N-1A of Putnam Ohio Tax Exempt Income Fund and any and all amendments (including post-effective amendments) to said Registration Statement and to file the same with all exhibits thereto, and other documents in connection thereunder, with the Securities and Exchange Commission, granting unto my said attorneys, and each of them acting alone, full power and authority to do and perform each and every act and thing requisite or necessary to be done in the premises, as fully to all intents and purposes as he or she might or could do in person, and hereby ratify and confirm all that said attorneys or any of them may lawfully do or cause to be done by virtue thereof. WITNESS my hand and seal on the date set forth below. Signature Title Date /s/ Ronald J. Jackson Ronald J. Jackson Trustee May 12, 1996 POWER OF ATTORNEY I, the undersigned Trustee of Putnam Pennsylvania Tax Exempt Income Fund, hereby severally constitute and appoint George Putnam, Charles E. Porter, Gordon H. Silver, Edward A. Benjamin, Timothy W. Diggins and John W. Gerstmayr, and each of them singly, my true and lawful attorneys, with full power to them and each of them, to sign for me, and in my name and in the capacity indicated below, the Registration Statement on Form N-1A of Putnam Pennsylvania Tax Exempt Income Fund and any and all amendments (including post-effective amendments) to said Registration Statement and to file the same with all exhibits thereto, and other documents in connection thereunder, with the Securities and Exchange Commission, granting unto my said attorneys, and each of them acting alone, full power and authority to do and perform each and every act and thing requisite or necessary to be done in the premises, as fully to all intents and purposes as he or she might or could do in person, and hereby ratify and confirm all that said attorneys or any of them may lawfully do or cause to be done by virtue thereof. WITNESS my hand and seal on the date set forth below. Signature Title Date /s/ Ronald J. Jackson Ronald J. Jackson Trustee May 12, 1996 SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, each of the Registrants certifies that it meets all of the requirements for effectiveness of this Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused this Amendment to its Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Boston, and The Commonwealth of Massachusetts, on the 26th day of September, 1996 . 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 By: Gordon H. Silver, Vice President Pursuant to the requirements of the Securities Act of 1933, this Amendment to the Registration Statements of 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 and Putnam Pennsylvania Tax Exempt Income Fund has been signed below by the following persons in the capacities and on the dates indicated. SIGNATURE TITLE George Putnam President and Chairman of the Board; Principal Executive Officer; Trustee John D. Hughes Senior Vice President, Treasurer and Principal Financial Officer Paul G. Bucuvalas Assistant Treasurer and Principal Accounting Officer Jameson A. Baxter Trustee Hans H. Estin Trustee John A. Hill Trustee Ronald J.Jackson Trustee Elizabeth T. Kennan Trustee Lawrence J. Lasser Trustee Robert E. Patterson Trustee Donald S. Perkins Trustee William F. Pounds Trustee George Putnam, III Trustee Eli Shapiro Trustee A.J.C. Smith Trustee W. Nicholas Thorndike Trustee By: Gordon H. Silver, as Attorney-in-Fact September 26, 1996 EX-99.B5ADVSRCONTR 2 ARIZONA PUTNAM ARIZONA TAX EXEMPT INCOME FUND MANAGEMENT CONTRACT Management Contract dated as of September 20, 1996 between PUTNAM ARIZONA TAX EXEMPT INCOME FUND, a Massachusetts business trust (the "Fund"), and PUTNAM INVESTMENT MANAGEMENT, INC., a Massachusetts corporation (the "Manager"). WITNESSETH: That in consideration of the mutual covenants herein contained, it is agreed as follows: 1. SERVICES TO BE RENDERED BY MANAGER TO FUND. (a) The Manager, at its expense, will furnish continuously an investment program for the Fund, will determine what investments shall be purchased, held, sold or exchanged by the Fund and what portion, if any, of the assets of the Fund shall be held uninvested and shall, on behalf of the Fund, make changes in the Fund's investments. Subject always to the control of the Trustees of the Fund and except for the functions carried out by the officers and personnel referred to in Section 1(d), the Manager will also manage, supervise and conduct the other affairs and business of the Fund and matters incidental thereto. In the performance of its duties, the Manager will comply with the provisions of the Agreement and Declaration of Trust and By-Laws of the Fund and its stated investment objectives, policies and restrictions, and will use its best efforts to safeguard and promote the welfare of the Fund and to comply with other policies which the Trustees may from time to time determine and shall exercise the same care and diligence expected of the Trustees. (b) The Manager, at its expense, except as such expense is paid by the Fund as provided in Section 1(d), will furnish (1) all necessary investment and management facilities, including salaries of personnel, required for it to execute its duties faithfully; (2) suitable office space for the Fund; and (3) administrative facilities, including bookkeeping, clerical personnel and equipment necessary for the efficient conduct of the affairs of the Fund, including determination of the Fund's net asset value, but excluding shareholder accounting services. Except as otherwise provided in Section 1(d), the Manager will pay the compensation, if any, of the officers of the Fund. (c) The Manager, at its expense, shall place all orders for the purchase and sale of portfolio investments for the Fund's account with brokers or dealers selected by the Manager. In the selection of such brokers or dealers and the placing of such orders, the Manager shall use its best efforts to obtain for the Fund the most favorable price and execution available, except to the extent it may be permitted to pay higher brokerage commissions for brokerage and research services as described below. In using its best efforts to obtain for the Fund the most favorable price and execution available, the Manager, bearing in mind the Fund's best interests at all times, shall consider all factors it deems relevant, including by way of illustration, price, the size of the transaction, the nature of the market for the security, the amount of the commission, the timing of the transaction taking into account market prices and trends, the reputation, experience and financial stability of the broker or dealer involved and the quality of service rendered by the broker or dealer in other transactions. Subject to such policies as the Trustees of the Fund may determine, the Manager shall not be deemed to have acted unlawfully or to have breached any duty created by this Contract or otherwise solely by reason of its having caused the Fund to pay a broker or dealer that provides brokerage and research services to the Manager an amount of commission for effecting a portfolio investment transaction in excess of the amount of commission another broker or dealer would have charged for effecting that transaction, if the Manager determines in good faith that such amount of commission was reasonable in relation to the value of the brokerage and research services provided by such broker or dealer, viewed in terms of either that particular transaction or the Manager's overall responsibilities with respect to the Fund and to other clients of the Manager as to which the Manager exercises investment discretion. The Manager agrees that in connection with purchases or sales of portfolio investments for the Fund's account, neither the Manager nor any officer, director, employee or agent of the Manager shall act as a principal or receive any commission other than as provided in Section 3. (d) The Fund will pay or reimburse the Manager for the compensation in whole or in part of such officers of the Fund and persons assisting them as may be determined from time to time by the Trustees of the Fund. The Fund will also pay or reimburse the Manager for all or part of the cost of suitable office space, utilities, support services and equipment attributable to such officers and persons, as may be determined in each case by the Trustees of the Fund. The Fund will pay the fees, if any, of the Trustees of the Fund. (e) The Manager shall pay all expenses incurred in connection with the organization of the Fund and the initial public offering and sale of its shares of beneficial interest, provided that upon the issuance and sale of such shares to the public pursuant to the offering, and only in such event, the Fund shall become liable for, and to the extent requested reimburse the Manager for, registration fees payable to the Securities and Exchange Commission and for an additional amount not exceeding $125,000 as its agreed share of such expenses. (f) The Manager shall not be obligated to pay any expenses of or for the Fund not expressly assumed by the Manager pursuant to this Section 1 other than as provided in Section 3. 2. OTHER AGREEMENTS, ETC. It is understood that any of the shareholders, Trustees, officers and employees of the Fund may be a shareholder, director, officer or employee of, or be otherwise interested in, the Manager, and in any person controlled by or under common control with the Manager, and that the Manager and any person controlled by or under common control with the Manager may have an interest in the Fund. It is also understood that the Manager and any person controlled by or under common control with the Manager have and may have advisory, management, service or other contracts with other organizations and persons, and may have other interests and business. 3. COMPENSATION TO BE PAID BY THE FUND TO THE MANAGER. The Fund will pay to the Manager as compensation for the Manager's services rendered, for the facilities furnished and for the expenses borne by the Manager pursuant to paragraphs (a), (b), (c) and (e) of Section 1, a fee, computed and paid quarterly at the annual rate of: (a) 0.600% of the first $500 million of the average net asset value of the Fund; (b) 0.500% of the next $500 million of such average net asset value; (c) 0.450% of the next $500 million of such average net asset value; (d) 0.400% of the next $5 billion of such average net asset value; (e) 0.375% of the next $5 billion of such average net asset value; (f) 0.355% of the next $5 billion of such average net asset value; (g) 0.340% of the next $5 billion of such average net asset value; (h) 0.330% of any excess over $21.5 billion of such average net asset value. Such average net asset value shall be determined by taking an average of all of the determinations of such net asset value during such quarter at the close of business on each business day during such quarter while this Contract is in effect. Such fee shall be payable for each fiscal quarter within 30 days after the close of such quarter and shall commence accruing as of the date of the initial issuance of shares of the Fund to the public. The fees payable by the Fund to the Manager pursuant to this Section 3 shall be reduced by any commissions, fees, brokerage or similar payments received by the Manager or any affiliated person of the Manager in connection with the purchase and sale of portfolio investments of the Fund, less any direct expenses approved by the Trustees incurred by the Manager or any affiliated person of the Manager in connection with obtaining such payments. In the event that expenses of the Fund for any fiscal year should exceed the expense limitation on investment company expenses imposed by any statute or regulatory authority of any jurisdiction in which shares of the Fund are qualified for offer or sale, the compensation due the Manager for such fiscal year shall be reduced by the amount of excess by a reduction or refund thereof. In the event that the expenses of the Fund exceed any expense limitation which the Manager may, by written notice to the Fund, voluntarily declare to be effective subject to such terms and conditions as the Manager may prescribe in such notice, the compensation due the Manager shall be reduced, and, if necessary, the Manager shall assume expenses of the Fund to the extent required by the terms and conditions of such expense limitation. If the Manager shall serve for less than the whole of a quarter, the foregoing compensation shall be prorated. 4. ASSIGNMENT TERMINATES THIS CONTRACT; AMENDMENTS OF THIS CONTRACT. This Contract shall automatically terminate, without the payment of any penalty, in the event of its assignment; and this Contract shall not be amended unless such amendment be approved at a meeting by the affirmative vote of a majority of the outstanding shares of the Fund, and by the vote, cast in person at a meeting called for the purpose of voting on such approval, of a majority of the Trustees of the Fund who are not interested persons of the Fund or of the Manager. 5. EFFECTIVE PERIOD AND TERMINATION OF THIS CONTRACT. This Contract shall become effective upon its execution, and shall remain in full force and effect continuously thereafter (unless terminated automatically as set forth in Section 4) until terminated as follows: (a) Either party hereto may at any time terminate this Contract by not more than sixty days' nor less than thirty days' written notice delivered or mailed by registered mail, postage prepaid, to the other party, or (b) If (i) the Trustees of the Fund or the shareholders by the affirmative vote of a majority of the outstanding shares of the Fund, and (ii) a majority of the Trustees of the Fund who are not interested persons of the Fund or of the Manager, by vote cast in person at a meeting called for the purpose of voting on such approval, do not specifically approve at least annually the continuance of this Contract, then this Contract shall automatically terminate at the close of business on the second anniversary of its execution, or upon the expiration of one year from the effective date of the last such continuance, whichever is later. Action by the Fund under (a) above may be taken either (i) by vote of a majority of its Trustees, or (ii) by the affirmative vote of a majority of the outstanding shares of the Fund. Termination of this Contract pursuant to this Section 5 will be without the payment of any penalty. 6. CERTAIN DEFINITIONS. For the purposes of this Contract, the "affirmative vote of a majority of the outstanding shares of the Fund" means the affirmative vote, at a duly called and held meeting of shareholders of the Fund, (a) of the holders of 67% or more of the shares of the Fund present (in person or by proxy) and entitled to vote at such meeting, if the holders of more than 50% of the outstanding shares of the Fund entitled to vote at such meeting are present in person or by proxy, or (b) of the holders of more than 50% of the outstanding shares of the Fund entitled to vote at such meeting, whichever is less. For the purposes of this Contract, the terms "affiliated person," "control," "interested person" and "assignment" shall have their respective meanings defined in the Investment Company Act of 1940 and the Rules and Regulations thereunder (the "1940 Act"), subject, however, to such exemptions as may be granted by the Securities and Exchange Commission under said Act; the term "specifically approve at least annually" shall be construed in a manner consistent with the 1940 Act, and the Rules and Regulations thereunder; and the term "brokerage and research services" shall have the meaning given in the Securities Exchange Act of 1934 and the Rules and Regulations thereunder. 7. NON-LIABILITY OF MANAGER. In the absence of willful misfeasance, bad faith or gross negligence on the part of the Manager, or reckless disregard of its obligations and duties hereunder, the Manager shall not be subject to any liability to the Fund or to any shareholder of the Fund, for any act or omission in the course of, or connected with, rendering services hereunder. 8. TERMINATION OF PRIOR CONTRACT. This Contract shall become effective as of its date, and supersedes the Management Contract dated March 5, 1992. 9. LIMITATION OF LIABILITY OF THE TRUSTEES, OFFICERS, AND SHAREHOLDERS. A copy of the Agreement and Declaration of Trust of the Fund is on file with the Secretary of State of The Commonwealth of Massachusetts, and notice is hereby given that this instrument is executed on behalf of the Trustees of the Fund as Trustees and not individually and that the obligations of or arising out of this instrument are not binding upon any of the Trustees, officers or shareholders individually but are binding only upon the assets and property of the Fund. IN WITNESS WHEREOF, PUTNAM ARIZONA TAX EXEMPT INCOME FUND and PUTNAM INVESTMENT MANAGEMENT, INC. have each caused this instrument to be signed in duplicate in its behalf by its President or a Vice President thereunto duly authorized, all as of the day and year first above written. PUTNAM ARIZONA TAX EXEMPT INCOME FUND /s/ Charles E. Porter By: -------------------------------- Charles E. Porter Executive Vice President PUTNAM INVESTMENT MANAGEMENT, INC. /s/ Gordon H. Silver By: -------------------------------- Gordon H. Silver Senior Managing Director EX-99.B5ADVSRCONTR 3 FLORIDA PUTNAM FLORIDA TAX EXEMPT INCOME FUND MANAGEMENT CONTRACT Management Contract dated as of September 20, 1996 between PUTNAM FLORIDA TAX EXEMPT INCOME FUND, a Massachusetts business trust (the "Fund"), and PUTNAM INVESTMENT MANAGEMENT, INC., a Massachusetts corporation (the "Manager"). WITNESSETH: That in consideration of the mutual covenants herein contained, it is agreed as follows: 1. SERVICES TO BE RENDERED BY MANAGER TO FUND. (a) The Manager, at its expense, will furnish continuously an investment program for the Fund, will determine what investments shall be purchased, held, sold or exchanged by the Fund and what portion, if any, of the assets of the Fund shall be held uninvested and shall, on behalf of the Fund, make changes in the Fund's investments. Subject always to the control of the Trustees of the Fund and except for the functions carried out by the officers and personnel referred to in Section 1(d), the Manager will also manage, supervise and conduct the other affairs and business of the Fund and matters incidental thereto. In the performance of its duties, the Manager will comply with the provisions of the Agreement and Declaration of Trust and By-Laws of the Fund and its stated investment objectives, policies and restrictions, and will use its best efforts to safeguard and promote the welfare of the Fund and to comply with other policies which the Trustees may from time to time determine and shall exercise the same care and diligence expected of the Trustees. (b) The Manager, at its expense, except as such expense is paid by the Fund as provided in Section 1(d), will furnish (1) all necessary investment and management facilities, including salaries of personnel, required for it to execute its duties faithfully; (2) suitable office space for the Fund; and (3) administrative facilities, including bookkeeping, clerical personnel and equipment necessary for the efficient conduct of the affairs of the Fund, including determination of the Fund's net asset value, but excluding shareholder accounting services. Except as otherwise provided in Section 1(d), the Manager will pay the compensation, if any, of the officers of the Fund. (c) The Manager, at its expense, shall place all orders for the purchase and sale of portfolio investments for the Fund's account with brokers or dealers selected by the Manager. In the selection of such brokers or dealers and the placing of such orders, the Manager shall use its best efforts to obtain for the Fund the most favorable price and execution available, except to the extent it may be permitted to pay higher brokerage commissions for brokerage and research services as described below. In using its best efforts to obtain for the Fund the most favorable price and execution available, the Manager, bearing in mind the Fund's best interests at all times, shall consider all factors it deems relevant, including by way of illustration, price, the size of the transaction, the nature of the market for the security, the amount of the commission, the timing of the transaction taking into account market prices and trends, the reputation, experience and financial stability of the broker or dealer involved and the quality of service rendered by the broker or dealer in other transactions. Subject to such policies as the Trustees of the Fund may determine, the Manager shall not be deemed to have acted unlawfully or to have breached any duty created by this Contract or otherwise solely by reason of its having caused the Fund to pay a broker or dealer that provides brokerage and research services to the Manager an amount of commission for effecting a portfolio investment transaction in excess of the amount of commission another broker or dealer would have charged for effecting that transaction, if the Manager determines in good faith that such amount of commission was reasonable in relation to the value of the brokerage and research services provided by such broker or dealer, viewed in terms of either that particular transaction or the Manager's overall responsibilities with respect to the Fund and to other clients of the Manager as to which the Manager exercises investment discretion. The Manager agrees that in connection with purchases or sales of portfolio investments for the Fund's account, neither the Manager nor any officer, director, employee or agent of the Manager shall act as a principal or receive any commission other than as provided in Section 3. (d) The Fund will pay or reimburse the Manager for (i) the compensation of the Vice Chairman of the Fund and of persons assisting him in this office, as determined from time to time by the Trustees of the Fund, (ii) the compensation in whole or in part of such other officers of the Fund and persons assisting them as may be determined from time to time by the Trustees of the Fund, and (iii) the cost of suitable office space, utilities, support services and equipment of the Vice Chairman and persons assisting him and, as determined from time to time by the Trustees of the Fund, all or a part of such cost attributable to the other officers and persons assisting them whose compensation is paid in whole or in part by the Fund. The Fund will pay the fees, if any, of the Trustees of the Fund. (e) The Manager shall pay all expenses incurred in connection with the organization of the Fund and the initial public offering and sale of its shares of beneficial interest, provided that upon the issuance and sale of such shares to the public pursuant to the offering, and only in such event, the Fund shall become liable for, and to the extent requested reimburse the Manager for, registration fees payable to the Securities and Exchange Commission and for an additional amount not exceeding $125,000 as its agreed share of such expenses. (f) The Manager shall not be obligated to pay any expenses of or for the Fund not expressly assumed by the Manager pursuant to this Section 1 other than as provided in Section 3. 2. OTHER AGREEMENTS, ETC. It is understood that any of the shareholders, Trustees, officers and employees of the Fund may be a shareholder, director, officer or employee of, or be otherwise interested in, the Manager, and in any person controlled by or under common control with the Manager, and that the Manager and any person controlled by or under common control with the Manager may have an interest in the Fund. It is also understood that the Manager and any person controlled by or under common control with the Manager have and may have advisory, management, service or other contracts with other organizations and persons, and may have other interests and business. 3. COMPENSATION TO BE PAID BY THE FUND TO THE MANAGER. The Fund will pay to the Manager as compensation for the Manager's services rendered, for the facilities furnished and for the expenses borne by the Manager pursuant to paragraphs (a), (b), (c) and (e) of Section 1, a fee, computed and paid quarterly at the annual rate of: (a) 0.600% of the first $500 million of the average net asset value of the Fund; (b) 0.500% of the next $500 million of such average net asset value; (c) 0.450% of the next $500 million of such average net asset value; (d) 0.400% of the next $5 billion of such average net asset value; (e) 0.375% of the next $5 billion of such average net asset value; (f) 0.355% of the next $5 billion of such average net asset value; (g) 0.340% of the next $5 billion of such average net asset value; (h) 0.330% of any excess over $21.5 billion of such average net asset value. Such average net asset value shall be determined by taking an average of all of the determinations of such net asset value during such quarter at the close of business on each business day during such quarter while this Contract is in effect. Such fee shall be payable for each fiscal quarter within 30 days after the close of such quarter and shall commence accruing as of the date of the initial issuance of shares of the Fund to the public. The fees payable by the Fund to the Manager pursuant to this Section 3 shall be reduced by any commissions, fees, brokerage or similar payments received by the Manager or any affiliated person of the Manager in connection with the purchase and sale of portfolio investments of the Fund, less any direct expenses approved by the Trustees incurred by the Manager or any affiliated person of the Manager in connection with obtaining such payments. In the event that expenses of the Fund for any fiscal year should exceed the expense limitation on investment company expenses imposed by any statute or regulatory authority of any jurisdiction in which shares of the Fund are qualified for offer or sale, the compensation due the Manager for such fiscal year shall be reduced by the amount of excess by a reduction or refund thereof. In the event that the expenses of the Fund exceed any expense limitation which the Manager may, by written notice to the Fund, voluntarily declare to be effective subject to such terms and conditions as the Manager may prescribe in such notice, the compensation due the Manager shall be reduced, and, if necessary, the Manager shall assume expenses of the Fund to the extent required by the terms and conditions of such expense limitation. If the Manager shall serve for less than the whole of a quarter, the foregoing compensation shall be prorated. 4. ASSIGNMENT TERMINATES THIS CONTRACT; AMENDMENTS OF THIS CONTRACT. This Contract shall automatically terminate, without the payment of any penalty, in the event of its assignment; and this Contract shall not be amended unless such amendment be approved at a meeting by the affirmative vote of a majority of the outstanding shares of the Fund, and by the vote, cast in person at a meeting called for the purpose of voting on such approval, of a majority of the Trustees of the Fund who are not interested persons of the Fund or of the Manager. 5. EFFECTIVE PERIOD AND TERMINATION OF THIS CONTRACT. This Contract shall become effective upon its execution, and shall remain in full force and effect continuously thereafter (unless terminated automatically as set forth in Section 4) until terminated as follows: (a) Either party hereto may at any time terminate this Contract by not more than sixty days' nor less than thirty days' written notice delivered or mailed by registered mail, postage prepaid, to the other party, or (b) If (i) the Trustees of the Fund or the shareholders by the affirmative vote of a majority of the outstanding shares of the Fund, and (ii) a majority of the Trustees of the Fund who are not interested persons of the Fund or of the Manager, by vote cast in person at a meeting called for the purpose of voting on such approval, do not specifically approve at least annually the continuance of this Contract, then this Contract shall automatically terminate at the close of business on the second anniversary of its execution, or upon the expiration of one year from the effective date of the last such continuance, whichever is later. Action by the Fund under (a) above may be taken either (i) by vote of a majority of its Trustees, or (ii) by the affirmative vote of a majority of the outstanding shares of the Fund. Termination of this Contract pursuant to this Section 5 will be without the payment of any penalty. 6. CERTAIN DEFINITIONS. For the purposes of this Contract, the "affirmative vote of a majority of the outstanding shares of the Fund" means the affirmative vote, at a duly called and held meeting of shareholders of the Fund, (a) of the holders of 67% or more of the shares of the Fund present (in person or by proxy) and entitled to vote at such meeting, if the holders of more than 50% of the outstanding shares of the Fund entitled to vote at such meeting are present in person or by proxy, or (b) of the holders of more than 50% of the outstanding shares of the Fund entitled to vote at such meeting, whichever is less. For the purposes of this Contract, the terms "affiliated person," "control," "interested person" and "assignment" shall have their respective meanings defined in the Investment Company Act of 1940 and the Rules and Regulations thereunder (the "1940 Act"), subject, however, to such exemptions as may be granted by the Securities and Exchange Commission under said Act; the term "specifically approve at least annually" shall be construed in a manner consistent with the 1940 Act, and the Rules and Regulations thereunder; and the term "brokerage and research services" shall have the meaning given in the Securities Exchange Act of 1934 and the Rules and Regulations thereunder. 7. NON-LIABILITY OF MANAGER. In the absence of willful misfeasance, bad faith or gross negligence on the part of the Manager, or reckless disregard of its obligations and duties hereunder, the Manager shall not be subject to any liability to the Fund or to any shareholder of the Fund, for any act or omission in the course of, or connected with, rendering services hereunder. 8. TERMINATION OF PRIOR CONTRACT. This Contract shall become effective as of its date, and supersedes the Management Contract dated December 5, 1991. 9. LIMITATION OF LIABILITY OF THE TRUSTEES, OFFICERS, AND SHAREHOLDERS. A copy of the Agreement and Declaration of Trust of the Fund is on file with the Secretary of State of The Commonwealth of Massachusetts, and notice is hereby given that this instrument is executed on behalf of the Trustees of the Fund as Trustees and not individually and that the obligations of or arising out of this instrument are not binding upon any of the Trustees, officers or shareholders individually but are binding only upon the assets and property of the Fund. IN WITNESS WHEREOF, PUTNAM FLORIDA TAX EXEMPT INCOME FUND and PUTNAM INVESTMENT MANAGEMENT, INC. have each caused this instrument to be signed in duplicate in its behalf by its President or a Vice President thereunto duly authorized, all as of the day and year first above written. PUTNAM FLORIDA TAX EXEMPT INCOME FUND /s/ Charles E. Porter By: -------------------------------- Charles E. Porter Executive Vice President PUTNAM INVESTMENT MANAGEMENT, INC. /s/ Gordon H. Silver By: -------------------------------- Gordon H. Silver Senior Managing Director EX-99.B5ADVSRCONTR 4 MASSACHUSETTS PUTNAM MASSACHUSETTS TAX EXEMPT INCOME FUND MANAGEMENT CONTRACT Management Contract dated as of September 20, 1996 between PUTNAM MASSACHUSETTS TAX EXEMPT INCOME FUND, a Massachusetts business trust (the "Fund"), and PUTNAM INVESTMENT MANAGEMENT, INC., a Massachusetts corporation (the "Manager"). WITNESSETH: That in consideration of the mutual covenants herein contained, it is agreed as follows: 1. SERVICES TO BE RENDERED BY MANAGER TO FUND. (a) The Manager, at its expense, will furnish continuously an investment program for the Fund, will determine what investments shall be purchased, held, sold or exchanged by the Fund and what portion, if any, of the assets of the Fund shall be held uninvested and shall, on behalf of the Fund, make changes in the Fund's investments. Subject always to the control of the Trustees of the Fund and except for the functions carried out by the officers and personnel referred to in Section 1(d), the Manager will also manage, supervise and conduct the other affairs and business of the Fund and matters incidental thereto. In the performance of its duties, the Manager will comply with the provisions of the Agreement and Declaration of Trust and By-Laws of the Fund and its stated investment objectives, policies and restrictions, and will use its best efforts to safeguard and promote the welfare of the Fund and to comply with other policies which the Trustees may from time to time determine and shall exercise the same care and diligence expected of the Trustees. (b) The Manager, at its expense, except as such expense is paid by the Fund as provided in Section 1(d), will furnish (1) all necessary investment and management facilities, including salaries of personnel, required for it to execute its duties faithfully; (2) suitable office space for the Fund; and (3) administrative facilities, including bookkeeping, clerical personnel and equipment necessary for the efficient conduct of the affairs of the Fund, including determination of the Fund's net asset value, but excluding shareholder accounting services. Except as otherwise provided in Section 1(d), the Manager will pay the compensation, if any, of the officers of the Fund. (c) The Manager, at its expense, shall place all orders for the purchase and sale of portfolio investments for the Fund's account with brokers or dealers selected by the Manager. In the selection of such brokers or dealers and the placing of such orders, the Manager shall use its best efforts to obtain for the Fund the most favorable price and execution available, except to the extent it may be permitted to pay higher brokerage commissions for brokerage and research services as described below. In using its best efforts to obtain for the Fund the most favorable price and execution available, the Manager, bearing in mind the Fund's best interests at all times, shall consider all factors it deems relevant, including by way of illustration, price, the size of the transaction, the nature of the market for the security, the amount of the commission, the timing of the transaction taking into account market prices and trends, the reputation, experience and financial stability of the broker or dealer involved and the quality of service rendered by the broker or dealer in other transactions. Subject to such policies as the Trustees of the Fund may determine, the Manager shall not be deemed to have acted unlawfully or to have breached any duty created by this Contract or otherwise solely by reason of its having caused the Fund to pay a broker or dealer that provides brokerage and research services to the Manager an amount of commission for effecting a portfolio investment transaction in excess of the amount of commission another broker or dealer would have charged for effecting that transaction, if the Manager determines in good faith that such amount of commission was reasonable in relation to the value of the brokerage and research services provided by such broker or dealer, viewed in terms of either that particular transaction or the Manager's overall responsibilities with respect to the Fund and to other clients of the Manager as to which the Manager exercises investment discretion. The Manager agrees that in connection with purchases or sales of portfolio investments for the Fund's account, neither the Manager nor any officer, director, employee or agent of the Manager shall act as a principal or receive any commission other than as provided in Section 3. (d) The Fund will pay or reimburse the Manager for (i) the compensation of the Vice Chairman of the Fund and of persons assisting him in this office, as determined from time to time by the Trustees of the Fund, (ii) the compensation in whole or in part of such other officers of the Fund and persons assisting them as may be determined from time to time by the Trustees of the Fund, and (iii) the cost of suitable office space, utilities, support services and equipment of the Vice Chairman and persons assisting him and, as determined from time to time by the Trustees of the Fund, all or a part of such cost attributable to the other officers and persons assisting them whose compensation is paid in whole or in part by the Fund. The Fund will pay the fees, if any, of the Trustees of the Fund. (e) The Manager shall pay all expenses incurred in connection with the organization of the Fund and the initial public offering and sale of its shares of beneficial interest, provided that upon the issuance and sale of such shares to the public pursuant to the offering, and only in such event, the Fund shall become liable for, and to the extent requested reimburse the Manager for, registration fees payable to the Securities and Exchange Commission and for an additional amount not exceeding $125,000 as its agreed share of such expenses. (f) The Manager shall not be obligated to pay any expenses of or for the Fund not expressly assumed by the Manager pursuant to this Section 1 other than as provided in Section 3. 2. OTHER AGREEMENTS, ETC. It is understood that any of the shareholders, Trustees, officers and employees of the Fund may be a shareholder, director, officer or employee of, or be otherwise interested in, the Manager, and in any person controlled by or under common control with the Manager, and that the Manager and any person controlled by or under common control with the Manager may have an interest in the Fund. It is also understood that the Manager and any person controlled by or under common control with the Manager have and may have advisory, management, service or other contracts with other organizations and persons, and may have other interests and business. 3. COMPENSATION TO BE PAID BY THE FUND TO THE MANAGER. The Fund will pay to the Manager as compensation for the Manager's services rendered, for the facilities furnished and for the expenses borne by the Manager pursuant to paragraphs (a), (b), (c) and (e) of Section 1, a fee, computed and paid quarterly at the annual rate of: (a) 0.600% of the first $500 million of the average net asset value of the Fund; (b) 0.500% of the next $500 million of such average net asset value; (c) 0.450% of the next $500 million of such average net asset value; (d) 0.400% of the next $5 billion of such average net asset value; (e) 0.375% of the next $5 billion of such average net asset value; (f) 0.355% of the next $5 billion of such average net asset value; (g) 0.340% of the next $5 billion of such average net asset value; (h) 0.330% of any excess over $21.5 billion of such average net asset value. Such average net asset value shall be determined by taking an average of all of the determinations of such net asset value during such quarter at the close of business on each business day during such quarter while this Contract is in effect. Such fee shall be payable for each fiscal quarter within 30 days after the close of such quarter and shall commence accruing as of the date of the initial issuance of shares of the Fund to the public. The fees payable by the Fund to the Manager pursuant to this Section 3 shall be reduced by any commissions, fees, brokerage or similar payments received by the Manager or any affiliated person of the Manager in connection with the purchase and sale of portfolio investments of the Fund, less any direct expenses approved by the Trustees incurred by the Manager or any affiliated person of the Manager in connection with obtaining such payments. In the event that expenses of the Fund for any fiscal year should exceed the expense limitation on investment company expenses imposed by any statute or regulatory authority of any jurisdiction in which shares of the Fund are qualified for offer or sale, the compensation due the Manager for such fiscal year shall be reduced by the amount of excess by a reduction or refund thereof. In the event that the expenses of the Fund exceed any expense limitation which the Manager may, by written notice to the Fund, voluntarily declare to be effective subject to such terms and conditions as the Manager may prescribe in such notice, the compensation due the Manager shall be reduced, and, if necessary, the Manager shall assume expenses of the Fund to the extent required by the terms and conditions of such expense limitation. If the Manager shall serve for less than the whole of a quarter, the foregoing compensation shall be prorated. 4. ASSIGNMENT TERMINATES THIS CONTRACT; AMENDMENTS OF THIS CONTRACT. This Contract shall automatically terminate, without the payment of any penalty, in the event of its assignment; and this Contract shall not be amended unless such amendment be approved at a meeting by the affirmative vote of a majority of the outstanding shares of the Fund, and by the vote, cast in person at a meeting called for the purpose of voting on such approval, of a majority of the Trustees of the Fund who are not interested persons of the Fund or of the Manager. 5. EFFECTIVE PERIOD AND TERMINATION OF THIS CONTRACT. This Contract shall become effective upon its execution, and shall remain in full force and effect continuously thereafter (unless terminated automatically as set forth in Section 4) until terminated as follows: (a) Either party hereto may at any time terminate this Contract by not more than sixty days' nor less than thirty days' written notice delivered or mailed by registered mail, postage prepaid, to the other party, or (b) If (i) the Trustees of the Fund or the shareholders by the affirmative vote of a majority of the outstanding shares of the Fund, and (ii) a majority of the Trustees of the Fund who are not interested persons of the Fund or of the Manager, by vote cast in person at a meeting called for the purpose of voting on such approval, do not specifically approve at least annually the continuance of this Contract, then this Contract shall automatically terminate at the close of business on the second anniversary of its execution, or upon the expiration of one year from the effective date of the last such continuance, whichever is later. Action by the Fund under (a) above may be taken either (i) by vote of a majority of its Trustees, or (ii) by the affirmative vote of a majority of the outstanding shares of the Fund. Termination of this Contract pursuant to this Section 5 will be without the payment of any penalty. 6. CERTAIN DEFINITIONS. For the purposes of this Contract, the "affirmative vote of a majority of the outstanding shares of the Fund" means the affirmative vote, at a duly called and held meeting of shareholders of the Fund, (a) of the holders of 67% or more of the shares of the Fund present (in person or by proxy) and entitled to vote at such meeting, if the holders of more than 50% of the outstanding shares of the Fund entitled to vote at such meeting are present in person or by proxy, or (b) of the holders of more than 50% of the outstanding shares of the Fund entitled to vote at such meeting, whichever is less. For the purposes of this Contract, the terms "affiliated person," "control," "interested person" and "assignment" shall have their respective meanings defined in the Investment Company Act of 1940 and the Rules and Regulations thereunder (the "1940 Act"), subject, however, to such exemptions as may be granted by the Securities and Exchange Commission under said Act; the term "specifically approve at least annually" shall be construed in a manner consistent with the 1940 Act, and the Rules and Regulations thereunder; and the term "brokerage and research services" shall have the meaning given in the Securities Exchange Act of 1934 and the Rules and Regulations thereunder. 7. NON-LIABILITY OF MANAGER. In the absence of willful misfeasance, bad faith or gross negligence on the part of the Manager, or reckless disregard of its obligations and duties hereunder, the Manager shall not be subject to any liability to the Fund or to any shareholder of the Fund, for any act or omission in the course of, or connected with, rendering services hereunder. 8. TERMINATION OF PRIOR CONTRACT. This Contract shall become effective as of its date, and supersedes the Management Contract dated July 11, 1991. 9. LIMITATION OF LIABILITY OF THE TRUSTEES, OFFICERS, AND SHAREHOLDERS. A copy of the Agreement and Declaration of Trust of the Fund is on file with the Secretary of State of The Commonwealth of Massachusetts, and notice is hereby given that this instrument is executed on behalf of the Trustees of the Fund as Trustees and not individually and that the obligations of or arising out of this instrument are not binding upon any of the Trustees, officers or shareholders individually but are binding only upon the assets and property of the Fund. IN WITNESS WHEREOF, PUTNAM MASSACHUSETTS TAX EXEMPT INCOME FUND and PUTNAM INVESTMENT MANAGEMENT, INC. have each caused this instrument to be signed in duplicate in its behalf by its President or a Vice President thereunto duly authorized, all as of the day and year first above written. PUTNAM MASSACHUSETTS TAX EXEMPT INCOME FUND /s/ Charles E. Porter By: -------------------------------- Charles E. Porter Executive Vice President PUTNAM INVESTMENT MANAGEMENT, INC. /s/ Gordon H. Silver By: -------------------------------- Gordon H. Silver Senior Managing Director EX-99.B5ADVSRCONTR 5 MICHIGAN PUTNAM MICHIGAN TAX EXEMPT INCOME FUND MANAGEMENT CONTRACT Management Contract dated as of September 20, 1996 between PUTNAM MICHIGAN TAX EXEMPT INCOME FUND, a Massachusetts business trust (the "Fund"), and PUTNAM INVESTMENT MANAGEMENT, INC., a Massachusetts corporation (the "Manager"). WITNESSETH: That in consideration of the mutual covenants herein contained, it is agreed as follows: 1. SERVICES TO BE RENDERED BY MANAGER TO FUND. (a) The Manager, at its expense, will furnish continuously an investment program for the Fund, will determine what investments shall be purchased, held, sold or exchanged by the Fund and what portion, if any, of the assets of the Fund shall be held uninvested and shall, on behalf of the Fund, make changes in the Fund's investments. Subject always to the control of the Trustees of the Fund and except for the functions carried out by the officers and personnel referred to in Section 1(d), the Manager will also manage, supervise and conduct the other affairs and business of the Fund and matters incidental thereto. In the performance of its duties, the Manager will comply with the provisions of the Agreement and Declaration of Trust and By-Laws of the Fund and its stated investment objectives, policies and restrictions, and will use its best efforts to safeguard and promote the welfare of the Fund and to comply with other policies which the Trustees may from time to time determine and shall exercise the same care and diligence expected of the Trustees. (b) The Manager, at its expense, except as such expense is paid by the Fund as provided in Section 1(d), will furnish (1) all necessary investment and management facilities, including salaries of personnel, required for it to execute its duties faithfully; (2) suitable office space for the Fund; and (3) administrative facilities, including bookkeeping, clerical personnel and equipment necessary for the efficient conduct of the affairs of the Fund, including determination of the Fund's net asset value, but excluding shareholder accounting services. Except as otherwise provided in Section 1(d), the Manager will pay the compensation, if any, of the officers of the Fund. (c) The Manager, at its expense, shall place all orders for the purchase and sale of portfolio investments for the Fund's account with brokers or dealers selected by the Manager. In the selection of such brokers or dealers and the placing of such orders, the Manager shall use its best efforts to obtain for the Fund the most favorable price and execution available, except to the extent it may be permitted to pay higher brokerage commissions for brokerage and research services as described below. In using its best efforts to obtain for the Fund the most favorable price and execution available, the Manager, bearing in mind the Fund's best interests at all times, shall consider all factors it deems relevant, including by way of illustration, price, the size of the transaction, the nature of the market for the security, the amount of the commission, the timing of the transaction taking into account market prices and trends, the reputation, experience and financial stability of the broker or dealer involved and the quality of service rendered by the broker or dealer in other transactions. Subject to such policies as the Trustees of the Fund may determine, the Manager shall not be deemed to have acted unlawfully or to have breached any duty created by this Contract or otherwise solely by reason of its having caused the Fund to pay a broker or dealer that provides brokerage and research services to the Manager an amount of commission for effecting a portfolio investment transaction in excess of the amount of commission another broker or dealer would have charged for effecting that transaction, if the Manager determines in good faith that such amount of commission was reasonable in relation to the value of the brokerage and research services provided by such broker or dealer, viewed in terms of either that particular transaction or the Manager's overall responsibilities with respect to the Fund and to other clients of the Manager as to which the Manager exercises investment discretion. The Manager agrees that in connection with purchases or sales of portfolio investments for the Fund's account, neither the Manager nor any officer, director, employee or agent of the Manager shall act as a principal or receive any commission other than as provided in Section 3. (d) The Fund will pay or reimburse the Manager for (i) the compensation of the Vice Chairman of the Fund and of persons assisting him in this office, as determined from time to time by the Trustees of the Fund, (ii) the compensation in whole or in part of such other officers of the Fund and persons assisting them as may be determined from time to time by the Trustees of the Fund, and (iii) the cost of suitable office space, utilities, support services and equipment of the Vice Chairman and persons assisting him and, as determined from time to time by the Trustees of the Fund, all or a part of such cost attributable to the other officers and persons assisting them whose compensation is paid in whole or in part by the Fund. The Fund will pay the fees, if any, of the Trustees of the Fund. (e) The Manager shall pay all expenses incurred in connection with the organization of the Fund and the initial public offering and sale of its shares of beneficial interest, provided that upon the issuance and sale of such shares to the public pursuant to the offering, and only in such event, the Fund shall become liable for, and to the extent requested reimburse the Manager for, registration fees payable to the Securities and Exchange Commission and for an additional amount not exceeding $125,000 as its agreed share of such expenses. (f) The Manager shall not be obligated to pay any expenses of or for the Fund not expressly assumed by the Manager pursuant to this Section 1 other than as provided in Section 3. 2. OTHER AGREEMENTS, ETC. It is understood that any of the shareholders, Trustees, officers and employees of the Fund may be a shareholder, director, officer or employee of, or be otherwise interested in, the Manager, and in any person controlled by or under common control with the Manager, and that the Manager and any person controlled by or under common control with the Manager may have an interest in the Fund. It is also understood that the Manager and any person controlled by or under common control with the Manager have and may have advisory, management, service or other contracts with other organizations and persons, and may have other interests and business. 3. COMPENSATION TO BE PAID BY THE FUND TO THE MANAGER. The Fund will pay to the Manager as compensation for the Manager's services rendered, for the facilities furnished and for the expenses borne by the Manager pursuant to paragraphs (a), (b), (c) and (e) of Section 1, a fee, computed and paid quarterly at the annual rate of: (a) 0.600% of the first $500 million of the average net asset value of the Fund; (b) 0.500% of the next $500 million of such average net asset value; (c) 0.450% of the next $500 million of such average net asset value; (d) 0.400% of the next $5 billion of such average net assets; (e) 0.375% of the next $5 billion of such average net assets; (f) 0.355% of the next $5 billion of such average net assets; (g) 0.340% of the next $5 billion of such average net assets; (h) 0.330% of any excess over $21.5 billion of such average net asset value. Such average net asset value shall be determined by taking an average of all of the determinations of such net asset value during such quarter at the close of business on each business day during such quarter while this Contract is in effect. Such fee shall be payable for each fiscal quarter within 30 days after the close of such quarter and shall commence accruing as of the date of the initial issuance of shares of the Fund to the public. The fees payable by the Fund to the Manager pursuant to this Section 3 shall be reduced by any commissions, fees, brokerage or similar payments received by the Manager or any affiliated person of the Manager in connection with the purchase and sale of portfolio investments of the Fund, less any direct expenses approved by the Trustees incurred by the Manager or any affiliated person of the Manager in connection with obtaining such payments. In the event that expenses of the Fund for any fiscal year should exceed the expense limitation on investment company expenses imposed by any statute or regulatory authority of any jurisdiction in which shares of the Fund are qualified for offer or sale, the compensation due the Manager for such fiscal year shall be reduced by the amount of excess by a reduction or refund thereof. In the event that the expenses of the Fund exceed any expense limitation which the Manager may, by written notice to the Fund, voluntarily declare to be effective subject to such terms and conditions as the Manager may prescribe in such notice, the compensation due the Manager shall be reduced, and, if necessary, the Manager shall assume expenses of the Fund to the extent required by the terms and conditions of such expense limitation. If the Manager shall serve for less than the whole of a quarter, the foregoing compensation shall be prorated. 4. ASSIGNMENT TERMINATES THIS CONTRACT; AMENDMENTS OF THIS CONTRACT. This Contract shall automatically terminate, without the payment of any penalty, in the event of its assignment; and this Contract shall not be amended unless such amendment be approved at a meeting by the affirmative vote of a majority of the outstanding shares of the Fund, and by the vote, cast in person at a meeting called for the purpose of voting on such approval, of a majority of the Trustees of the Fund who are not interested persons of the Fund or of the Manager. 5. EFFECTIVE PERIOD AND TERMINATION OF THIS CONTRACT. This Contract shall become effective upon its execution, and shall remain in full force and effect continuously thereafter (unless terminated automatically as set forth in Section 4) until terminated as follows: (a) Either party hereto may at any time terminate this Contract by not more than sixty days' nor less than thirty days' written notice delivered or mailed by registered mail, postage prepaid, to the other party, or (b) If (i) the Trustees of the Fund or the shareholders by the affirmative vote of a majority of the outstanding shares of the Fund, and (ii) a majority of the Trustees of the Fund who are not interested persons of the Fund or of the Manager, by vote cast in person at a meeting called for the purpose of voting on such approval, do not specifically approve at least annually the continuance of this Contract, then this Contract shall automatically terminate at the close of business on the second anniversary of its execution, or upon the expiration of one year from the effective date of the last such continuance, whichever is later. Action by the Fund under (a) above may be taken either (i) by vote of a majority of its Trustees, or (ii) by the affirmative vote of a majority of the outstanding shares of the Fund. Termination of this Contract pursuant to this Section 5 will be without the payment of any penalty. 6. CERTAIN DEFINITIONS. For the purposes of this Contract, the "affirmative vote of a majority of the outstanding shares of the Fund" means the affirmative vote, at a duly called and held meeting of shareholders of the Fund, (a) of the holders of 67% or more of the shares of the Fund present (in person or by proxy) and entitled to vote at such meeting, if the holders of more than 50% of the outstanding shares of the Fund entitled to vote at such meeting are present in person or by proxy, or (b) of the holders of more than 50% of the outstanding shares of the Fund entitled to vote at such meeting, whichever is less. For the purposes of this Contract, the terms "affiliated person," "control," "interested person" and "assignment" shall have their respective meanings defined in the Investment Company Act of 1940 and the Rules and Regulations thereunder (the "1940 Act"), subject, however, to such exemptions as may be granted by the Securities and Exchange Commission under said Act; the term "specifically approve at least annually" shall be construed in a manner consistent with the 1940 Act, and the Rules and Regulations thereunder; and the term "brokerage and research services" shall have the meaning given in the Securities Exchange Act of 1934 and the Rules and Regulations thereunder. 7. NON-LIABILITY OF MANAGER. In the absence of willful misfeasance, bad faith or gross negligence on the part of the Manager, or reckless disregard of its obligations and duties hereunder, the Manager shall not be subject to any liability to the Fund or to any shareholder of the Fund, for any act or omission in the course of, or connected with, rendering services hereunder. 8. TERMINATION OF PRIOR CONTRACT. This Contract shall become effective as of its date, and supersedes the Management Contract dated July 11, 1991. 9. LIMITATION OF LIABILITY OF THE TRUSTEES, OFFICERS, AND SHAREHOLDERS. A copy of the Agreement and Declaration of Fund of the Fund is on file with the Secretary of State of The Commonwealth of Massachusetts, and notice is hereby given that this instrument is executed on behalf of the Trustees of the Fund as Trustees and not individually and that the obligations of or arising out of this instrument are not binding upon any of the Trustees, officers or shareholders individually but are binding only upon the assets and property of the Fund. IN WITNESS WHEREOF, PUTNAM MICHIGAN TAX EXEMPT INCOME FUND and PUTNAM INVESTMENT MANAGEMENT, INC. have each caused this instrument to be signed in duplicate in its behalf by its President or a Vice President thereunto duly authorized, all as of the day and year first above written. PUTNAM MICHIGAN TAX EXEMPT INCOME FUND /s/ Charles E. Porter By: -------------------------------- Charles E. Porter Executive Vice President PUTNAM INVESTMENT MANAGEMENT, INC. /s/ Gordon H. Silver By: -------------------------------- Gordon H. Silver Senior Managing Director EX-99.B5ADVSRCONTR 6 MINNESOTA PUTNAM MINNESOTA TAX EXEMPT INCOME FUND MANAGEMENT CONTRACT Management Contract dated as of September 20, 1996 between PUTNAM MINNESOTA TAX EXEMPT INCOME FUND, a Massachusetts business trust (the "Fund"), and PUTNAM INVESTMENT MANAGEMENT, INC., a Massachusetts corporation (the "Manager"). WITNESSETH: That in consideration of the mutual covenants herein contained, it is agreed as follows: 1. SERVICES TO BE RENDERED BY MANAGER TO FUND. (a) The Manager, at its expense, will furnish continuously an investment program for the Fund, will determine what investments shall be purchased, held, sold or exchanged by the Fund and what portion, if any, of the assets of the Fund shall be held uninvested and shall, on behalf of the Fund, make changes in the Fund's investments. Subject always to the control of the Trustees of the Fund and except for the functions carried out by the officers and personnel referred to in Section 1(d), the Manager will also manage, supervise and conduct the other affairs and business of the Fund and matters incidental thereto. In the performance of its duties, the Manager will comply with the provisions of the Agreement and Declaration of Trust and By-Laws of the Fund and its stated investment objectives, policies and restrictions, and will use its best efforts to safeguard and promote the welfare of the Fund and to comply with other policies which the Trustees may from time to time determine and shall exercise the same care and diligence expected of the Trustees. (b) The Manager, at its expense, except as such expense is paid by the Fund as provided in Section 1(d), will furnish (1) all necessary investment and management facilities, including salaries of personnel, required for it to execute its duties faithfully; (2) suitable office space for the Fund; and (3) administrative facilities, including bookkeeping, clerical personnel and equipment necessary for the efficient conduct of the affairs of the Fund, including determination of the Fund's net asset value, but excluding shareholder accounting services. Except as otherwise provided in Section 1(d), the Manager will pay the compensation, if any, of the officers of the Fund. (c) The Manager, at its expense, shall place all orders for the purchase and sale of portfolio investments for the Fund's account with brokers or dealers selected by the Manager. In the selection of such brokers or dealers and the placing of such orders, the Manager shall use its best efforts to obtain for the Fund the most favorable price and execution available, except to the extent it may be permitted to pay higher brokerage commissions for brokerage and research services as described below. In using its best efforts to obtain for the Fund the most favorable price and execution available, the Manager, bearing in mind the Fund's best interests at all times, shall consider all factors it deems relevant, including by way of illustration, price, the size of the transaction, the nature of the market for the security, the amount of the commission, the timing of the transaction taking into account market prices and trends, the reputation, experience and financial stability of the broker or dealer involved and the quality of service rendered by the broker or dealer in other transactions. Subject to such policies as the Trustees of the Fund may determine, the Manager shall not be deemed to have acted unlawfully or to have breached any duty created by this Contract or otherwise solely by reason of its having caused the Fund to pay a broker or dealer that provides brokerage and research services to the Manager an amount of commission for effecting a portfolio investment transaction in excess of the amount of commission another broker or dealer would have charged for effecting that transaction, if the Manager determines in good faith that such amount of commission was reasonable in relation to the value of the brokerage and research services provided by such broker or dealer, viewed in terms of either that particular transaction or the Manager's overall responsibilities with respect to the Fund and to other clients of the Manager as to which the Manager exercises investment discretion. The Manager agrees that in connection with purchases or sales of portfolio investments for the Fund's account, neither the Manager nor any officer, director, employee or agent of the Manager shall act as a principal or receive any commission other than as provided in Section 3. (d) The Fund will pay or reimburse the Manager for (i) the compensation of the Vice Chairman of the Fund and of persons assisting him in this office, as determined from time to time by the Trustees of the Fund, (ii) the compensation in whole or in part of such other officers of the Fund and persons assisting them as may be determined from time to time by the Trustees of the Fund, and (iii) the cost of suitable office space, utilities, support services and equipment of the Vice Chairman and persons assisting him and, as determined from time to time by the Trustees of the Fund, all or a part of such cost attributable to the other officers and persons assisting them whose compensation is paid in whole or in part by the Fund. The Fund will pay the fees, if any, of the Trustees of the Fund. (e) The Manager shall pay all expenses incurred in connection with the organization of the Fund and the initial public offering and sale of its shares of beneficial interest, provided that upon the issuance and sale of such shares to the public pursuant to the offering, and only in such event, the Fund shall become liable for, and to the extent requested reimburse the Manager for, registration fees payable to the Securities and Exchange Commission and for an additional amount not exceeding $125,000 as its agreed share of such expenses. (f) The Manager shall not be obligated to pay any expenses of or for the Fund not expressly assumed by the Manager pursuant to this Section 1 other than as provided in Section 3. 2. OTHER AGREEMENTS, ETC. It is understood that any of the shareholders, Trustees, officers and employees of the Fund may be a shareholder, director, officer or employee of, or be otherwise interested in, the Manager, and in any person controlled by or under common control with the Manager, and that the Manager and any person controlled by or under common control with the Manager may have an interest in the Fund. It is also understood that the Manager and any person controlled by or under common control with the Manager have and may have advisory, management, service or other contracts with other organizations and persons, and may have other interests and business. 3. COMPENSATION TO BE PAID BY THE FUND TO THE MANAGER. The Fund will pay to the Manager as compensation for the Manager's services rendered, for the facilities furnished and for the expenses borne by the Manager pursuant to paragraphs (a), (b), (c) and (e) of Section 1, a fee, computed and paid quarterly at the annual rate of: (a) 0.600% of the first $500 million of the average net asset value of the Fund; (b) 0.500% of the next $500 million of such average net asset value; (c) 0.450% of the next $500 million of such average net asset value; (d) 0.400% of the next $5 billion of such average net asset value; (e) 0.375% of the next $5 billion of such average net asset value; (f) 0.355% of the next $5 billion of such average net asset value; (g) 0.340% of the next $5 billion of such average net asset value; (h) 0.330% of any excess over $21.5 billion of such average net asset value. Such average net asset value shall be determined by taking an average of all of the determinations of such net asset value during such quarter at the close of business on each business day during such quarter while this Contract is in effect. Such fee shall be payable for each fiscal quarter within 30 days after the close of such quarter and shall commence accruing as of the date of the initial issuance of shares of the Fund to the public. The fees payable by the Fund to the Manager pursuant to this Section 3 shall be reduced by any commissions, fees, brokerage or similar payments received by the Manager or any affiliated person of the Manager in connection with the purchase and sale of portfolio investments of the Fund, less any direct expenses approved by the Trustees incurred by the Manager or any affiliated person of the Manager in connection with obtaining such payments. In the event that expenses of the Fund for any fiscal year should exceed the expense limitation on investment company expenses imposed by any statute or regulatory authority of any jurisdiction in which shares of the Fund are qualified for offer or sale, the compensation due the Manager for such fiscal year shall be reduced by the amount of excess by a reduction or refund thereof. In the event that the expenses of the Fund exceed any expense limitation which the Manager may, by written notice to the Fund, voluntarily declare to be effective subject to such terms and conditions as the Manager may prescribe in such notice, the compensation due the Manager shall be reduced, and, if necessary, the Manager shall assume expenses of the Fund to the extent required by the terms and conditions of such expense limitation. If the Manager shall serve for less than the whole of a quarter, the foregoing compensation shall be prorated. 4. ASSIGNMENT TERMINATES THIS CONTRACT; AMENDMENTS OF THIS CONTRACT. This Contract shall automatically terminate, without the payment of any penalty, in the event of its assignment; and this Contract shall not be amended unless such amendment be approved at a meeting by the affirmative vote of a majority of the outstanding shares of the Fund, and by the vote, cast in person at a meeting called for the purpose of voting on such approval, of a majority of the Trustees of the Fund who are not interested persons of the Fund or of the Manager. 5. EFFECTIVE PERIOD AND TERMINATION OF THIS CONTRACT. This Contract shall become effective upon its execution, and shall remain in full force and effect continuously thereafter (unless terminated automatically as set forth in Section 4) until terminated as follows: (a) Either party hereto may at any time terminate this Contract by not more than sixty days' nor less than thirty days' written notice delivered or mailed by registered mail, postage prepaid, to the other party, or (b) If (i) the Trustees of the Fund or the shareholders by the affirmative vote of a majority of the outstanding shares of the Fund, and (ii) a majority of the Trustees of the Fund who are not interested persons of the Fund or of the Manager, by vote cast in person at a meeting called for the purpose of voting on such approval, do not specifically approve at least annually the continuance of this Contract, then this Contract shall automatically terminate at the close of business on the second anniversary of its execution, or upon the expiration of one year from the effective date of the last such continuance, whichever is later. Action by the Fund under (a) above may be taken either (i) by vote of a majority of its Trustees, or (ii) by the affirmative vote of a majority of the outstanding shares of the Fund. Termination of this Contract pursuant to this Section 5 will be without the payment of any penalty. 6. CERTAIN DEFINITIONS. For the purposes of this Contract, the "affirmative vote of a majority of the outstanding shares of the Fund" means the affirmative vote, at a duly called and held meeting of shareholders of the Fund, (a) of the holders of 67% or more of the shares of the Fund present (in person or by proxy) and entitled to vote at such meeting, if the holders of more than 50% of the outstanding shares of the Fund entitled to vote at such meeting are present in person or by proxy, or (b) of the holders of more than 50% of the outstanding shares of the Fund entitled to vote at such meeting, whichever is less. For the purposes of this Contract, the terms "affiliated person," "control," "interested person" and "assignment" shall have their respective meanings defined in the Investment Company Act of 1940 and the Rules and Regulations thereunder (the "1940 Act"), subject, however, to such exemptions as may be granted by the Securities and Exchange Commission under said Act; the term "specifically approve at least annually" shall be construed in a manner consistent with the 1940 Act, and the Rules and Regulations thereunder; and the term "brokerage and research services" shall have the meaning given in the Securities Exchange Act of 1934 and the Rules and Regulations thereunder. 7. NON-LIABILITY OF MANAGER. In the absence of willful misfeasance, bad faith or gross negligence on the part of the Manager, or reckless disregard of its obligations and duties hereunder, the Manager shall not be subject to any liability to the Fund or to any shareholder of the Fund, for any act or omission in the course of, or connected with, rendering services hereunder. 8. TERMINATION OF PRIOR CONTRACT. This Contract shall become effective as of its date, and supersedes the Management Contract dated July 11, 1991. 9. LIMITATION OF LIABILITY OF THE TRUSTEES, OFFICERS, AND SHAREHOLDERS. A copy of the Agreement and Declaration of Trust of the Fund is on file with the Secretary of State of The Commonwealth of Massachusetts, and notice is hereby given that this instrument is executed on behalf of the Trustees of the Fund as Trustees and not individually and that the obligations of or arising out of this instrument are not binding upon any of the Trustees, officers or shareholders individually but are binding only upon the assets and property of the Fund. IN WITNESS WHEREOF, PUTNAM MINNESOTA TAX EXEMPT INCOME FUND and PUTNAM INVESTMENT MANAGEMENT, INC. have each caused this instrument to be signed in duplicate in its behalf by its President or a Vice President thereunto duly authorized, all as of the day and year first above written. PUTNAM MINNESOTA TAX EXEMPT INCOME FUND /s/ Charles E. Porter By: -------------------------------- Charles E. Porter Executive Vice President PUTNAM INVESTMENT MANAGEMENT, INC. /s/ Gordon H. Silver By: -------------------------------- Gordon H. Silver Senior Managing Director EX-99.B5ADVSRCONTR 7 NEW JERSEY PUTNAM NEW JERSEY TAX EXEMPT INCOME FUND MANAGEMENT CONTRACT Management Contract dated as of September 20, 1996 between PUTNAM NEW JERSEY TAX EXEMPT INCOME FUND, a Massachusetts business trust (the "Fund"), and PUTNAM INVESTMENT MANAGEMENT, INC., a Massachusetts corporation (the "Manager"). WITNESSETH: That in consideration of the mutual covenants herein contained, it is agreed as follows: 1. SERVICES TO BE RENDERED BY MANAGER TO FUND. (a) The Manager, at its expense, will furnish continuously an investment program for the Fund, will determine what investments shall be purchased, held, sold or exchanged by the Fund and what portion, if any, of the assets of the Fund shall be held uninvested and shall, on behalf of the Fund, make changes in the Fund's investments. Subject always to the control of the Trustees of the Fund and except for the functions carried out by the officers and personnel referred to in Section 1(d), the Manager will also manage, supervise and conduct the other affairs and business of the Fund and matters incidental thereto. In the performance of its duties, the Manager will comply with the provisions of the Agreement and Declaration of Trust and By-Laws of the Fund and its stated investment objectives, policies and restrictions, and will use its best efforts to safeguard and promote the welfare of the Fund and to comply with other policies which the Trustees may from time to time determine and shall exercise the same care and diligence expected of the Trustees. (b) The Manager, at its expense, except as such expense is paid by the Fund as provided in Section 1(d), will furnish (1) all necessary investment and management facilities, including salaries of personnel, required for it to execute its duties faithfully; (2) suitable office space for the Fund; and (3) administrative facilities, including bookkeeping, clerical personnel and equipment necessary for the efficient conduct of the affairs of the Fund, including determination of the Fund's net asset value, but excluding shareholder accounting services. Except as otherwise provided in Section 1(d), the Manager will pay the compensation, if any, of the officers of the Fund. (c) The Manager, at its expense, shall place all orders for the purchase and sale of portfolio investments for the Fund's account with brokers or dealers selected by the Manager. In the selection of such brokers or dealers and the placing of such orders, the Manager shall use its best efforts to obtain for the Fund the most favorable price and execution available, except to the extent it may be permitted to pay higher brokerage commissions for brokerage and research services as described below. In using its best efforts to obtain for the Fund the most favorable price and execution available, the Manager, bearing in mind the Fund's best interests at all times, shall consider all factors it deems relevant, including by way of illustration, price, the size of the transaction, the nature of the market for the security, the amount of the commission, the timing of the transaction taking into account market prices and trends, the reputation, experience and financial stability of the broker or dealer involved and the quality of service rendered by the broker or dealer in other transactions. Subject to such policies as the Trustees of the Fund may determine, the Manager shall not be deemed to have acted unlawfully or to have breached any duty created by this Contract or otherwise solely by reason of its having caused the Fund to pay a broker or dealer that provides brokerage and research services to the Manager an amount of commission for effecting a portfolio investment transaction in excess of the amount of commission another broker or dealer would have charged for effecting that transaction, if the Manager determines in good faith that such amount of commission was reasonable in relation to the value of the brokerage and research services provided by such broker or dealer, viewed in terms of either that particular transaction or the Manager's overall responsibilities with respect to the Fund and to other clients of the Manager as to which the Manager exercises investment discretion. The Manager agrees that in connection with purchases or sales of portfolio investments for the Fund's account, neither the Manager nor any officer, director, employee or agent of the Manager shall act as a principal or receive any commission other than as provided in Section 3. (d) The Fund will pay or reimburse the Manager for (i) the compensation of the Vice Chairman of the Fund and of persons assisting him in this office, as determined from time to time by the Trustees of the Fund, (ii) the compensation in whole or in part of such other officers of the Fund and persons assisting them as may be determined from time to time by the Trustees of the Fund, and (iii) the cost of suitable office space, utilities, support services and equipment of the Vice Chairman and persons assisting him and, as determined from time to time by the Trustees of the Fund, all or a part of such cost attributable to the other officers and persons assisting them whose compensation is paid in whole or in part by the Fund. The Fund will pay the fees, if any, of the Trustees of the Fund. (e) The Manager shall pay all expenses incurred in connection with the organization of the Fund and the initial public offering and sale of its shares of beneficial interest, provided that upon the issuance and sale of such shares to the public pursuant to the offering, and only in such event, the Fund shall become liable for, and to the extent requested reimburse the Manager for, registration fees payable to the Securities and Exchange Commission and for an additional amount not exceeding $125,000 as its agreed share of such expenses. (f) The Manager shall not be obligated to pay any expenses of or for the Fund not expressly assumed by the Manager pursuant to this Section 1 other than as provided in Section 3. 2. OTHER AGREEMENTS, ETC. It is understood that any of the shareholders, Trustees, officers and employees of the Fund may be a shareholder, director, officer or employee of, or be otherwise interested in, the Manager, and in any person controlled by or under common control with the Manager, and that the Manager and any person controlled by or under common control with the Manager may have an interest in the Fund. It is also understood that the Manager and any person controlled by or under common control with the Manager have and may have advisory, management, service or other contracts with other organizations and persons, and may have other interests and business. 3. COMPENSATION TO BE PAID BY THE FUND TO THE MANAGER. The Fund will pay to the Manager as compensation for the Manager's services rendered, for the facilities furnished and for the expenses borne by the Manager pursuant to paragraphs (a), (b), (c) and (e) of Section 1, a fee, computed and paid quarterly at the annual rate of: (a) 0.600% of the first $500 million of the average net asset value of the Fund; (b) 0.500% of the next $500 million of such average net asset value; (c) 0.450% of the next $500 million of such average net asset value; (d) 0.400% of the next $5 billion of such average net asset value; (e) 0.375% of the next $5 billion of such average net asset value; (f) 0.355% of the next $5 billion of such average net asset value; (g) 0.340% of the next $5 billion of such average net asset value; (h) 0.330% of any excess over $21.5 billion of such average net asset value. Such average net asset value shall be determined by taking an average of all of the determinations of such net asset value during such quarter at the close of business on each business day during such quarter while this Contract is in effect. Such fee shall be payable for each fiscal quarter within 30 days after the close of such quarter and shall commence accruing as of the date of the initial issuance of shares of the Fund to the public. The fees payable by the Fund to the Manager pursuant to this Section 3 shall be reduced by any commissions, fees, brokerage or similar payments received by the Manager or any affiliated person of the Manager in connection with the purchase and sale of portfolio investments of the Fund, less any direct expenses approved by the Trustees incurred by the Manager or any affiliated person of the Manager in connection with obtaining such payments. In the event that expenses of the Fund for any fiscal year should exceed the expense limitation on investment company expenses imposed by any statute or regulatory authority of any jurisdiction in which shares of the Fund are qualified for offer or sale, the compensation due the Manager for such fiscal year shall be reduced by the amount of excess by a reduction or refund thereof. In the event that the expenses of the Fund exceed any expense limitation which the Manager may, by written notice to the Fund, voluntarily declare to be effective subject to such terms and conditions as the Manager may prescribe in such notice, the compensation due the Manager shall be reduced, and, if necessary, the Manager shall assume expenses of the Fund to the extent required by the terms and conditions of such expense limitation. If the Manager shall serve for less than the whole of a quarter, the foregoing compensation shall be prorated. 4. ASSIGNMENT TERMINATES THIS CONTRACT; AMENDMENTS OF THIS CONTRACT. This Contract shall automatically terminate, without the payment of any penalty, in the event of its assignment; and this Contract shall not be amended unless such amendment be approved at a meeting by the affirmative vote of a majority of the outstanding shares of the Fund, and by the vote, cast in person at a meeting called for the purpose of voting on such approval, of a majority of the Trustees of the Fund who are not interested persons of the Fund or of the Manager. 5. EFFECTIVE PERIOD AND TERMINATION OF THIS CONTRACT. This Contract shall become effective upon its execution, and shall remain in full force and effect continuously thereafter (unless terminated automatically as set forth in Section 4) until terminated as follows: (a) Either party hereto may at any time terminate this Contract by not more than sixty days' nor less than thirty days' written notice delivered or mailed by registered mail, postage prepaid, to the other party, or (b) If (i) the Trustees of the Fund or the shareholders by the affirmative vote of a majority of the outstanding shares of the Fund, and (ii) a majority of the Trustees of the Fund who are not interested persons of the Fund or of the Manager, by vote cast in person at a meeting called for the purpose of voting on such approval, do not specifically approve at least annually the continuance of this Contract, then this Contract shall automatically terminate at the close of business on the second anniversary of its execution, or upon the expiration of one year from the effective date of the last such continuance, whichever is later. Action by the Fund under (a) above may be taken either (i) by vote of a majority of its Trustees, or (ii) by the affirmative vote of a majority of the outstanding shares of the Fund. Termination of this Contract pursuant to this Section 5 will be without the payment of any penalty. 6. CERTAIN DEFINITIONS. For the purposes of this Contract, the "affirmative vote of a majority of the outstanding shares of the Fund" means the affirmative vote, at a duly called and held meeting of shareholders of the Fund, (a) of the holders of 67% or more of the shares of the Fund present (in person or by proxy) and entitled to vote at such meeting, if the holders of more than 50% of the outstanding shares of the Fund entitled to vote at such meeting are present in person or by proxy, or (b) of the holders of more than 50% of the outstanding shares of the Fund entitled to vote at such meeting, whichever is less. For the purposes of this Contract, the terms "affiliated person," "control," "interested person" and "assignment" shall have their respective meanings defined in the Investment Company Act of 1940 and the Rules and Regulations thereunder (the "1940 Act"), subject, however, to such exemptions as may be granted by the Securities and Exchange Commission under said Act; the term "specifically approve at least annually" shall be construed in a manner consistent with the 1940 Act, and the Rules and Regulations thereunder; and the term "brokerage and research services" shall have the meaning given in the Securities Exchange Act of 1934 and the Rules and Regulations thereunder. 7. NON-LIABILITY OF MANAGER. In the absence of willful misfeasance, bad faith or gross negligence on the part of the Manager, or reckless disregard of its obligations and duties hereunder, the Manager shall not be subject to any liability to the Fund or to any shareholder of the Fund, for any act or omission in the course of, or connected with, rendering services hereunder. 8. TERMINATION OF PRIOR CONTRACT. This Contract shall become effective as of its date, and supersedes the Management Contract dated June 6, 1991. 9. LIMITATION OF LIABILITY OF THE TRUSTEES, OFFICERS, AND SHAREHOLDERS. A copy of the Agreement and Declaration of Trust of the Fund is on file with the Secretary of State of The Commonwealth of Massachusetts, and notice is hereby given that this instrument is executed on behalf of the Trustees of the Fund as Trustees and not individually and that the obligations of or arising out of this instrument are not binding upon any of the Trustees, officers or shareholders individually but are binding only upon the assets and property of the Fund. IN WITNESS WHEREOF, PUTNAM NEW JERSEY TAX EXEMPT INCOME FUND and PUTNAM INVESTMENT MANAGEMENT, INC. have each caused this instrument to be signed in duplicate in its behalf by its President or a Vice President thereunto duly authorized, all as of the day and year first above written. PUTNAM NEW JERSEY TAX EXEMPT INCOME FUND /s/ Charles E. Porter By: -------------------------------- Charles E. Porter Executive Vice President PUTNAM INVESTMENT MANAGEMENT, INC. /s/ Gordon H. Silver By: -------------------------------- Gordon H. Silver Senior Managing Director EX-99.B5ADVSRCONTR 8 OHIO PUTNAM OHIO TAX EXEMPT INCOME FUND MANAGEMENT CONTRACT Management Contract dated as of September 20, 1996 between PUTNAM OHIO TAX EXEMPT INCOME FUND, a Massachusetts business trust (the "Fund"), and PUTNAM INVESTMENT MANAGEMENT, INC., a Massachusetts corporation (the "Manager"). WITNESSETH: That in consideration of the mutual covenants herein contained, it is agreed as follows: 1. SERVICES TO BE RENDERED BY MANAGER TO FUND. (a) The Manager, at its expense, will furnish continuously an investment program for the Fund, will determine what investments shall be purchased, held, sold or exchanged by the Fund and what portion, if any, of the assets of the Fund shall be held uninvested and shall, on behalf of the Fund, make changes in the Fund's investments. Subject always to the control of the Trustees of the Fund and except for the functions carried out by the officers and personnel referred to in Section 1(d), the Manager will also manage, supervise and conduct the other affairs and business of the Fund and matters incidental thereto. In the performance of its duties, the Manager will comply with the provisions of the Agreement and Declaration of Trust and By-Laws of the Fund and its stated investment objectives, policies and restrictions, and will use its best efforts to safeguard and promote the welfare of the Fund and to comply with other policies which the Trustees may from time to time determine and shall exercise the same care and diligence expected of the Trustees. (b) The Manager, at its expense, except as such expense is paid by the Fund as provided in Section 1(d), will furnish (1) all necessary investment and management facilities, including salaries of personnel, required for it to execute its duties faithfully; (2) suitable office space for the Fund; and (3) administrative facilities, including bookkeeping, clerical personnel and equipment necessary for the efficient conduct of the affairs of the Fund, including determination of the Fund's net asset value, but excluding shareholder accounting services. Except as otherwise provided in Section 1(d), the Manager will pay the compensation, if any, of the officers of the Fund. (c) The Manager, at its expense, shall place all orders for the purchase and sale of portfolio investments for the Fund's account with brokers or dealers selected by the Manager. In the selection of such brokers or dealers and the placing of such orders, the Manager shall use its best efforts to obtain for the Fund the most favorable price and execution available, except to the extent it may be permitted to pay higher brokerage commissions for brokerage and research services as described below. In using its best efforts to obtain for the Fund the most favorable price and execution available, the Manager, bearing in mind the Fund's best interests at all times, shall consider all factors it deems relevant, including by way of illustration, price, the size of the transaction, the nature of the market for the security, the amount of the commission, the timing of the transaction taking into account market prices and trends, the reputation, experience and financial stability of the broker or dealer involved and the quality of service rendered by the broker or dealer in other transactions. Subject to such policies as the Trustees of the Fund may determine, the Manager shall not be deemed to have acted unlawfully or to have breached any duty created by this Contract or otherwise solely by reason of its having caused the Fund to pay a broker or dealer that provides brokerage and research services to the Manager an amount of commission for effecting a portfolio investment transaction in excess of the amount of commission another broker or dealer would have charged for effecting that transaction, if the Manager determines in good faith that such amount of commission was reasonable in relation to the value of the brokerage and research services provided by such broker or dealer, viewed in terms of either that particular transaction or the Manager's overall responsibilities with respect to the Fund and to other clients of the Manager as to which the Manager exercises investment discretion. The Manager agrees that in connection with purchases or sales of portfolio investments for the Fund's account, neither the Manager nor any officer, director, employee or agent of the Manager shall act as a principal or receive any commission other than as provided in Section 3. (d) The Fund will pay or reimburse the Manager for (i) the compensation of the Vice Chairman of the Fund and of persons assisting him in this office, as determined from time to time by the Trustees of the Fund, (ii) the compensation in whole or in part of such other officers of the Fund and persons assisting them as may be determined from time to time by the Trustees of the Fund, and (iii) the cost of suitable office space, utilities, support services and equipment of the Vice Chairman and persons assisting him and, as determined from time to time by the Trustees of the Fund, all or a part of such cost attributable to the other officers and persons assisting them whose compensation is paid in whole or in part by the Fund. The Fund will pay the fees, if any, of the Trustees of the Fund. (e) The Manager shall pay all expenses incurred in connection with the organization of the Fund and the initial public offering and sale of its shares of beneficial interest, provided that upon the issuance and sale of such shares to the public pursuant to the offering, and only in such event, the Fund shall become liable for, and to the extent requested reimburse the Manager for, registration fees payable to the Securities and Exchange Commission and for an additional amount not exceeding $125,000 as its agreed share of such expenses. (f) The Manager shall not be obligated to pay any expenses of or for the Fund not expressly assumed by the Manager pursuant to this Section 1 other than as provided in Section 3. 2. OTHER AGREEMENTS, ETC. It is understood that any of the shareholders, Trustees, officers and employees of the Fund may be a shareholder, director, officer or employee of, or be otherwise interested in, the Manager, and in any person controlled by or under common control with the Manager, and that the Manager and any person controlled by or under common control with the Manager may have an interest in the Fund. It is also understood that the Manager and any person controlled by or under common control with the Manager have and may have advisory, management, service or other contracts with other organizations and persons, and may have other interests and business. 3. COMPENSATION TO BE PAID BY THE FUND TO THE MANAGER. The Fund will pay to the Manager as compensation for the Manager's services rendered, for the facilities furnished and for the expenses borne by the Manager pursuant to paragraphs (a), (b), (c) and (e) of Section 1, a fee, computed and paid quarterly at the annual rate of: (a) 0.600% of the first $500 million of the average net asset value of the Fund; (b) 0.500% of the next $500 million of such average net asset value; (c) 0.450% of the next $500 million of such average net asset value; (d) 0.400% of the next $5 billion of such average net asset value; (e) 0.375% of the next $5 billion of such average net asset value; (f) 0.355% of the next $5 billion of such average net asset value; (g) 0.340% of the next $5 billion of such average net asset value; (h) 0.330% of any excess over $21.5 billion of such average net asset value. Such average net asset value shall be determined by taking an average of all of the determinations of such net asset value during such quarter at the close of business on each business day during such quarter while this Contract is in effect. Such fee shall be payable for each fiscal quarter within 30 days after the close of such quarter and shall commence accruing as of the date of the initial issuance of shares of the Fund to the public. The fees payable by the Fund to the Manager pursuant to this Section 3 shall be reduced by any commissions, fees, brokerage or similar payments received by the Manager or any affiliated person of the Manager in connection with the purchase and sale of portfolio investments of the Fund, less any direct expenses approved by the Trustees incurred by the Manager or any affiliated person of the Manager in connection with obtaining such payments. In the event that expenses of the Fund for any fiscal year should exceed the expense limitation on investment company expenses imposed by any statute or regulatory authority of any jurisdiction in which shares of the Fund are qualified for offer or sale, the compensation due the Manager for such fiscal year shall be reduced by the amount of excess by a reduction or refund thereof. In the event that the expenses of the Fund exceed any expense limitation which the Manager may, by written notice to the Fund, voluntarily declare to be effective subject to such terms and conditions as the Manager may prescribe in such notice, the compensation due the Manager shall be reduced, and, if necessary, the Manager shall assume expenses of the Fund to the extent required by the terms and conditions of such expense limitation. If the Manager shall serve for less than the whole of a quarter, the foregoing compensation shall be prorated. 4. ASSIGNMENT TERMINATES THIS CONTRACT; AMENDMENTS OF THIS CONTRACT. This Contract shall automatically terminate, without the payment of any penalty, in the event of its assignment; and this Contract shall not be amended unless such amendment be approved at a meeting by the affirmative vote of a majority of the outstanding shares of the Fund, and by the vote, cast in person at a meeting called for the purpose of voting on such approval, of a majority of the Trustees of the Fund who are not interested persons of the Fund or of the Manager. 5. EFFECTIVE PERIOD AND TERMINATION OF THIS CONTRACT. This Contract shall become effective upon its execution, and shall remain in full force and effect continuously thereafter (unless terminated automatically as set forth in Section 4) until terminated as follows: (a) Either party hereto may at any time terminate this Contract by not more than sixty days' nor less than thirty days' written notice delivered or mailed by registered mail, postage prepaid, to the other party, or (b) If (i) the Trustees of the Fund or the shareholders by the affirmative vote of a majority of the outstanding shares of the Fund, and (ii) a majority of the Trustees of the Fund who are not interested persons of the Fund or of the Manager, by vote cast in person at a meeting called for the purpose of voting on such approval, do not specifically approve at least annually the continuance of this Contract, then this Contract shall automatically terminate at the close of business on the second anniversary of its execution, or upon the expiration of one year from the effective date of the last such continuance, whichever is later. Action by the Fund under (a) above may be taken either (i) by vote of a majority of its Trustees, or (ii) by the affirmative vote of a majority of the outstanding shares of the Fund. Termination of this Contract pursuant to this Section 5 will be without the payment of any penalty. 6. CERTAIN DEFINITIONS. For the purposes of this Contract, the "affirmative vote of a majority of the outstanding shares of the Fund" means the affirmative vote, at a duly called and held meeting of shareholders of the Fund, (a) of the holders of 67% or more of the shares of the Fund present (in person or by proxy) and entitled to vote at such meeting, if the holders of more than 50% of the outstanding shares of the Fund entitled to vote at such meeting are present in person or by proxy, or (b) of the holders of more than 50% of the outstanding shares of the Fund entitled to vote at such meeting, whichever is less. For the purposes of this Contract, the terms "affiliated person," "control," "interested person" and "assignment" shall have their respective meanings defined in the Investment Company Act of 1940 and the Rules and Regulations thereunder (the "1940 Act"), subject, however, to such exemptions as may be granted by the Securities and Exchange Commission under said Act; the term "specifically approve at least annually" shall be construed in a manner consistent with the 1940 Act, and the Rules and Regulations thereunder; and the term "brokerage and research services" shall have the meaning given in the Securities Exchange Act of 1934 and the Rules and Regulations thereunder. 7. NON-LIABILITY OF MANAGER. In the absence of willful misfeasance, bad faith or gross negligence on the part of the Manager, or reckless disregard of its obligations and duties hereunder, the Manager shall not be subject to any liability to the Fund or to any shareholder of the Fund, for any act or omission in the course of, or connected with, rendering services hereunder. 8. TERMINATION OF PRIOR CONTRACT. This Contract shall become effective as of its date, and supersedes the Management Contract dated July 11, 1991. 9. LIMITATION OF LIABILITY OF THE TRUSTEES, OFFICERS, AND SHAREHOLDERS. A copy of the Agreement and Declaration of Trust of the Fund is on file with the Secretary of State of The Commonwealth of Massachusetts, and notice is hereby given that this instrument is executed on behalf of the Trustees of the Fund as Trustees and not individually and that the obligations of or arising out of this instrument are not binding upon any of the Trustees, officers or shareholders individually but are binding only upon the assets and property of the Fund. IN WITNESS WHEREOF, PUTNAM OHIO TAX EXEMPT INCOME FUND and PUTNAM INVESTMENT MANAGEMENT, INC. have each caused this instrument to be signed in duplicate in its behalf by its President or a Vice President thereunto duly authorized, all as of the day and year first above written. PUTNAM OHIO TAX EXEMPT INCOME FUND /s/ Charles E. Porter By: -------------------------------- Charles E. Porter Executive Vice President PUTNAM INVESTMENT MANAGEMENT, INC. /s/ Gordon H. Silver By: -------------------------------- Gordon H. Silver Senior Managing Director EX-99.B5ADVSRCONTR 9 PENNSYLVANIA PUTNAM PENNSYLVANIA TAX EXEMPT INCOME FUND MANAGEMENT CONTRACT Management Contract dated as of September 20, 1996 between PUTNAM PENNSYLVANIA TAX EXEMPT INCOME FUND, a Massachusetts business trust (the "Fund"), and PUTNAM INVESTMENT MANAGEMENT, INC., a Massachusetts corporation (the "Manager"). WITNESSETH: That in consideration of the mutual covenants herein contained, it is agreed as follows: 1. SERVICES TO BE RENDERED BY MANAGER TO FUND. (a) The Manager, at its expense, will furnish continuously an investment program for the Fund, will determine what investments shall be purchased, held, sold or exchanged by the Fund and what portion, if any, of the assets of the Fund shall be held uninvested and shall, on behalf of the Fund, make changes in the Fund's investments. Subject always to the control of the Trustees of the Fund and except for the functions carried out by the officers and personnel referred to in Section 1(d), the Manager will also manage, supervise and conduct the other affairs and business of the Fund and matters incidental thereto. In the performance of its duties, the Manager will comply with the provisions of the Agreement and Declaration of Trust and By-Laws of the Fund and its stated investment objectives, policies and restrictions, and will use its best efforts to safeguard and promote the welfare of the Fund and to comply with other policies which the Trustees may from time to time determine and shall exercise the same care and diligence expected of the Trustees. (b) The Manager, at its expense, except as such expense is paid by the Fund as provided in Section 1(d), will furnish (1) all necessary investment and management facilities, including salaries of personnel, required for it to execute its duties faithfully; (2) suitable office space for the Fund; and (3) administrative facilities, including bookkeeping, clerical personnel and equipment necessary for the efficient conduct of the affairs of the Fund, including determination of the Fund's net asset value, but excluding shareholder accounting services. Except as otherwise provided in Section 1(d), the Manager will pay the compensation, if any, of the officers of the Fund. (c) The Manager, at its expense, shall place all orders for the purchase and sale of portfolio investments for the Fund's account with brokers or dealers selected by the Manager. In the selection of such brokers or dealers and the placing of such orders, the Manager shall use its best efforts to obtain for the Fund the most favorable price and execution available, except to the extent it may be permitted to pay higher brokerage commissions for brokerage and research services as described below. In using its best efforts to obtain for the Fund the most favorable price and execution available, the Manager, bearing in mind the Fund's best interests at all times, shall consider all factors it deems relevant, including by way of illustration, price, the size of the transaction, the nature of the market for the security, the amount of the commission, the timing of the transaction taking into account market prices and trends, the reputation, experience and financial stability of the broker or dealer involved and the quality of service rendered by the broker or dealer in other transactions. Subject to such policies as the Trustees of the Fund may determine, the Manager shall not be deemed to have acted unlawfully or to have breached any duty created by this Contract or otherwise solely by reason of its having caused the Fund to pay a broker or dealer that provides brokerage and research services to the Manager an amount of commission for effecting a portfolio investment transaction in excess of the amount of commission another broker or dealer would have charged for effecting that transaction, if the Manager determines in good faith that such amount of commission was reasonable in relation to the value of the brokerage and research services provided by such broker or dealer, viewed in terms of either that particular transaction or the Manager's overall responsibilities with respect to the Fund and to other clients of the Manager as to which the Manager exercises investment discretion. The Manager agrees that in connection with purchases or sales of portfolio investments for the Fund's account, neither the Manager nor any officer, director, employee or agent of the Manager shall act as a principal or receive any commission other than as provided in Section 3. (d) The Fund will pay or reimburse the Manager for (i) the compensation of the Vice Chairman of the Fund and of persons assisting him in this office, as determined from time to time by the Trustees of the Fund, (ii) the compensation in whole or in part of such other officers of the Fund and persons assisting them as may be determined from time to time by the Trustees of the Fund, and (iii) the cost of suitable office space, utilities, support services and equipment of the Vice Chairman and persons assisting him and, as determined from time to time by the Trustees of the Fund, all or a part of such cost attributable to the other officers and persons assisting them whose compensation is paid in whole or in part by the Fund. The Fund will pay the fees, if any, of the Trustees of the Fund. (e) The Manager shall pay all expenses incurred in connection with the organization of the Fund and the initial public offering and sale of its shares of beneficial interest, provided that upon the issuance and sale of such shares to the public pursuant to the offering, and only in such event, the Fund shall become liable for, and to the extent requested reimburse the Manager for, registration fees payable to the Securities and Exchange Commission and for an additional amount not exceeding $125,000 as its agreed share of such expenses. (f) The Manager shall not be obligated to pay any expenses of or for the Fund not expressly assumed by the Manager pursuant to this Section 1 other than as provided in Section 3. 2. OTHER AGREEMENTS, ETC. It is understood that any of the shareholders, Trustees, officers and employees of the Fund may be a shareholder, director, officer or employee of, or be otherwise interested in, the Manager, and in any person controlled by or under common control with the Manager, and that the Manager and any person controlled by or under common control with the Manager may have an interest in the Fund. It is also understood that the Manager and any person controlled by or under common control with the Manager have and may have advisory, management, service or other contracts with other organizations and persons, and may have other interests and business. 3. COMPENSATION TO BE PAID BY THE FUND TO THE MANAGER. The Fund will pay to the Manager as compensation for the Manager's services rendered, for the facilities furnished and for the expenses borne by the Manager pursuant to paragraphs (a), (b), (c) and (e) of Section 1, a fee, computed and paid quarterly at the annual rate of: (a) 0.600% of the first $500 million of the average net asset value of the Fund; (b) 0.500% of the next $500 million of such average net asset value; (c) 0.450% of the next $500 million of such average net asset value; (d) 0.400% of the next $5 billion of such average net asset value; (e) 0.375% of the next $5 billion of such average net asset value; (f) 0.355% of the next $5 billion of such average net asset value; (g) 0.340% of the next $5 billion of such average net asset value; (h) 0.330% of any excess over $21.5 billion of such average net asset value. Such average net asset value shall be determined by taking an average of all of the determinations of such net asset value during such quarter at the close of business on each business day during such quarter while this Contract is in effect. Such fee shall be payable for each fiscal quarter within 30 days after the close of such quarter and shall commence accruing as of the date of the initial issuance of shares of the Fund to the public. The fees payable by the Fund to the Manager pursuant to this Section 3 shall be reduced by any commissions, fees, brokerage or similar payments received by the Manager or any affiliated person of the Manager in connection with the purchase and sale of portfolio investments of the Fund, less any direct expenses approved by the Trustees incurred by the Manager or any affiliated person of the Manager in connection with obtaining such payments. In the event that expenses of the Fund for any fiscal year should exceed the expense limitation on investment company expenses imposed by any statute or regulatory authority of any jurisdiction in which shares of the Fund are qualified for offer or sale, the compensation due the Manager for such fiscal year shall be reduced by the amount of excess by a reduction or refund thereof. In the event that the expenses of the Fund exceed any expense limitation which the Manager may, by written notice to the Fund, voluntarily declare to be effective subject to such terms and conditions as the Manager may prescribe in such notice, the compensation due the Manager shall be reduced, and, if necessary, the Manager shall assume expenses of the Fund to the extent required by the terms and conditions of such expense limitation. If the Manager shall serve for less than the whole of a quarter, the foregoing compensation shall be prorated. 4. ASSIGNMENT TERMINATES THIS CONTRACT; AMENDMENTS OF THIS CONTRACT. This Contract shall automatically terminate, without the payment of any penalty, in the event of its assignment; and this Contract shall not be amended unless such amendment be approved at a meeting by the affirmative vote of a majority of the outstanding shares of the Fund, and by the vote, cast in person at a meeting called for the purpose of voting on such approval, of a majority of the Trustees of the Fund who are not interested persons of the Fund or of the Manager. 5. EFFECTIVE PERIOD AND TERMINATION OF THIS CONTRACT. This Contract shall become effective upon its execution, and shall remain in full force and effect continuously thereafter (unless terminated automatically as set forth in Section 4) until terminated as follows: (a) Either party hereto may at any time terminate this Contract by not more than sixty days' nor less than thirty days' written notice delivered or mailed by registered mail, postage prepaid, to the other party, or (b) If (i) the Trustees of the Fund or the shareholders by the affirmative vote of a majority of the outstanding shares of the Fund, and (ii) a majority of the Trustees of the Fund who are not interested persons of the Fund or of the Manager, by vote cast in person at a meeting called for the purpose of voting on such approval, do not specifically approve at least annually the continuance of this Contract, then this Contract shall automatically terminate at the close of business on the second anniversary of its execution, or upon the expiration of one year from the effective date of the last such continuance, whichever is later. Action by the Fund under (a) above may be taken either (i) by vote of a majority of its Trustees, or (ii) by the affirmative vote of a majority of the outstanding shares of the Fund. Termination of this Contract pursuant to this Section 5 will be without the payment of any penalty. 6. CERTAIN DEFINITIONS. For the purposes of this Contract, the "affirmative vote of a majority of the outstanding shares of the Fund" means the affirmative vote, at a duly called and held meeting of shareholders of the Fund, (a) of the holders of 67% or more of the shares of the Fund present (in person or by proxy) and entitled to vote at such meeting, if the holders of more than 50% of the outstanding shares of the Fund entitled to vote at such meeting are present in person or by proxy, or (b) of the holders of more than 50% of the outstanding shares of the Fund entitled to vote at such meeting, whichever is less. For the purposes of this Contract, the terms "affiliated person," "control," "interested person" and "assignment" shall have their respective meanings defined in the Investment Company Act of 1940 and the Rules and Regulations thereunder (the "1940 Act"), subject, however, to such exemptions as may be granted by the Securities and Exchange Commission under said Act; the term "specifically approve at least annually" shall be construed in a manner consistent with the 1940 Act, and the Rules and Regulations thereunder; and the term "brokerage and research services" shall have the meaning given in the Securities Exchange Act of 1934 and the Rules and Regulations thereunder. 7. NON-LIABILITY OF MANAGER. In the absence of willful misfeasance, bad faith or gross negligence on the part of the Manager, or reckless disregard of its obligations and duties hereunder, the Manager shall not be subject to any liability to the Fund or to any shareholder of the Fund, for any act or omission in the course of, or connected with, rendering services hereunder. 8. TERMINATION OF PRIOR CONTRACT. This Contract shall become effective as of its date, and supersedes the Management Contract dated July 11, 1991 9. LIMITATION OF LIABILITY OF THE TRUSTEES, OFFICERS, AND SHAREHOLDERS. A copy of the Agreement and Declaration of Trust of the Fund is on file with the Secretary of State of The Commonwealth of Massachusetts, and notice is hereby given that this instrument is executed on behalf of the Trustees of the Fund as Trustees and not individually and that the obligations of or arising out of this instrument are not binding upon any of the Trustees, officers or shareholders individually but are binding only upon the assets and property of the Fund. IN WITNESS WHEREOF, PUTNAM PENNSYLVANIA TAX EXEMPT INCOME FUND and PUTNAM INVESTMENT MANAGEMENT, INC. have each caused this instrument to be signed in duplicate in its behalf by its President or a Vice President thereunto duly authorized, all as of the day and year first above written. PUTNAM PENNSYLVANIA TAX EXEMPT INCOME FUND /s/ Charles E. Porter By: -------------------------------- Charles E. Porter Executive Vice President PUTNAM INVESTMENT MANAGEMENT, INC. /s/ Gordon H. Silver By: -------------------------------- Gordon H. Silver Senior Managing Director EX-99.B10OPINCOUNS 10 ARIZONA ROPES & GRAY One International Place Boston, Massachusetts 02110-2624 (617) 951-7000 September 26, 1996 PUTNAM ARIZONA TAX EXEMPT INCOME FUND (the "Fund") One Post Office Square Boston, Massachusetts 02109 Gentlemen: You have informed us that you propose to offer and sell from time to time 1,248,389 of your shares of beneficial interest (the "Shares"), for cash or securities at the net asset value per share, determined in accordance with your Bylaws, which Shares are in addition to your shares of beneficial interest which you have previously offered and sold or which you are currently offering. We have examined copies of (i) your Agreement and Declaration of Trust as on file at the office of the Secretary of State of The Commonwealth of Massachusetts, which provides for an unlimited number of authorized shares of beneficial interest, and (ii) your Bylaws, which provide for the issue and sale by the Fund of such Shares. We assume that appropriate action will be taken to register or qualify the sale of the Shares under any applicable state and federal laws regulating offerings and sales of securities. Based upon the foregoing, we are of the opinion that: 1. The Fund is a legally organized and validly existing voluntary association with transferable shares of beneficial interest under the laws of The Commonwealth of Massachusetts and is authorized to issue an unlimited number of shares of beneficial interest. 2. Upon the issue of any of the Shares referred to in the first paragraph hereof for cash or securities at net asset value, and the receipt of the appropriate consideration therefor as provided in your Bylaws, such Shares so issued will be validly issued, fully paid and nonassessable by the Fund. ROPES & GRAY PUTNAM ARIZONA TAX EXEMPT INCOME FUND -2- September 26, 1996 The Fund is an entity of the type commonly known as a "Massachusetts business trust". Under Massachusetts law, shareholders could, under certain circumstances, be held personally liable for the obligations of the Fund. However, the Agreement and Declaration of Trust disclaims shareholder liability for acts or obligations of the Fund and requires that notice of such disclaimer be given in each agreement, obligation or instrument entered into or executed by the Fund or its Trustees. The Agreement and Declaration of Trust provides for indemnification out of the property of the Fund for all loss and expense of any shareholder of the Fund held personally liable for the obligations of the Fund solely by reason of his being or having been a shareholder. Thus, the risk of a shareholder's incurring financial loss on account of shareholder liability is limited to circumstances in which the Fund itself would be unable to meet its obligations. We understand that this opinion is to be used in connection with the registration of the Shares for offering and sale pursuant to the Securities Act of 1933, as amended, and the provisions of Rule 24e-2 under the Investment Company Act of 1940, as amended. We consent to the filing of this opinion with and as a part of Post-Effective Amendment No. 7 to your Registration Statement No. 33-37992. Very truly yours, /s/ Ropes & Gray Ropes & Gray EX-99.B10OPINCOUNS 11 FLORIDA ROPES & GRAY One International Place Boston, Massachusetts 02110-2624 (617) 951-7000 September 26, 1996 PUTNAM FLORIDA TAX EXEMPT INCOME FUND (the "Fund") One Post Office Square Boston, Massachusetts 02109 Gentlemen: You have informed us that you propose to offer and sell from time to time 2,638,275 of your shares of beneficial interest (the "Shares"), for cash or securities at the net asset value per share, determined in accordance with your Bylaws, which Shares are in addition to your shares of beneficial interest which you have previously offered and sold or which you are currently offering. We have examined copies of (i) your Agreement and Declaration of Trust as on file at the office of the Secretary of State of The Commonwealth of Massachusetts, which provides for an unlimited number of authorized shares of beneficial interest, and (ii) your Bylaws, which provide for the issue and sale by the Fund of such Shares. We assume that appropriate action will be taken to register or qualify the sale of the Shares under any applicable state and federal laws regulating offerings and sales of securities. Based upon the foregoing, we are of the opinion that: 1. The Fund is a legally organized and validly existing voluntary association with transferable shares of beneficial interest under the laws of The Commonwealth of Massachusetts and is authorized to issue an unlimited number of shares of beneficial interest. 2. Upon the issue of any of the Shares referred to in the first paragraph hereof for cash or securities at net asset value, and the receipt of the appropriate consideration therefor as provided in your Bylaws, such Shares so issued will be validly issued, fully paid and nonassessable by the Fund. ROPES & GRAY PUTNAM FLORIDA TAX EXEMPT INCOME FUND -2- September 26, 1996 The Fund is an entity of the type commonly known as a "Massachusetts business trust". Under Massachusetts law, shareholders could, under certain circumstances, be held personally liable for the obligations of the Fund. However, the Agreement and Declaration of Trust disclaims shareholder liability for acts or obligations of the Fund and requires that notice of such disclaimer be given in each agreement, obligation or instrument entered into or executed by the Fund or its Trustees. The Agreement and Declaration of Trust provides for indemnification out of the property of the Fund for all loss and expense of any shareholder of the Fund held personally liable for the obligations of the Fund solely by reason of his being or having been a shareholder. Thus, the risk of a shareholder's incurring financial loss on account of shareholder liability is limited to circumstances in which the Fund itself would be unable to meet its obligations. We understand that this opinion is to be used in connection with the registration of the Shares for offering and sale pursuant to the Securities Act of 1933, as amended, and the provisions of Rule 24e-2 under the Investment Company Act of 1940, as amended. We consent to the filing of this opinion with and as a part of Post-Effective Amendment No. 7 to your Registration Statement No. 33-35677. Very truly yours, /s/ Ropes & Gray Ropes & Gray EX-99.B1512B1PLAN 12 ARIZONA PUTNAM ARIZONA TAX EXEMPT INCOME FUND CLASS M DISTRIBUTION PLAN AND AGREEMENT This Plan and Agreement (the "Plan") constitutes the Distribution Plan for the Class M shares of Putnam Arizona Tax Exempt Income Fund, a Massachusetts business trust (the "Trust"), adopted pursuant to the provisions of Rule 12b-1 under the Investment Company Act of 1940 (the "Act") and the related agreement between the Trust and Putnam Mutual Funds Corp. ("PMF"). During the effective term of this Plan, the Trust may incur expenses primarily intended to result in the sale of its Class M shares upon the terms and conditions hereinafter set forth: Section 1. The Trust shall pay to PMF a monthly fee at the annual rate of 1.00% of the average net asset value of the Class M shares of the Trust, as determined at the close of each business day during the month, to compensate PMF for services provided and expenses incurred by it in connection with the offering of the Trust's Class M shares, which may include, without limitation, payments by PMF to investment dealers with respect to Class M shares, as set forth in the then current Prospectus or Statement of Additional Information of the Trust, including the payment of a service fee of up to 0.25% of such net asset value for the purpose of maintaining or improving services provided to shareholders by PMF and investment dealers. Such fees shall be payable for each month within 15 days after the close of such month. A majority of the Qualified Trustees, as defined below, may, from time to time, reduce the amount of such payments, or may suspend the operation of the Plan for such period or periods of time as they may determine. Section 2. This Plan shall not take effect until: (a) it has been approved by a vote of a majority of the outstanding Class M shares of the Trust; (b) it has been approved, together with any related agreements, by votes of the majority (or whatever greater percentage may, from time to time, be required by Section 12(b) of the Act or the rules and regulations thereunder) of both (i) the Trustees of the Trust, and (ii) the Qualified Trustees of the Trust, cast in person at a meeting called for the purpose of voting on this Plan or such agreement; and (c) the Trust has received the proceeds of the initial public offering of its Class M shares. Section 3. This Plan shall continue in effect for a period of more than one year after it takes effect only so long as such continuance is specifically approved at least annually in the manner provided for approval of this Plan in Section 2(b). Section 4. PMF shall provide to the Trustees of the Trust, and the Trustees shall review, at least quarterly, a written report of the amounts so expended and the purposes for which such expenditures were made. Section 5. This Plan may be terminated at any time by vote of a majority of the Qualified Trustees or by vote of the majority of the outstanding Class M shares of the Trust. Section 6. All agreements with any person relating to implementation of this Plan shall be in writing, and any agreement related to this Plan shall provide: (a) that such agreement may be terminated at any time, without payment of any penalty, by vote of a majority of the Qualified Trustees or by vote of a majority of the outstanding Class M shares of the Trust, on not more than 60 days' written notice to any other party to the agreement; and (b) that such agreement shall terminate automatically in the event of its assignment. Section 7. This Plan may not be amended to increase materially the amount of distribution expenses permitted pursuant to Section 1 hereof without the approval of a majority of the outstanding Class M shares of the Trust and all material amendments to this Plan shall be approved in the manner provided for approval of this Plan in Section 2(b). Section 8. As used in this Plan, (a) the term "Qualified Trustees" shall mean those Trustees of the Trust who are not interested persons of the Trust, and have no direct or indirect financial interest in the operation of this Plan or any agreements related to it, and (b) the term "majority of the outstanding Class M shares of the Trust" means the affirmative vote, at a duly called and held meeting of Class M shareholders of the Trust, (i) of the holders of 67% or more of the Class M shares of the Trust present (in person or by proxy) and entitled to vote at such meeting, if the holders of more than 50% of the outstanding Class M shares of the Trust entitled to vote at such meeting are present in person or by proxy, or (ii) of the holders of more than 50% of the outstanding Class M shares of the Trust entitled to vote at such meeting, whichever is less, and (c) the terms "assignment" and "interested person" shall have the respective meanings specified in the Act and the rules and regulations thereunder, subject to such exemptions as may be granted by the Securities and Exchange Commission. Section 9. A copy of the Agreement and Declaration of Trust of the Trust is on file with the Secretary of State of The Commonwealth of Massachusetts and notice is hereby given that this instrument is executed on behalf of the Trustees of the Trust as Trustees and not individually, and that the obligations of or arising out of this instrument are not binding upon any of the Trustees, officers or shareholders individually but are binding only upon the assets and property of the Trust. Executed as of June 30, 1995. PUTNAM MUTUAL FUNDS CORP. PUTNAM ARIZONA TAX EXEMPT INCOME FUND /s/ William N. Shiebler /s/ Charles E. Porter By: ---------------------- By: -------------------------- William N. Shiebler Charles E. Porter President Executive Vice President EX-99.B1512B1PLAN 13 PENNSYLVANIA PUTNAM PENNSYLVANIA TAX EXEMPT INCOME FUND CLASS M DISTRIBUTION PLAN AND AGREEMENT This Plan and Agreement (the "Plan") constitutes the Distribution Plan for the Class M shares of Putnam Pennsylvania Tax Exempt Income Fund, a Massachusetts business trust (the "Trust"), adopted pursuant to the provisions of Rule 12b-1 under the Investment Company Act of 1940 (the "Act") and the related agreement between the Trust and Putnam Mutual Funds Corp. ("PMF"). During the effective term of this Plan, the Trust may incur expenses primarily intended to result in the sale of its Class M shares upon the terms and conditions hereinafter set forth: Section 1. The Trust shall pay to PMF a monthly fee at the annual rate of 1.00% of the average net asset value of the Class M shares of the Trust, as determined at the close of each business day during the month, to compensate PMF for services provided and expenses incurred by it in connection with the offering of the Trust's Class M shares, which may include, without limitation, payments by PMF to investment dealers with respect to Class M shares, as set forth in the then current Prospectus or Statement of Additional Information of the Trust, including the payment of a service fee of up to 0.25% of such net asset value for the purpose of maintaining or improving services provided to shareholders by PMF and investment dealers. Such fees shall be payable for each month within 15 days after the close of such month. A majority of the Qualified Trustees, as defined below, may, from time to time, reduce the amount of such payments, or may suspend the operation of the Plan for such period or periods of time as they may determine. Section 2. This Plan shall not take effect until: (a) it has been approved by a vote of a majority of the outstanding Class M shares of the Trust; (b) it has been approved, together with any related agreements, by votes of the majority (or whatever greater percentage may, from time to time, be required by Section 12(b) of the Act or the rules and regulations thereunder) of both (i) the Trustees of the Trust, and (ii) the Qualified Trustees of the Trust, cast in person at a meeting called for the purpose of voting on this Plan or such agreement; and (c) the Trust has received the proceeds of the initial public offering of its Class M shares. Section 3. This Plan shall continue in effect for a period of more than one year after it takes effect only so long as such continuance is specifically approved at least annually in the manner provided for approval of this Plan in Section 2(b). Section 4. PMF shall provide to the Trustees of the Trust, and the Trustees shall review, at least quarterly, a written report of the amounts so expended and the purposes for which such expenditures were made. Section 5. This Plan may be terminated at any time by vote of a majority of the Qualified Trustees or by vote of the majority of the outstanding Class M shares of the Trust. Section 6. All agreements with any person relating to implementation of this Plan shall be in writing, and any agreement related to this Plan shall provide: (a) that such agreement may be terminated at any time, without payment of any penalty, by vote of a majority of the Qualified Trustees or by vote of a majority of the outstanding Class M shares of the Trust, on not more than 60 days' written notice to any other party to the agreement; and (b) that such agreement shall terminate automatically in the event of its assignment. Section 7. This Plan may not be amended to increase materially the amount of distribution expenses permitted pursuant to Section 1 hereof without the approval of a majority of the outstanding Class M shares of the Trust and all material amendments to this Plan shall be approved in the manner provided for approval of this Plan in Section 2(b). Section 8. As used in this Plan, (a) the term "Qualified Trustees" shall mean those Trustees of the Trust who are not interested persons of the Trust, and have no direct or indirect financial interest in the operation of this Plan or any agreements related to it, and (b) the term "majority of the outstanding Class M shares of the Trust" means the affirmative vote, at a duly called and held meeting of Class M shareholders of the Trust, (i) of the holders of 67% or more of the Class M shares of the Trust present (in person or by proxy) and entitled to vote at such meeting, if the holders of more than 50% of the outstanding Class M shares of the Trust entitled to vote at such meeting are present in person or by proxy, or (ii) of the holders of more than 50% of the outstanding Class M shares of the Trust entitled to vote at such meeting, whichever is less, and (c) the terms "assignment" and "interested person" shall have the respective meanings specified in the Act and the rules and regulations thereunder, subject to such exemptions as may be granted by the Securities and Exchange Commission. Section 9. A copy of the Agreement and Declaration of Trust of the Trust is on file with the Secretary of State of The Commonwealth of Massachusetts and notice is hereby given that this instrument is executed on behalf of the Trustees of the Trust as Trustees and not individually, and that the obligations of or arising out of this instrument are not binding upon any of the Trustees, officers or shareholders individually but are binding only upon the assets and property of the Trust. Executed as of June 30, 1995. PUTNAM MUTUAL FUNDS CORP. PUTNAM PENNSYLVANIA TAX EXEMPT INCOME FUND /s/ William N. Shiebler /s/ Charles E. Porter By: ---------------------- By: -------------------------- William N. Shiebler Charles E. Porter President Executive Vice President EX-99.B16PERFQUOT 14 ARIZONA SCHEDULES FOR COMPUTATION OF PERFORMANCE QUOTATIONS Fund name: Putnam Arizona Tax Exempt Income Fund -- Class A Fiscal period ending: 5/31/96 Inception date (if less than 10 years of performance): 1/30/91 TOTAL RETURN Formula -- Average Annual Total Return: ERV = P(1+T)^n n = Number of Time Periods 1 Year 5 Years 10 Years* P = Initial Investment $1,000 $1,000 $1,000 ERV = Ending Redeemable Value $985 $1,326 $1,370 T = Average Annual Total Return -1.54% 5.80% 6.07%* *Life of fund, if less than 10 years YIELD Formula: Interest + Dividends - Expenses 2 (-------------------------------------------------- +1)(6) -1 POP x Average shares Interest and Dividends $603,050 Expenses $94,457 Reimbursement $0 Average shares 14,372,184 NAV $8.84 Sales Charge 4.75% POP $9.28 Yield at POP 4.62% TAX-EXEMPT EQUIVALENT YIELD Formula: 30 day yield --------------- = TAX EQUIVALENT YIELD 1-(Highest Individual Tax Rate) 4.62% 4.62% ------ = ------ = 8.10% 1-42.98% 57.02% SCHEDULES FOR COMPUTATION OF PERFORMANCE QUOTATIONS Fund name: Putnam Arizona Tax Exempt Income Fund -- Class B Fiscal period ending: 5/31/96 Inception date (if less than 10 years of performance): 7/15/93 TOTAL RETURN Formula -- Average Annual Total Return: ERV = P(1+T)^n n = Number of Time Periods 1 Year 5 Years 10 Years* P = Initial Investment $1,000 n/a $1,000 ERV = Ending Redeemable Value $1,026 n/a $1,084 T = Average Annual Total Return 2.60% n/a 2.82%* *Life of fund, if less than 10 years YIELD Formula: Interest + Dividends - Expenses 2 (-------------------------------------------------- +1)(6) -1 POP x Average shares Interest and Dividends $113,203 Expenses $30,524 Reimbursement $0 Average shares 2,700,810 NAV $8.82 Maximum Contingent Deferred Sales Charge 5.0% Yield at NAV 4.20% TAX-EXEMPT EQUIVALENT YIELD Formula: 30 day yield --------------- = TAX EQUIVALENT YIELD 1-(Highest Individual Tax Rate) 4.20% 4.20% ------ = ------ = 7.37% 1-42.98% 57.02% SCHEDULES FOR COMPUTATION OF PERFORMANCE QUOTATIONS Fund name: Putnam Arizona Tax Exempt Income Fund -- Class M Fiscal period ending: 5/31/96 Inception date (if less than 10 years of performance): 7/3/95 TOTAL RETURN Formula -- Cumulative Total Return: ERV = P(1+T)^n n = Number of Time Periods 1 Year 5 Years 10 Years* P = Initial Investment n/a n/a $1,000 ERV = Ending Redeemable Value n/a n/a $1010 T = Cumulative Total Return n/a n/a 1.02%* *Life of fund, if less than 10 years YIELD Formula: Interest + Dividends - Expenses 2 (-------------------------------------------------- +1)(6) -1 POP x Average shares Interest and Dividends $1,268 Expenses $265 Reimbursement $0 Average shares 30,237 NAV $8.85 Sales Charge 3.25% POP $9.15 Yield at POP 4.39% TAX-EXEMPT EQUIVALENT YIELD Formula: 30 day yield --------------- = TAX EQUIVALENT YIELD 1-(Highest Individual Tax Rate) 4.39% 4.39% ------ = ------ = 7.70% 1-42.98% 57.02% EX-99.B16PERFQUOT 15 FLORIDA SCHEDULES FOR COMPUTATION OF PERFORMANCE QUOTATIONS Fund name: Putnam Florida Tax Exempt Income Fund -- Class A Fiscal period ending: 5/31/96 Inception date (if less than 10 years of performance): 8/24/90 TOTAL RETURN Formula -- Average Annual Total Return: ERV = P(1+T)^n n = Number of Time Periods 1 Year 5 Years 10 Years* P = Initial Investment $1,000 $1,000 $1,000 ERV = Ending Redeemable Value $982 $1336 $1445 T = Average Annual Total Return -1.80% 5.96% 6.59%* *Life of fund, if less than 10 years YIELD Formula: Interest + Dividends - Expenses 2 (-------------------------------------------------- +1)(6) -1 POP x Average shares Interest and Dividends $1,255,109 Expenses $184,295 Reimbursement $0 Average shares 27,811,783 NAV $8.91 Sales Charge 4.75% POP $9.35 Yield at POP 4.99% TAX-EXEMPT EQUIVALENT YIELD Formula: 30 day yield --------------- = TAX EQUIVALENT YIELD 1-(Highest Individual Tax Rate) 4.99% 4.99% ------ = ------ = 8.26% 1-39.6% 60.40% SCHEDULES FOR COMPUTATION OF PERFORMANCE QUOTATIONS Fund name: Putnam Florida Tax Exempt Income Fund -- Class B Fiscal period ending: 5/31/96 Inception date (if less than 10 years of performance): 1/4/93 TOTAL RETURN Formula -- Average Annual Total Return: ERV = P(1+T)^n n = Number of Time Periods 1 Year 5 Years 10 Years* P = Initial Investment $1,000 n/a $1,000 ERV = Ending Redeemable Value $1024 n/a $1156 T = Average Annual Total Return 2.37% n/a 4.35%* *Life of fund, if less than 10 years YIELD Formula: Interest + Dividends - Expenses 2 (-------------------------------------------------- +1)(6) -1 POP x Average shares Interest and Dividends $265,785 Expenses $67,245 Reimbursement $0 Average shares 5,891,537 NAV $8.91 Maximum Contingent Deferred Sales Charge 5.0% Yield at NAV 4.58% TAX-EXEMPT EQUIVALENT YIELD Formula: 30 day yield --------------- = TAX EQUIVALENT YIELD 1-(Highest Individual Tax Rate) 4.58% 4.58% ------ = ------ = 7.58% 1-39.6% 60.40% SCHEDULES FOR COMPUTATION OF PERFORMANCE QUOTATIONS Fund name: Putnam Florida Tax Exempt Income Fund -- Class M Fiscal period ending: 5/31/96 Inception date (if less than 10 years of performance): 5/1/95 TOTAL RETURN Formula -- Average Annual Total Return: ERV = P(1+T)^n n = Number of Time Periods 1 Year 5 Years 10 Years* P = Initial Investment $1,000 n/a $1,000 ERV = Ending Redeemable Value $994 n/a $1027 T = Cumulative Total Return -0.62% n/a 2.43%* *Life of fund, if less than 10 years YIELD Formula: Interest + Dividends - Expenses 2 (-------------------------------------------------- +1)(6) -1 POP x Average shares Interest and Dividends $4,879 Expenses $9.56 Reimbursement $0 Average shares 108,175 NAV $8.91 Sales Charge 3.25% POP $9.21 Yield at POP 4.77% TAX-EXEMPT EQUIVALENT YIELD Formula: 30 day yield --------------- = TAX EQUIVALENT YIELD 1-(Highest Individual Tax Rate) 4.77% 4.77% ------ = ------ = 7.90% 1-39.6% 60.40% EX-99.B16PERFQUOT 16 MASSACHUSETTS SCHEDULES FOR COMPUTATION OF PERFORMANCE QUOTATIONS Fund name: Putnam Massachusetts Tax Exempt Income Fund -- Class A Fiscal period ending: 5/31/96 Inception date (if less than 10 years of performance): 10/23/89 TOTAL RETURN Formula -- Average Annual Total Return: ERV = P(1+T)^n n = Number of Time Periods 1 Year 5 Years 10 Years* P = Initial Investment $1,000 $1,000 $1,000 ERV = Ending Redeemable Value $998 $1,394 $1,599 T = Average Annual Total Return -0.17% 6.87% 7.36%* *Life of fund, if less than 10 years YIELD Formula: Interest + Dividends - Expenses 2 (-------------------------------------------------- +1)(6) -1 POP x Average shares Interest and Dividends $1,377,442 Expenses $177,511 Reimbursement $0 Average shares 28,599,083 NAV $9.11 Sales Charge 4.75% POP $9.56 Yield at POP 5.32% TAX-EXEMPT EQUIVALENT YIELD Formula: 30 day yield --------------- = TAX EQUIVALENT YIELD 1-(Highest Individual Tax Rate) 5.32% 5.32% ------ = ------ = 10.01% 1-46.85% 53.15% SCHEDULES FOR COMPUTATION OF PERFORMANCE QUOTATIONS Fund name: Putnam Massachusetts Tax Exempt Income Fund -- Class B Fiscal period ending: 5/31/96 Inception date (if less than 10 years of performance): 7/15/93 TOTAL RETURN Formula -- Average Annual Total Return: ERV = P(1+T)^n n = Number of Time Periods 1 Year 5 Years 10 Years* P = Initial Investment $1,000 n/a $1,000 ERV = Ending Redeemable Value $1,041 n/a $1,108 T = Average Annual Total Return 4.12% n/a 3.62%* *Life of fund, if less than 10 years YIELD Formula: Interest + Dividends - Expenses 2 (-------------------------------------------------- +1)(6) -1 POP x Average shares Interest and Dividends $339,873 Expenses $78,360 Reimbursement $0 Average shares 7,062,695 NAV $9.10 Maximum Contingent Deferred Sales Charge 5.0% Yield at NAV 4.93% TAX-EXEMPT EQUIVALENT YIELD Formula: 30 day yield --------------- = TAX EQUIVALENT YIELD 1-(Highest Individual Tax Rate) 4.93% 4.93% ------ = ------ = 9.28% 1-46.85% 53.15% SCHEDULES FOR COMPUTATION OF PERFORMANCE QUOTATIONS Fund name: Putnam Massachusetts Tax Exempt Income Fund -- Class M Fiscal period ending: 5/31/96 Inception date (if less than 10 years of performance): 4/1/95 TOTAL RETURN Formula -- Average Annual Total Return: ERV = P(1+T)^n n = Number of Time Periods 1 Year 5 Years 10 Years* P = Initial Investment $1,000 n/a $1,000 ERV = Ending Redeemable Value $1,008 n/a $1,023 T = Average Annual Total Return 0.79% n/a 2.15%* *Life of fund, if less than 10 years YIELD Formula: Interest + Dividends - Expenses 2 (-------------------------------------------------- +1)(6) -1 POP x Average shares Interest and Dividends $6,613 Expenses $1,161 Reimbursement $ 0 Average shares 137,416 NAV $9.10 Sales Charge 3.25% POP $9.41 Yield at POP 5.12% TAX-EXEMPT EQUIVALENT YIELD Formula: 30 day yield --------------- = TAX EQUIVALENT YIELD 1-(Highest Individual Tax Rate) 5.12% 5.12% ------ = ------ = 9.63% 1-46.85% 53.15% EX-99.B16PERFQUOT 17 MICHIGAN SCHEDULES FOR COMPUTATION OF PERFORMANCE QUOTATIONS Fund name: Putnam Michigan Tax Exempt Income Fund -- Class A Fiscal period ending: 5/31/96 Inception date (if less than 10 years of performance): 10/23/89 TOTAL RETURN Formula -- Average Annual Total Return: ERV = P(1+T)^n n = Number of Time Periods 1 Year 5 Years 10 Years* P = Initial Investment $1,000 $1,000 $1,000 ERV = Ending Redeemable Value $988 $1,343 $1,498 T = Average Annual Total Return -1.18% 6.08% 6.30%* *Life of fund, if less than 10 years YIELD Formula: Interest + Dividends - Expenses 2 (-------------------------------------------------- +1)(6) -1 POP x Average shares Interest and Dividends $706,796 Expenses $102,734 Reimbursement $0 Average shares 15,631,415 NAV $8.85 Sales Charge 4.75% POP $9.29 Yield at POP 5.04% TAX-EXEMPT EQUIVALENT YIELD Formula: 30 day yield --------------- = TAX EQUIVALENT YIELD 1-(Highest Individual Tax Rate) 5.04% 5.04% ------ = ------ = 8.73% 1-42.26% 57.74% SCHEDULES FOR COMPUTATION OF PERFORMANCE QUOTATIONS Fund name: Putnam Michigan Tax Exempt Income Fund -- Class B Fiscal period ending: 5/31/96 Inception date (if less than 10 years of performance): 7/15/93 TOTAL RETURN Formula -- Average Annual Total Return: ERV = P(1+T)^n n = Number of Time Periods 1 Year 5 Years 10 Years* P = Initial Investment $1,000 n/a $1,000 ERV = Ending Redeemable Value $1,030 n/a $1,092 T = Average Annual Total Return 3.05% n/a 3.11%* *Life of fund, if less than 10 years YIELD Formula: Interest + Dividends - Expenses 2 (-------------------------------------------------- +1)(6) -1 POP x Average shares Interest and Dividends $148,004 Expenses $37,071 Reimbursement $0 Average shares 3,277,791 NAV $8.83 Maximum Contingent Deferred Sales Charge 5.0% Yield at NAV 4.64% TAX-EXEMPT EQUIVALENT YIELD Formula: 30 day yield --------------- = TAX EQUIVALENT YIELD 1-(Highest Individual Tax Rate) 4.64% 4.64% ------ = ------ = 8.04% 1-42.26% 57.74% SCHEDULES FOR COMPUTATION OF PERFORMANCE QUOTATIONS Fund name: Putnam Michigan Tax Exempt Income Fund -- Class M Fiscal period ending: 5/31/96 Inception date (if less than 10 years of performance): 4/1/95 TOTAL RETURN Formula -- Average Annual Total Return: ERV = P(1+T)^n n = Number of Time Periods 1 Year 5 Years 10 Years* P = Initial Investment $1,000 n/a $1,000 ERV = Ending Redeemable Value $1,002 n/a $1,031 T = Average Annual Total Return 0.19% n/a 2.72%* *Life of fund, if less than 10 years YIELD Formula: Interest + Dividends - Expenses 2 (-------------------------------------------------- +1)(6) -1 POP x Average shares Interest and Dividends $2,715 Expenses $528 Reimbursement $0 Average shares 60,036 NAV $8.84 Sales Charge 3.25% POP $9.14 Yield at POP 4.83% TAX-EXEMPT EQUIVALENT YIELD Formula: 30 day yield --------------- = TAX EQUIVALENT YIELD 1-(Highest Individual Tax Rate) 4.83% 4.83% ------ = ------ = 8.37% 1-42.26% 57.74% EX-99 18 MINNESOTA SCHEDULES FOR COMPUTATION OF PERFORMANCE QUOTATIONS Fund name: Putnam Minnesota Tax Exempt Income Fund -- Class A Fiscal period ending: 5/31/96 Inception date (if less than 10 years of performance): 10/23/89 TOTAL RETURN Formula -- Average Annual Total Return: ERV = P(1+T)^n n = Number of Time Periods 1 Year 5 Years 10 Years* P = Initial Investment $1,000 $1,000 $1,000 ERV = Ending Redeemable Value $982 $1,305 $1,467 T = Average Annual Total Return -1.72% 5.48% 5.47%* *Life of fund, if less than 10 years YIELD Formula: Interest + Dividends - Expenses 2 (-------------------------------------------------- +1)(6) -1 POP x Average shares Interest and Dividends $468,010 Expenses $65,845 Reimbursement $0 Average shares 11,015,630 NAV $8.76 Sales Charge 4.75% POP $9.20 Yield at POP 4.81% TAX-EXEMPT EQUIVALENT YIELD Formula: 30 day yield --------------- = TAX EQUIVALENT YIELD 1-(Highest Individual Tax Rate) 4.81% 4.81% ------ = ------ = 8.70% 1-44.73% 55.27% SCHEDULES FOR COMPUTATION OF PERFORMANCE QUOTATIONS Fund name: Putnam Minnesota Tax Exempt Income Fund -- Class B Fiscal period ending: 5/31/96 Inception date (if less than 10 years of performance): 7/15/93 TOTAL RETURN Formula -- Average Annual Total Return: ERV = P(1+T)^n n = Number of Time Periods 1 Year 5 Years 10 Years* P = Initial Investment $1,000 n/a $1,000 ERV = Ending Redeemable Value $1,025 n/a $1,095 T = Average Annual Total Return 2.49% n/a 3.20%* *Life of fund, if less than 10 years YIELD Formula: Interest + Dividends - Expenses 2 (-------------------------------------------------- +1)(6) -1 POP x Average shares Interest and Dividends $144,817 Expenses $36,389 Reimbursement $0 Average shares 3,419,848 NAV $8.73 Maximum Contingent Deferred Sales Charge 5.0% Yield at NAV 4.40% TAX-EXEMPT EQUIVALENT YIELD Formula: 30 day yield --------------- = TAX EQUIVALENT YIELD 1-(Highest Individual Tax Rate) 4.40% 4.40% ------ = ------ = 7.96% 1-44.73% 55.27% SCHEDULES FOR COMPUTATION OF PERFORMANCE QUOTATIONS Fund name: Putnam Minnesota Tax Exempt Income Fund -- Class M Fiscal period ending: 5/31/96 Inception date (if less than 10 years of performance): 4/1/95 TOTAL RETURN Formula -- Cumulative Total Return: ERV = P(1+T)^n n = Number of Time Periods 1 Year 5 Years 10 Years* P = Initial Investment $1,000 n/a $1,000 ERV = Ending Redeemable Value $995 n/a $1,024 T = Average Annual Total Return -0.51% n/a 2.07%* *Life of fund, if less than 10 years YIELD Formula: Interest + Dividends - Expenses 2 (-------------------------------------------------- +1)(6) -1 POP x Average shares Interest and Dividends $4,156 Expenses $797 Reimbursement $0 Average shares 97,867 NAV $8.76 Sales Charge 3.25% POP $9.05 Yield at POP 4.59% TAX-EXEMPT EQUIVALENT YIELD Formula: 30 day yield --------------- = TAX EQUIVALENT YIELD 1-(Highest Individual Tax Rate) 4.59% 4.59% ------ = ------ = 8.30% 1-44.73% 55.27% EX-99 19 NEW JERSEY SCHEDULES FOR COMPUTATION OF PERFORMANCE QUOTATIONS Fund name: Putnam New Jersey Tax Exempt Income Fund -- Class A Fiscal period ending: 5/31/96 Inception date (if less than 10 years of performance): 2/20/90 TOTAL RETURN Formula -- Average Annual Total Return: ERV = P(1+T)^n n = Number of Time Periods 1 Year 5 Years 10 Years* P = Initial Investment $1,000 $1,000 $1,000 ERV = Ending Redeemable Value $980 $1,324 $1,486 T = Average Annual Total Return -1.99% 5.77% 6.52%* *Life of fund, if less than 10 years YIELD Formula: Interest + Dividends - Expenses 2 (-------------------------------------------------- +1)(6) -1 POP x Average shares Interest and Dividends $1,177,217 Expenses $174,855 Reimbursement $0 Average shares 26,123,427 NAV $8.76 Sales Charge 4.75% POP $9.20 Yield at POP 5.06% TAX-EXEMPT EQUIVALENT YIELD Formula: 30 day yield --------------- = TAX EQUIVALENT YIELD 1-(Highest Individual Tax Rate) 5.06% 5.06% ------ = ------ = 8.97% 1-43.57% 56.43% SCHEDULES FOR COMPUTATION OF PERFORMANCE QUOTATIONS Fund name: Putnam New Jersey Tax Exempt Income Fund -- Class B Fiscal period ending: 5/31/96 Inception date (if less than 10 years of performance): 1/4/93 TOTAL RETURN Formula -- Average Annual Total Return: ERV = P(1+T)^n n = Number of Time Periods 1 Year 5 Years 10 Years* P = Initial Investment $1,000 n/a $1,000 ERV = Ending Redeemable Value $1,023 n/a $1,160 T = Average Annual Total Return 2.25% n/a 4.44%* *Life of fund, if less than 10 years YIELD Formula: Interest + Dividends - Expenses 2 (-------------------------------------------------- +1)(6) -1 POP x Average shares Interest and Dividends $365,075 Expenses $92,436 Reimbursement $0 Average shares 8,116,842 NAV $8.75 Maximum Contingent Deferred Sales Charge 5.0% Yield at NAV 4.65% TAX-EXEMPT EQUIVALENT YIELD Formula: 30 day yield --------------- = TAX EQUIVALENT YIELD 1-(Highest Individual Tax Rate) 4.65% 4.65% ------ = ------ = 8.24% 1-43.57% 56.43% SCHEDULES FOR COMPUTATION OF PERFORMANCE QUOTATIONS Fund name: Putnam New Jersey Tax Exempt Income Fund -- Class M Fiscal period ending: 5/31/96 Inception date (if less than 10 years of performance): 5/1/95 TOTAL RETURN Formula -- Average Annual Total Return: ERV = P(1+T)^n n = Number of Time Periods 1 Year 5 Years 10 Years* P = Initial Investment $1,000 n/a $1,000 ERV = Ending Redeemable Value $993 n/a $1,025 T = Average Annual Total Return -0.68% n/a 2.33%* *Life of fund, if less than 10 years YIELD Formula: Interest + Dividends - Expenses 2 (-------------------------------------------------- +1)(6) -1 POP x Average shares Interest and Dividends $1,818 Expenses $358 Reimbursement $0 Average shares 40,366 NAV $8.76 Sales Charge 3.25% POP $9.05 Yield at POP 4.84% TAX-EXEMPT EQUIVALENT YIELD Formula: 30 day yield --------------- = TAX EQUIVALENT YIELD 1-(Highest Individual Tax Rate) 4.84% 4.84% ------ = ------ = 8.58% 1-43.57% 56.43% EX-99 20 OHIO SCHEDULES FOR COMPUTATION OF PERFORMANCE QUOTATIONS Fund name: Putnam Ohio Tax Exempt Income Fund -- Class A Fiscal period ending: 5/31/96 Inception date (if less than 10 years of performance): 10/23/89 TOTAL RETURN Formula -- Average Annual Total Return: ERV = P(1+T)^n n = Number of Time Periods 1 Year 5 Years 10 Years* P = Initial Investment $1,000 $1,000 $1,000 ERV = Ending Redeemable Value $984 $1,329 $1,494 T = Average Annual Total Return -1.65% 5.85% 6.26%* *Life of fund, if less than 10 years YIELD Formula: Interest + Dividends - Expenses 2 (-------------------------------------------------- +1)(6) -1 POP x Average shares Interest and Dividends $903,763 Expenses $137,644 Reimbursement $0 Average shares 21,420,371 NAV $8.76 Sales Charge 4.75% POP $9.20 Yield at POP 4.71% TAX-EXEMPT EQUIVALENT YIELD Formula: 30 day yield --------------- = TAX EQUIVALENT YIELD 1-(Highest Individual Tax Rate) 4.71% 4.71% ------ = ------ = 8.43% 1-44.13% 55.87% SCHEDULES FOR COMPUTATION OF PERFORMANCE QUOTATIONS Fund name: Putnam Ohio Tax Exempt Income Fund -- Class B Fiscal period ending: 5/31/96 Inception date (if less than 10 years of performance): 7/15/93 TOTAL RETURN Formula -- Average Annual Total Return: ERV = P(1+T)^n n = Number of Time Periods 1 Year 5 Years 10 Years* P = Initial Investment $1,000 n/a $1,000 ERV = Ending Redeemable Value $1026 n/a $1004 T = Average Annual Total Return 2.63% n/a 3.15%* *Life of fund, if less than 10 years YIELD Formula: Interest + Dividends - Expenses 2 (-------------------------------------------------- +1)(6) -1 POP x Average shares Interest and Dividends $198,208 Expenses $52,318 Reimbursement $ 0 Average shares 4,703,447 NAV $ 8.75 Maximum Contingent Deferred Sales Charge 5.0% Yield at NAV 4.29% TAX-EXEMPT EQUIVALENT YIELD Formula: 30 day yield --------------- = TAX EQUIVALENT YIELD 1-(Highest Individual Tax Rate) % 4.29% ------ = ------ = 7.68% 1-44.13% 55.87% SCHEDULES FOR COMPUTATION OF PERFORMANCE QUOTATIONS Fund name: Putnam Ohio Tax Exempt Income Fund -- Class M Fiscal period ending: 5/31/96 Inception date (if less than 10 years of performance): 4/1/95 TOTAL RETURN Formula -- Average Annual Total Return: ERV = P(1+T)^n n = Number of Time Periods 1 Year 5 Years 10 Years* P = Initial Investment $1,000 n/a $1,000 ERV = Ending Redeemable Value $993 n/a $1025 T = Average Annual Total Return %-0.68 n/a 2.33%* *Life of fund, if less than 10 years YIELD Formula: Interest + Dividends - Expenses 2 (-------------------------------------------------- +1)(6) -1 POP x Average shares Interest and Dividends $2,313 Expenses $472 Reimbursement $ 0 Average shares 54,821 NAV $ 8.76 Sales Charge 3.25% POP $9.05 Yield at POP 4.49% TAX-EXEMPT EQUIVALENT YIELD Formula: 30 day yield --------------- = TAX EQUIVALENT YIELD 1-(Highest Individual Tax Rate) % 4.49% ------ = ------ = 8.04% 1-44.13% 55.87% EX-99 21 PENNSYLVANIA SCHEDULES FOR COMPUTATION OF PERFORMANCE QUOTATIONS Fund name: Putnam Pennsylvania Tax Exempt Income Fund -- Class A Fiscal period ending: 5/31/96 Inception date (if less than 10 years of performance): 7/21/89 TOTAL RETURN Formula -- Average Annual Total Return: ERV = P(1+T)^n n = Number of Time Periods 1 Year 5 Years 10 Years* P = Initial Investment $1000 $1000 $1000 ERV = Ending Redeemable Value $989 $1,380 $1,580 T = Average Annual Total Return -1.09% 6.66% 6.90%* *Life of fund, if less than 10 years YIELD Formula: Interest + Dividends - Expenses 2 (-------------------------------------------------- +1)(6) -1 POP x Average shares Interest and Dividends $932,127 Expenses $136,600 Reimbursement $0 Average shares 20,083,007 NAV $9.08 Sales Charge 4.75% POP $9.53 Yield at POP 5.04% TAX-EXEMPT EQUIVALENT YIELD Formula: 30 day yield --------------- = TAX EQUIVALENT YIELD 1-(Highest Individual Tax Rate) 5.04% 5.04% ------ = ------ = 8.58% 1-41.29% 58.71% SCHEDULES FOR COMPUTATION OF PERFORMANCE QUOTATIONS Fund name: Putnam Pennsylvania Tax Exempt Income Fund -- Class B Fiscal period ending: 5/31/96 Inception date (if less than 10 years of performance): 7/15/95 TOTAL RETURN Formula -- Average Annual Total Return: ERV = P(1+T)^n n = Number of Time Periods 1 Year 5 Years 10 Years* P = Initial Investment $1,000 n/a $1,000 ERV = Ending Redeemable Value $1,031 n/a $1,109 T = Average Annual Total Return 3.14% n/a 3.65%* *Life of fund, if less than 10 years YIELD Formula: Interest + Dividends - Expenses 2 (-------------------------------------------------- +1)(6) -1 POP x Average shares Interest and Dividends $332,129 Expenses $83,631 Reimbursement $0 Average shares 7,164,239 NAV $9.07 Maximum Contingent Deferred Sales Charge 5.0% Yield at NAV 4.63% TAX-EXEMPT EQUIVALENT YIELD Formula: 30 day yield --------------- = TAX EQUIVALENT YIELD 1-(Highest Individual Tax Rate) 4.63% 4.63% ------ = ------ = 7.89% 1-41.29% 58.71% SCHEDULES FOR COMPUTATION OF PERFORMANCE QUOTATIONS Fund name: Putnam Pennsylvania Tax Exempt Income Fund -- Class M Fiscal period ending: 5/31/96 Inception date (if less than 10 years of performance): 7/3/95 TOTAL RETURN Formula -- Cumulative Total Return: ERV = P(1+T)^n n = Number of Time Periods 1 Year 5 Years 10 Years* P = Initial Investment n/a n/a $1,000 ERV = Ending Redeemable Value n/a n/a $1,012 T = Cumulative Total Return n/a n/a 1.24%* *Life of fund, if less than 10 years YIELD Formula: Interest + Dividends - Expenses 2 (-------------------------------------------------- +1)(6) -1 POP x Average shares Interest and Dividends $1,641 Expenses $321 Reimbursement $0 Average shares 35,323 NAV $9.09 Sales Charge 3.25% POP $9.40 Yield at POP 4.82% TAX-EXEMPT EQUIVALENT YIELD Formula: 30 day yield --------------- = TAX EQUIVALENT YIELD 1-(Highest Individual Tax Rate) 4.82% 4.82% ------ = ------ = 8.21% 1-41.29% 58.71% EX-27.CLASSA 22 ARIZONA WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PUTNAM ARIZONA TAX EXEMPT INCOME FUND CLASS A AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. YEAR AUG-31-1994 AUG-31-1994 $158,204,624 $158,861,089 $5,856,589 $459,193 0 $165,176,871 $5,157,295 0 $822,430 $5,979,725 0 $160,898,650 16,171,783 0 0 $(5,215) (2,352,754) 0 $656,465 $159,197,146 $0 $0 $0 $1,613,961 $8,770,368 $(1,813,591) $(9,114,262) $(2,157,485) 0 $(8,146,391) $474,505 0 3,092,943 2,730,191 464,189 10,919,678 0 0 $138,844 $44,413 $952,641 0 $1,613,961 $148,690,436 $9.47 .51 (.61) (.50) (.03) 0 $8.84 .97 0 0
EX-27.CLASSA 23 FLORIDA WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM Putnam Florida Tax Exempt Income Fund Class A AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. YEAR MAY-31-1996 MAY-31-1996 297,004,845 299,615,569 7,634,637 268,242 0 307,518,448 4,339,454 0 1,731,822 6,071,276 0 303,788,167 27,813,398 29,753,721 0 (281,809) 0 (4,746,461) 2,687,275 301,447,172 0 19,090,926 0 2,965,853 16,125,073 4,016,288 (11,218,657) 8,922,704 0 (13,857,960) 0 0 4,006,206 (6,598,927) 652,398 (14,443,887) 0 0 (365,028) (8,645,699) 1,860,534 0 3,257,420 310,043,164 9.12 .48 (.21) (.48) 0 0 8.91 .95 0 0
EX-27.CLASSA 24 MASSACHUSETTS WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM Putnam Massachusetts Tax Exempt Income Fund Class A AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. YEAR MAY-31-1996 MAY-31-1996 312,230,933 321,318,399 6,912,800 309,108 0 328,540,307 0 0 1,778,825 1,778,825 0 325,212,746 28,531,442 27,274,597 93,750 0 0 (7,514,586) 8,969,572 326,761,482 0 20,853,311 0 3,006,945 17,846,366 873,800 (4,662,141) 14,058,025 0 (14,858,958) 0 0 7,159,447 (6,805,725) 903,123 27,953,093 0 0 (98,234) (8,348,121) 1,885,492 0 3,365,159 314,148,880 9.21 .54 (.10) 0 (.54) 0 9.11 .95 0 0
EX-27.CLASSA 25 MICHIGAN WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM Putnam Michigan Tax Exempt Income Fund Class A AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. YEAR MAY-31-1996 MAY-31-1996 155,817,923 157,508,715 10,876,520 821,924 0 169,207,159 0 0 888,066 888,066 0 167,906,911 15,634,139 15,089,622 85,347 0 0 1,363,957 1,690,792 168,319,093 0 10,361,547 0 1,606,238 8,755,309 1,753,438 (4,781,877) 5,726,870 0 (7,598,988) 0 0 1,790,658 (1,767,677) 521,536 11,118,478 96,048 0 0 (3,026,581) 990,338 0 1,817,431 138,753,133 9.01 .49 (.16) (.49) 0 0 8.85 1.00 0 0
EX-27.CLASSA 26 MINNESOTA WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM Putnam Minnesota Tax Exempt Income Fund Class A AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. YEAR MAY-31-1996 MAY-31-1996 120,684,361 122,564,659 7,259,237 2,510,242 0 132,334,138 4,549,375 0 612,553 5,161,928 0 127,796,908 10,968,128 10,999,904 31,118 0 0 (2,536,114) 1,880,298 127,172,210 0 7,538,790 0 1,209,211 6,329,579 816,541 (3,550,267) 3,595,853 0 (5,131,471) 0 0 1,304,550 (1,721,071) 384,745 9,054,836 0 0 (17,447) (3,250,498) 742,566 0 1,419,736 97,869,153 8.95 .47 (.19) 0 (.47) 0 8.76 1.01 0 0
EX-27.CLASSA 27 NEW JERSEY WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM Putnam New Jersey Tax Exempt Income Fund Class A AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. YEAR MAY-31-1996 MAY-31-1996 290,874,911 292,406,717 9,331,213 218,331 0 301,956,261 0 0 1,577,699 1,577,699 0 306,800,267 26,017,112 27,009,966 66,944 0 0 (8,018,892) 1,530,243 300,378,562 0 18,797,121 0 2,937,314 15,859,807 2,169,534 (9,678,068) 8,351,273 0 (12,722,118) 0 0 6,433,107 (8,230,011) 804,050 (781,990) 0 (18,267) 0 (10,120,082) 1,824,907 0 3,340,846 304,082,906 8.98 .48 (.22) 0 (.48) 0 8.76 .96 0 0
EX-27.CLASSA 28 OHIO WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM Putnam Ohio Tax Exempt Income Fund Class A AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. YEAR MAY-31-1996 MAY-31-1996 227,280,582 231,417,493 9,751,875 0 0 241,169,368 11,085,779 0 1,300,324 12,386,103 0 228,027,366 21,305,292 21,585,186 75,656 0 0 (3,525,335) 4,205,578 228,783,265 0 14,378,380 0 2,249,378 12,129,002 938,453 (5,934,894) 7,132,561 0 (10,350,980) 0 0 1,664,704 (2,684,436) 739,838 2,759,698 4,919 0 0 (4,381,157) 1,379,995 0 2,450,207 229,952,544 8.95 .48 (.19) 0 (.48) 0 8.76 .96 0 0
EX-27.CLASSA 29 PENNSYLVANIA WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM Putnam Pennsylvania Tax Exempt Income Fund Class A AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. YEAR MAY-31-1996 MAY-31-1996 251,455,690 254,892,603 5,669,071 14,825 0 260,576,499 10,518,188 0 935,300 11,453,488 0 243,928,156 20,169,134 19,101,804 13,925 0 1,709,647 0 3,471,283 249,123,011 0 15,125,495 0 2,527,768 12,597,727 2,785,836 (7,165,681) 8,217,882 0 (10,000,537) 0 0 4,774,300 (4,579,112) 620,989 26,086,334 90,838 0 0 (848,055) 1,426,014 0 2,638,698 237,725,500 9.24 .51 (.16) 0 (.51) 0 9.08 .98 0 0
EX-27.CLASSB 30 ARIZONA WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM Putnam Arizona Tax Exempt Income Fund Class B AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. YEAR MAY-31-1996 MAY-31-1996 144,227,408 144,974,648 6,749,064 130,602 1,141 151,855,515 0 0 796,389 796,389 0 153,051,894 2,725,682 2,394,416 140,414 0 0 (2,880,422) 747,240 151,059,126 0 9,468,873 0 1,463,924 8,004,949 3,538,697 (6,356,255) 5,187,391 0 (1,049,588) 0 0 806,485 (537,152) 61,931 (7,077,557) 106,796 0 0 (6,342,123) 943,091 0 1,760,204 157,048,115 9.00 .41 (.18) 0 (.41) 0 8.82 1.67 0 0
EX-27.CLASSB 31 FLORIDA WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM Putnam Florida Tax Exempt Income Fund Class B AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. YEAR MAY-31-1996 MAY-31-1996 297,004,845 299,615,569 7,634,637 268,242 0 307,518,448 4,339,454 0 1,731,822 6,071,276 0 303,788,167 5,896,442 4,890,302 0 (281,809) 0 (4,746,461) 2,687,275 301,447,172 0 19,090,926 0 2,965,853 16,125,073 4,016,288 (11,218,657) 8,922,704 0 (2,288,453) 0 0 1,874,095 (963,430) 95,475 (14,443,887) 0 0 (365,028) (8,645,699) 1,860,534 0 3,257,420 310,043,164 9.12 .42 (.21) (.42) 0 0 8.91 1.60 0 0
EX-27.CLASSB 32 MASSACHUSETTS WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM Putnam Massachusetts Tax Exempt Income Fund Class B AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. YEAR MAY-31-1996 MAY-31-1996 312,230,933 321,318,399 6,912,800 309,108 0 328,540,307 0 0 1,778,825 1,778,825 0 325,212,746 7,199,958 5,169,525 93,750 0 0 (7,514,586) 8,969,572 326,761,482 0 20,853,311 0 3,006,945 17,846,366 873,800 (4,662,141) 14,058,025 0 (2,875,759) 0 0 3,039,068 (1,196,103) 187,468 27,953,093 0 0 (98,234) (8,348,121) 1,885,492 0 3,365,159 314,148,880 9.20 .48 (.11) 0 (.47) 0 9.10 1.60 0 0
EX-27.CLASSB 33 MICHIGAN WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM Putnam Michigan Tax Exempt Income Fund Class B AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. YEAR MAY-31-1996 MAY-31-1996 155,817,923 157,508,715 10,876,520 821,924 0 169,207,159 0 0 888,066 888,066 0 167,906,911 3,324,013 2,341,519 85,347 0 0 1,363,957 1,690,792 168,319,093 0 10,361,547 0 1,606,238 8,755,309 1,753,438 (4,781,877) 5,726,870 0 (1,242,161) 0 0 1,169,338 (277,570) 90,726 11,118,478 96,048 0 0 (3,026,581) 990,338 0 1,817,431 25,819,388 9.00 .43 (.16) (.43) 0 0 8.84 1.65 0 0
EX-27.CLASSB 34 MINNESOTA WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM Putnam Minnesota Tax Exempt Income Fund Class B AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. YEAR MAY-31-1996 MAY-31-1996 120,684,361 122,564,659 7,259,237 2,510,242 0 132,334,138 4,549,375 0 612,553 5,161,928 0 127,796,908 3,451,771 2,208,418 31,118 0 0 (2,536,114) 1,880,298 127,172,210 0 7,538,790 0 1,209,211 6,329,579 816,541 (3,550,267) 3,595,853 0 (1,159,900) 0 0 1,432,703 (273,301) 83,951 9,054,836 0 0 (17,447) (3,250,498) 742,566 0 1,419,736 25,374,422 8.92 .41 (.19) 0 (.41) 0 8.73 1.67 0 0
EX-27.CLASSB 35 NEW JERSEY WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM Putnam New Jersey Tax Exempt Income Fund Class B AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. YEAR MAY-31-1996 MAY-31-1996 290,874,911 292,406,717 9,331,213 218,331 0 301,956,261 0 0 1,577,699 1,577,699 0 306,800,267 8,235,420 6,530,449 66,944 0 0 (8,018,892) 1,530,243 300,378,562 0 18,797,121 0 2,937,314 15,859,807 2,169,534 (9,678,068) 8,351,273 0 (3,109,723) 0 0 2,466,981 (971,165) 209,155 (781,990) 0 (18,267) 0 (10,120,082) 1,824,907 0 3,340,846 304,082,906 8.97 .42 (.22) 0 (.48) 0 8.75 1.61 0 0 ??
EX-27.CLASSB 36 OHIO WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM Putnam Ohio Tax Exempt Income Fund Class B AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. YEAR MAY-31-1996 MAY-31-1996 227,280,582 231,417,493 9,751,875 0 0 241,169,368 11,085,779 0 1,300,324 12,386,103 0 228,027,366 4,761,991 3,674,021 75,656 0 0 (3,525,335) 4,205,578 228,783,265 0 14,378,380 0 2,249,378 12,129,002 938,453 (5,934,894) 7,132,561 0 (1,781,308) 0 0 1,827,306 (855,573) 116,237 2,759,698 4,919 0 0 (4,381,157) 1,379,995 0 2,450,207 229,952,544 8.94 .42 (.19) 0 (.42) 0 8.75 1.61 0 0
EX-27.CLASSB 37 PENNSYLVANIA WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM Putnam Pennsylvania Tax Exempt Income Fund Class B AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. YEAR MAY-31-1996 MAY-31-1996 251,455,690 254,892,603 5,669,071 14,825 0 260,576,499 10,518,188 0 935,300 11,453,488 0 243,928,156 7,242,332 4,086,943 13,925 0 1,709,647 0 3,471,283 249,123,011 0 15,125,495 0 2,527,768 12,597,727 2,785,836 (7,165,681) 8,217,882 0 (2,682,096) 0 0 2,812,059 (534,787) 169,396 26,086,334 90,838 0 0 (848,055) 1,426,014 0 2,638,698 237,725,500 9.23 .44 (.15) 0 (.45) 0 9.07 1.62 0 0
EX-27.CLASSM 38 ARIZONA WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM Putnam Arizona Tax Exempt Income Fund Class M AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. YEAR MAY-31-1996 MAY-31-1996 144,227,408 144,974,648 6,749,064 130,602 1,141 151,855,515 0 0 796,389 796,389 0 153,051,894 33,145 0 140,414 0 0 (2,880,422) 747,240 151,059,126 0 9,468,873 0 1,463,924 8,004,949 3,538,697 (6,356,255) 5,187,391 0 (3,649) 0 0 32,771 0 374 (7,077,557) 106,796 0 0 (6,342,123) 943,091 0 1,760,204 157,048,115 8.86 .41 (.02) 0 (.40) 0 8.85 1.09 0 0
EX-27.CLASSM 39 FLORIDA WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM Putnam Florida Tax Exempt Income Fund Class M AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. YEAR MAY-31-1996 MAY-31-1996 297,004,845 299,615,569 7,634,637 268,242 0 307,518,448 4,339,454 0 1,731,822 6,071,276 0 303,788,167 110,717 113 0 (281,809) 0 (4,746,461) 2,687,275 301,447,172 0 19,090,926 0 2,965,853 16,125,073 4,016,288 (11,218,657) 8,922,704 0 (21,671) 0 0 116,164 (7,123) 1,563 (14,443,887) 0 0 (365,028) (8,645,699) 1,860,534 0 3,257,420 310,043,164 9.12 .46 (.21) (.46) 0 0 8.91 1.23 0 0
EX-27.CLASSM 40 MASSACHUSETTS WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM Putnam Massachusetts Tax Exempt Income Fund Class M AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. YEAR MAY-31-1996 MAY-31-1996 312,230,933 321,318,399 6,912,800 309,108 0 328,540,307 0 0 1,778,825 1,778,825 0 325,212,746 141,683 2,345 93,750 0 0 (7,514,586) 8,969,572 326,761,482 0 20,853,311 0 3,006,945 17,846,366 873,800 (4,662,141) 14,058,025 0 (32,748) 0 0 145,572 (8,040) 1,806 27,953,093 0 0 (98,234) (8,348,121) 1,885,492 0 3,365,159 314,148,880 9.21 .51 (.11) 0 (.51) 0 9.10 1.24 0 0
EX-27.CLASSM 41 MICHIGAN WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM Putnam Michigan Tax Exempt Income Fund Class M AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. YEAR MAY-31-1996 MAY-31-1996 155,817,923 157,508,715 10,876,520 821,924 0 169,207,159 0 0 888,066 888,066 0 167,906,911 63,100 13,253 85,347 0 0 1,363,957 1,690,792 168,319,093 0 10,361,547 0 1,606,238 8,755,309 1,753,438 (4,781,877) 5,726,870 0 (15,675) 0 0 51,346 (2,683) 1,184 11,118,478 96,048 0 0 (3,026,581) 990,338 0 1,817,431 310,325 9.00 .47 (.16) (.46) 0 0 8.85 3.53 0 0
EX-27.CLASSB 42 MINNESOTA WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM Putnam Minnesota Tax Exempt Income Fund Class M AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. YEAR MAY-31-1996 MAY-31-1996 120,684,361 122,564,659 7,259,237 2,510,242 0 132,334,138 4,549,375 0 612,553 5,161,928 0 127,796,908 104,207 115 31,118 0 0 (2,536,114) 1,880,298 127,172,210 0 7,538,790 0 1,209,211 6,329,579 816,541 (3,550,267) 3,595,853 0 (22,640) 0 0 107,706 (5,935) 2,321 9,054,836 0 0 (17,447) (3,250,498) 742,566 0 1,419,736 474,697 8.95 .43 (.18) 0 (.44) 0 8.76 1.32 0 0
EX-27.CLASSM 43 NEW JERSEY WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM Putnam New Jersey Tax Exempt Income Fund Class M AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. YEAR MAY-31-1996 MAY-31-1996 290,874,911 292,406,717 9,331,213 218,331 0 301,956,261 0 0 1,577,699 1,577,699 0 306,800,267 40,549 115 66,944 0 0 (8,018,892) 1,530,243 300,378,562 0 18,797,121 0 2,937,314 15,859,807 2,169,534 (9,678,068) 8,351,273 0 (11,099) 0 0 40,656 (1,122) 900 (781,990) 0 (18,267) 0 (10,120,082) 1,824,907 0 3,340,846 304,082,906 8.98 .45 (.21) 0 (.46) 0 8.76 1.24 0 0
EX-27.CLASSM 44 OHIO WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM Putnam Ohio Tax Exempt Income Fund Class M AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. YEAR MAY-31-1996 MAY-31-1996 227,280,582 231,417,493 9,751,875 0 0 241,169,368 11,085,779 0 1,300,324 12,386,103 0 228,027,366 56,528 115 75,656 0 0 (3,525,335) 4,205,578 228,783,265 0 14,378,380 0 2,249,378 12,129,002 938,453 (5,934,894) 7,132,561 0 (8,960) 0 0 56,781 (1,135) 767 2,759,698 4,919 0 0 (4,381,157) 1,379,995 0 2,450,207 229,952,544 8.95 .45 (.18) 0 (.46) 0 8.76 1.27 0 0
EX-27.CLASSM 45 PENNSYLVANIA WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM Putnam Pennsylvania Tax Exempt Income Fund Class M AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. YEAR MAY-31-1996 MAY-31-1996 251,455,690 254,892,603 5,669,071 14,825 0 260,576,499 10,518,188 0 935,300 11,453,488 0 243,928,156 37,089 0 13,925 0 1,709,647 0 3,471,283 249,123,011 0 15,125,495 0 2,527,768 12,597,727 2,785,836 (7,165,681) 8,217,882 0 (5,299) 0 0 41,822 (5,210) 477 26,086,334 90,838 0 0 (848,055) 1,426,014 0 2,638,698 237,725,500 9.10 .44 (.01) 0 (.44) 0 9.09 1.13 0 0
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