AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON
FEBRUARY 2, 1994
REGISTRATION NO. 2-57165
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
PUTNAM TAX EXEMPT INCOME FUND
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
ONE POST OFFICE SQUARE, BOSTON, MASSACHUSETTS 02109
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
617-292-1000
(AREA CODE AND TELEPHONE NUMBER)
JOHN R. VERANI, VICE PRESIDENT
PUTNAM 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
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: AS SOON AS
PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON
SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE
DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH
SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL
THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
<PAGE>
AN INDEFINITE AMOUNT OF THE REGISTRANT'S SECURITIES HAS BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 PURSUANT TO RULE 24F-
2 UNDER THE INVESTMENT COMPANY ACT OF 1940. IN RELIANCE UPON
SUCH RULE, NO FILING FEE IS BEING PAID AT THIS TIME. A RULE 24F-
2 NOTICE FOR THE REGISTRANT FOR THE YEAR ENDED SEPTEMBER 30, 1993
WAS FILED ON NOVEMBER 30, 1993.
<PAGE>
CROSS-REFERENCE SHEET
FORM N-14 ITEM CAPTION IN PROSPECTUS/PROXY STATEMENT
(PART A)
1 CROSS-REFERENCE SHEET;
FRONT COVER
2 FRONT COVER
3 SYNOPSIS; RISK FACTORS
4 INTRODUCTION; PROPOSAL REGARDING APPROVAL OR
DISAPPROVAL OF AGREEMENT AND PLAN OF
REORGANIZATION; BACKGROUND AND REASONS FOR
THE PROPOSED REORGANIZATION; INFORMATION
ABOUT THE REORGANIZATION
5, 6 FRONT COVER -- INCORPORATED BY REFERENCE TO
SPECIFIED DOCUMENTS
7 INTRODUCTION; PROPOSAL REGARDING APPROVAL OR
DISAPPROVAL OF AGREEMENT AND PLAN OF
REORGANIZATION; INFORMATION ABOUT THE
REORGANIZATION; VOTING INFORMATION
8, 9 NOT APPLICABLE
FORM N-14 ITEM CAPTION IN STATEMENT OF ADDITIONAL
INFORMATION (PART B)
10, 11 COVER PAGE
12 NOT APPLICABLE
13 COVER PAGE -- INCORPORATED BY REFERENCE TO
SPECIFIED DOCUMENTS
14 INDEPENDENT ACCOUNTANTS AND
FINANCIAL STATEMENTS
PART C
THE INFORMATION REQUIRED TO BE INCLUDED IN PART C IS SET FORTH
UNDER THE APPROPRIATE ITEM, SO NUMBERED, IN PART C TO THIS
REGISTRATION STATEMENT.
<PAGE>
PUTNAM TEXAS TAX EXEMPT INCOME FUND
One Post Office Square
Boston, Massachusetts 02109
, 1994
To the Shareholders:
Enclosed you will find several documents being furnished to
you in connection with a meeting of Putnam Texas Tax Exempt
Income Fund (the "Texas Fund") shareholders to be held May 5,
1994 at 1:00 p.m. in Boston, Massachusetts. I hope this material
will receive your immediate attention and that, if you cannot
attend the meeting in person, you will vote your proxy promptly.
The Trustees of the Texas Fund are recommending that
shareholders approve a reorganization of the Texas Fund in which
the Texas Fund will transfer all of its assets to Putnam Tax
Exempt Income Fund (the "Income Fund") in return for Class A
shares of the Income Fund and the assumption by the Income Fund
of all of the liabilities of the Texas Fund. After the transfer,
the Class A shares of the Income Fund will be distributed to
holders of the Texas Fund shares, thereby liquidating the Texas
Fund. As a result of these transactions, your shares of the
Texas Fund would, in effect, be exchanged at net asset value and
on a tax-free basis for Class A shares of the Income Fund. Both
Funds are managed by Putnam Investment Management, Inc. ("Putnam
Management") and have the same Trustees.
Both Funds seek as high level of current income exempt from
federal income tax as is consistent with preservation of capital
and follow virtually identical investment policies. The
principal difference between the Funds is that the Texas Fund
normally concentrates its investments in tax exempt securities of
Texas issuers while the Income Fund normally invests in Tax
Exempt securities of issuers located in several different states.
Because of the similarities between the Funds, the proposed
reorganization will not affect the strategy or style in which the
portfolio manager will manage your investment.
Putnam Management, the investment adviser for both Funds,
believes that combining the Texas Fund with the Income Fund
offers shareholders of the Texas Fund an opportunity to pursue a
similar investment objective with greater economies of scale that
will result in a lower operating expense ratio. Putnam Management
also believes that the expected lower expense ratio and
additional portfolio management flexibility offered by a much
larger fund will likely result in improved investment performance
for Texas Fund shareholders acquiring Income Fund shares in the
reorganization.
YOUR TRUSTEES BELIEVE THAT THE PROPOSED COMBINATION WITH THE
INCOME FUND IS IN THE BEST INTERESTS OF SHAREHOLDERS AND
RECOMMEND THAT YOU VOTE IN FAVOR OF IT.
The Notice of Meeting of Shareholders and the accompanying
Prospectus/Proxy Statement and form of proxy are enclosed.
Please read them carefully. If you are unable to attend the
meeting in person, we urge you to sign, date, and return the
proxy card so that your shares may be voted in accordance with
your instructions.
SINCE THE MEETING IS LESS THAN THIRTEEN WEEKS AWAY, I URGE
YOU TO GIVE THE ENCLOSED MATERIAL YOUR PROMPT ATTENTION SO THAT
YOUR FUND WILL NOT HAVE TO INCUR THE EXPENSE OF ADDITIONAL
MAILINGS.
Sincerely yours,
George Putnam, Chairman
<PAGE>
PUTNAM TEXAS TAX EXEMPT INCOME FUND
NOTICE OF MEETING OF SHAREHOLDERS
TO THE SHAREHOLDERS OF PUTNAM TEXAS TAX EXEMPT INCOME FUND
NOTICE IS HEREBY GIVEN that a Meeting of Shareholders of
Putnam Texas Tax Exempt Income Fund (the "Fund" or the "Texas
Fund") will be held at One Post Office Square, 8th Floor, Boston,
Massachusetts, on May 5, 1994, at 1:00 p.m., Boston time, for the
following purposes:
1. To consider and act upon an Agreement and Plan of
Reorganization providing for the transfer of all of the
assets of the Fund to Putnam Tax Exempt Income Fund
(the "Income Fund") in exchange for shares of the
Income Fund and the assumption by the Income Fund of
all of the liabilities of the Fund, and the
distribution of such shares to the shareholders of the
Fund in liquidation of the Fund; and
2. To transact such other business as may properly come
before the Meeting or any adjournment or adjournments
thereof.
The Trustees have fixed the close of business on February
11, 1994 as the record date for determination of shareholders
entitled to notice of, and to vote at, the Meeting.
Each shareholder who does not expect to attend in person is
requested to date, fill in, sign, and return promptly the
enclosed form of proxy.
By the Trustees
George Putnam, Chairman Lawrence J. Lasser
William F. Pounds, Vice Chairman Robert E. Patterson
Jameson Adkins Baxter Donald S. Perkins
Hans H. Estin George Putnam, III
John A. Hill A.J.C. Smith
Elizabeth T. Kennan W. Nicholas Thorndike
Boston, Massachusetts
, 1994
Your prompt attention to the enclosed form of proxy will
help to avoid the expense of additional mailings.
PROSPECTUS/PROXY STATEMENT
, 1994
Acquisition of the assets of
PUTNAM TEXAS TAX EXEMPT INCOME FUND
One Post Office Square
Boston, Massachusetts 02109
(617) 292-1000
BY AND IN EXCHANGE FOR SHARES OF
PUTNAM TAX EXEMPT INCOME FUND
One Post Office Square
Boston, Massachusetts 02109
(617) 292-1000
TABLE OF CONTENTS
SYNOPSIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
PROPOSAL REGARDING APPROVAL OR DISAPPROVAL OF
AGREEMENT AND PLAN OF REORGANIZATION. . . . . . . . . . . . . . 14
BACKGROUND AND REASONS FOR THE PROPOSED REORGANIZATION . . . . . . . 16
INFORMATION ABOUT THE REORGANIZATION . . . . . . . . . . . . . . . . 18
VOTING INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . 25
AGREEMENT AND PLAN OF REORGANIZATION . . . . . . . . . . . . Exhibit A
This Prospectus/Proxy Statement relates to the proposed
transfer of all of the assets of Putnam Texas Tax Exempt Income
Fund (the "Texas Fund") to Putnam Tax Exempt Income Fund (the
"Income Fund") in exchange for Class A shares of beneficial
interest of the Income Fund (the "Income Fund Shares") and the
assumption by the Income Fund of all of the liabilities of the
Texas Fund. (The Income Fund and the Texas Fund are collectively
referred to herein as the "Funds", and each is referred to
individually as a "Fund"). Following the transfer, the Income
Fund Shares received by the Texas Fund will be distributed to
shareholders of the Texas Fund in liquidation of the Texas Fund.
As a result of the proposed transaction, each shareholder of the
Texas Fund will receive, on a tax-free basis, a number of full
and fractional Income Fund Shares equal in value at the date of
the exchange to the aggregate value of the shares of the Texas
Fund held by the shareholder.
This Prospectus/Proxy Statement explains concisely what you
should know before investing in the Income Fund. Please read it
and keep it for future reference. This Prospectus/ Proxy
Statement is accompanied by the Prospectus, dated February ,
1994, of the Income Fund, which contains information about the
Income Fund and is incorporated into this Prospectus/Proxy
Statement by reference. The current Statement of Additional
Information of the Income Fund, dated February , 1994, has been
filed with the Securities and Exchange Commission and is
incorporated into this Prospectus/Proxy Statement by reference.
The Report of Independent Accountants and financial statements
included in the Income Fund's Annual Report to Shareholders for
the 1993 fiscal year are also incorporated by reference into this
Prospectus/Proxy Statement. The current Prospectus dated June 1,
1993, and Supplement dated July 12, 1993, and Statement of
Additional Information, dated June 1, 1993, as revised July 12,
1993, of the Texas Fund, have been filed with the Securities and
Exchange Commission and are incorporated into this
Prospectus/Proxy Statement by reference. The Report of
Independent Accountants and financial statements included in the
Texas Fund's Annual Report to Shareholders for the 1993 fiscal
year, and the Report of Independent Accountants and financial
statements included in the Texas Fund's Semi-annual Report for
the sixth-month period ended July 31, 1993, are incorporated by
reference in this Prospectus/Proxy Statement. In addition, a
Statement of Additional Information dated February , 1994
relating to the transactions described in this Prospectus/Proxy
Statement has been filed with the Securities and Exchange
Commission and is also incorporated into this Prospectus/Proxy
Statement by reference. For a free copy of any or all of these
Prospectuses or Statements of Additional Information or Annual
Reports, call Putnam Investor Services at 1-800-225-1581.
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 INCOME FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY ANY FINANCIAL INSTITUTION AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY.
SYNOPSIS
PROPOSED TRANSACTION. The Trustees of the Texas Fund have
approved an Agreement and Plan of Reorganization providing for
the transfer of all of the assets of the Texas Fund to the Income
Fund in exchange for the assumption by the Income Fund of all of
the liabilities of the Texas Fund and for a number of Class A
Shares of the Income Fund equal in value to the value of the net
assets of the Texas Fund transferred to the Income Fund.
Following the transfer, the Texas Fund will distribute the Income
Fund Shares received by it to its shareholders of record, in
complete liquidation of the Texas Fund. No gain or loss will be
recognized for federal income tax purposes by the Texas Fund or
its shareholders as a result of the reorganization.
For the reasons set forth below under "Background and Reasons
for the Proposed Reorganization," the Funds' Trustees, including
the Trustees who are not interested persons of either Fund (the
"Independent Trustees"), have concluded that the reorganization
would be in the best interests of the Funds' shareholders and
recommend approval of the reorganization. The Funds' Trustees
have also determined that the interests of the Funds' existing
shareholders will not be diluted as a result of the transactions
contemplated by the reorganization. The Income Fund and the
Texas Fund have the same Trustees.
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS. The Texas
Fund and the Income Fund are both federally tax-exempt income
funds with the same investment objectives and similar investment
policies. Each Fund follows the fundamental policy of investing
at least 80% of its net assets in longer-term Tax Exempt
Securities (as defined below), except when investing during times
of adverse market conditions. "Tax Exempt Securities" are debt
obligations issued by a state (including the District of
Columbia), a territory or a United States possession, or any of
their political subdivisions, the interest from which is, in the
opinion of bond counsel, exempt from federal tax. Both funds may
not invest more than 25% of their assets in non-investment grade
bonds, although the Texas Fund may invest in bonds rated B or
higher, while the Income Fund may only invest in bonds rated BB
or higher. Currently, less than 2% of the total assets of the
Texas Fund are invested in B-rated bonds that would need to be
disposed of in anticipation of the merger. As of September 30,
1993, the quality composition of the Tax-Exempt Securities in
each Fund's portfolio was as follows:
TEXAS FUND INCOME FUND
AAA 25.3% 36.0%
AA 8.3% 23.6%
A 13.4% 16.8%
BBB 40.2% 20.0%
BB 11.8% 3.6%
B 1.0% --
The higher over-all quality, and consequent lower risk profile,
of the Income Fund may benefit the shareholders of the Texas
Fund.
The principal difference in the Funds' investment policies is
that the Texas Fund normally invests at least 65% of its assets
in Tax Exempt Securities of Texas issuers, while the Income Fund
is not subject to such a requirement and normally invests in Tax
Exempt Securities of issuers located in several states. Another
significant difference is that the Texas Fund is classified as a
"non-diversified" fund under the Investment Company Act of 1940
(the "1940 Act"), permitting it to invest a higher percentage of
its assets in the securities of a single issuer than the Income
Fund which is classified as a "diversified" Fund.
Despite these differences, the securities currently held by the
Income Fund are substantially similar, but for their broader
geographic diversification, to those securities currently held by
the Texas Fund. Consequently, the proposed reorganization is not
expected to result in a significant amount of portfolio turnover
as a result of the Income Fund's disposal of investments.
Because both Funds have identical investment objectives, very
similar investment policies and currently invest in certain of
the same issues, the reorganization will not affect the strategy
or style in which a shareholder's investment will be managed.
MANAGEMENT FEES AND OTHER EXPENSES. Both Funds pay a quarterly
fee to Putnam Management based on their respective average net
assets, as determined at the close of business each day during
the quarter, at an annual rate of .60% of the first $500 million
of average net assets, .50% of the next $500 million, .45% of the
next $500 million and .40% of any amount over $1.5 billion. This
would result in an effective fee rate of .47% based on the
average net assets for Class A shares of the Income Fund of $2.29
billion for the calendar year ended December 31, 1993. Pursuant
to an expense limitation currently in effect through April 30,
1994 Putnam Management has agreed to reduce its compensation and,
where necessary, absorb other expenses of the Texas Fund, to the
extent that total operating expenses of the Fund (exclusive of
brokerage, interest, taxes, deferred organizational and
extraordinary expense and payments under the Fund's Distribution
Plan) exceed an annual rate of .90% of the Fund's average net
assets. The Texas Fund currently pays management fees at the
rate of .46% (reflecting the expense limitation). In the absence
of the expense limitation, the Texas fund would pay fees at the
rate of .60% based upon average net assets of $15.38 million for
the calendar year ended December 31, 1993.
The Funds have adopted identical Distribution Plans pursuant to
Rule 12b-1 under the Investment Company Act of 1940 to permit the
Funds to compensate Putnam Mutual Funds Corp. ("Putnam Mutual
Funds") for services provided and expenses incurred by it in
promoting the sale of Class A shares of the Income Fund and
shares of the Texas Fund, reducing redemptions, or maintaining or
improving services provided to shareholders by Putnam Mutual
Funds or dealers. See "Distribution Plans" in the enclosed
Income Fund Prospectus for a detailed description of the Plan.
The Income Fund incurred total fund operating expenses for its
fiscal year ended September 30, 1993 of .78%. For the fiscal
year ended January 31, 1994, Putnam Management projects that the
Texas Fund will incur total fund operating expenses of 1.06%,
reflecting the expense limitation described above and
distribution plan payments less than the maximum permitted by the
plan. In the absence of the expense limitation and with full
payment of distribution plan payments, such projected expenses
would be 1.22%.
Putnam Management has advised the Trustees that it expects,
based on the projected relative sizes of the two Funds, that the
management fees paid by the Income Fund after the proposed
reorganization would likely be paid at the effective rate of
.47%. Putnam Management believes the Income Fund's total
expenses following the reorganization would amount to
approximately .77% of the Fund's net assets as compared to the
Texas Fund's current expense level of 1.06% of net assets (after
expense limitation). The above expense projections are based
upon average net assets of approximately $2.29 billion for Class
A shares of the Income Fund and $15.38 million for the Texas Fund
for the calendar year ended December 31, 1993.
OPERATING PROCEDURES. The procedures for purchasing and
redeeming shares of the Texas Fund and Class A shares of the
Income Fund, and for exchanging such shares of each Fund for
shares of other Putnam funds, are identical and are described in
detail in the enclosed Income Fund Prospectus.
PERFORMANCE. The tax-equivalent yield for the thirty-day
period ended December 31, 1993 was 8.43% for Class A shares of
the Income Fund and 8.29% (8.06% in the absence of the expense
limitation discussed above) for the Texas Fund. The actual yield
for this same period was 5.09% for Class A shares of the Income
Fund and 5.01% (4.87% in the absence of the expense limitation)
for the Texas Fund. The total return for the twelve-month period
ended December 31, 1993 was 7.99% for Class A shares of the
Income Fund and 7.1% (which would have been lower in the absence
of the expense limitation) for the Texas Fund. See "How
performance is shown" in the enclosed Tax Exempt Fund Prospectus
for a description of tax-equivalent yield, yield and total
return.
<PAGE>
RISK FACTORS
Because the Income Fund and the Texas Fund share similar
investment objectives and policies, the risks of an investment in
the Income Fund are similar to the risks of an investment in the
Texas Fund, except with respect to concentration and
diversification as noted below.
CERTAIN RISKS ASSOCIATED WITH INVESTMENTS IN TAX EXEMPT
SECURITIES. The market value of the Funds' investments will
change in response to changes in interest rates and other
factors. During periods of falling interest rates, the values of
long-term fixed-income securities generally rise. Conversely,
during periods of rising interest rates, the values of such
securities generally decline. Changes by recognized rating
services in their ratings of Tax Exempt Securities and in the
ability of an issuer to make payments of interest and principal
will also affect the value of these investments. Changes in the
value of portfolio securities will not affect interest income
dividend from those securities but will affect the net asset
value of the Funds.
LOWER-RATED SECURITIES. The Funds may invest in both higher-
rated and lower-rated Tax Exempt Securities. The values of
lower-rated securities generally fluctuate more than those of
higher-rated securities. In addition, the lower rating reflects
a greater possibility that the financial condition of the issuer,
or adverse changes in general economic conditions, or both, may
impair the ability of the issuer to make payments of income and
principal. The Income Fund will not purchase a Tax Exempt
Security rated Ba by Moody's and BB by Standard & Poor's at the
time of purchase, or, if unrated, determined by Putnam Management
to be of comparable quality if, as a result, more than 25% of the
Fund's total assets would be of that quality. The Texas Fund
will not purchase a Tax Exempt Security rated both Ba or B by
Moody's and BB or B by Standard & Poor's at the time of purchase,
or, if unrated, determined by Putnam Management to be of
comparable quality if, as a result, more than 25% of the Fund's
total assets would be of that quality. The rating services'
descriptions of the six highest grades of debt securities are
included in the Fund's Statement of Additional Information. Tax
Exempt Securities rated Ba or BB or lower, commonly known as
"junk bonds", are considered to have speculative elements, with
large uncertainties or major risk exposures to adverse
conditions.
OPTIONS AND FUTURES TRANSACTIONS AND OTHER INVESTMENT
PRACTICES. The ability of both Funds to engage in options and
futures transactions involves certain risks, including the risks
that the Fund will be unable at times to close out such
positions, that such transactions may not accomplish their
purpose because of imperfect market correlations, or that Putnam
Management may not forecast market movements correctly.
Finally, to the extent that a Fund exercises its ability to
engage in certain investment practices, such as repurchase
agreements and securities lending, it may be delayed in
recovering or unable to recover its collateral in the event of
default by the other party. In purchasing securities for future
delivery, a Fund runs the risk of a decline in the value of such
securities prior to the settlement date.
CONCENTRATION OF INVESTMENTS IN SECURITIES OF TEXAS ISSUERS.
Since the Texas Fund's portfolio investments generally emphasize
Tax Exempt Securities of Texas issuers, the value of its shares
may be especially affected by factors pertaining to the Texas
economy and other factors specifically affecting the ability of
Texas issuers of such securities to meet their obligations. The
Income Fund, on the other hand, may take full advantage of the
entire geographic range of Tax Exempt Securities.
NON-DIVERSIFIED INVESTMENT COMPANY. Because the Texas Fund is
a "non-diversified" investment company, it is more likely to
invest a higher percentage of its assets in the securities of a
single issuer or of a limited number of issuers than the Income
Fund, which is a "diversified" investment company investing in a
broader range of securities. This practice involves an increased
risk of loss to the Texas Fund if the issuers were to be unable
to make interest or principal payments or if the market values of
such securities were to decline.<PAGE>
INTRODUCTION
This Prospectus/Proxy Statement is furnished in connection with
the proposed reorganization of Putnam Texas Tax Exempt Income
Fund (the "Texas Fund") by the transfer of all of its assets and
liabilities to Putnam Tax Exempt Income Fund (the "Income Fund")
and the solicitation of proxies by and on behalf of the Trustees
of the Texas Fund for use at the Meeting of Shareholders (the
"Meeting"). The Meeting is to be held on May 5, 1994 at 1:00
p.m. at One Post Office Square, 8th Floor, Boston, Massachusetts.
This Prospectus/Proxy Statement and the enclosed form of proxy
are being mailed to shareholders on or about , 1994.
Any shareholder giving a proxy has the power to revoke it by
mail (addressed to the Texas Fund's Clerk at the principal office
of the Texas Fund, One Post Office Square, Boston, Massachusetts
02109) or in person at the meeting, by executing a superseding
proxy, or by submitting a notice of revocation to the Texas Fund.
All properly executed proxies received in time for the Meeting
will be voted as specified in the proxy, or, if no specification
is made, FOR the proposal (set forth in item (1) of the Notice of
Meeting) to implement the reorganization of the Texas Fund by the
transfer of all of its assets to the Income Fund in exchange for
the Class A Shares of the Income Fund (the "Income Fund Shares")
and the assumption by the Income Fund of all of the liabilities
of the Texas Fund.
At February 11, 1994 there were outstanding shares of
beneficial interest of the Texas Fund. Only shareholders of
record on February 11, 1994 will be entitled to notice of and to
vote at the Meeting. Each share is entitled to one vote, with
fractional shares voting proportionally.
The Texas Fund's Trustees know of no matters other than those
set forth herein to be brought before the Meeting. If, however,
any other matters properly come before the Meeting, it is the
Trustees' intention that proxies will be voted on such matters in
accordance with the judgment of the persons named in the enclosed
form of proxy.
PROPOSAL REGARDING APPROVAL OR DISAPPROVAL OF
AGREEMENT AND PLAN OF REORGANIZATION
The shareholders of the Texas Fund are being asked to approve
or disapprove the Agreement and Plan of Reorganization by and
between the Income Fund and the Texas Fund, dated as of February
, 1994 (the "Agreement"), a copy of which is attached to this
Prospectus/Proxy Statement as Exhibit A. The Agreement provides,
among other things, for the transfer of all of the assets of the
Texas Fund to the Income Fund in exchange for the assumption by
the Income Fund of all of the liabilities of the Texas Fund and
for a number of Income Fund Shares, calculated based on the value
of the net assets of the Texas Fund acquired by the Income Fund
and the net asset value per Income Fund Share, all as more fully
described below under "Information about the Reorganization".
After receipt of the Income Fund Shares, the Texas Fund will
cause the Income Fund Shares to be distributed to its
shareholders in complete liquidation of the Texas Fund, and the
legal existence of the Texas Fund as a separate business trust
under Massachusetts law will be terminated. In addition, the
Texas Fund will file an application for deregistration under
Section 8(f) of the Investment Company Act of 1940.
Prior to the date of the transfer (the "Exchange Date"), the
Texas Fund will declare a distribution to shareholders which,
together with all previous distributions, will have the effect of
distributing to shareholders all of its investment company
taxable income (computed without regard to the deduction for
dividends paid) and net realized capital gains, if any, through
the Exchange Date.
The Trustees of the Texas Fund have voted unanimously to
approve the proposed transaction and to recommend that
shareholders also approve the transaction. The affirmative vote
of two-thirds (66 2/3%) of the outstanding shares of beneficial
interest of the Texas Fund that are entitled to be voted at the
Meeting is necessary for the consummation of the proposed
transactions. The Income Fund and the Texas Fund have the same
Trustees.
A shareholder of the Texas Fund objecting to the proposed
transaction is not entitled under either Massachusetts law or the
Agreement and Declaration of Trust to demand payment for and an
appraisal of his or her Texas Fund shares if the transaction is
consummated over his or her objection. Like shares of the Texas
Fund, shares of the Income Fund are redeemable for cash at their
net asset value on any day on which the New York Stock Exchange
is open.
In the event that this proposal is not approved by the
shareholders of the Texas Fund, the Texas Fund will continue to
be managed as a separate fund in accordance with its current
investment objectives and policies, and the Trustees may consider
alternatives in the best interests of the shareholders.
BACKGROUND AND REASONS FOR THE PROPOSED REORGANIZATION
The Trustees of each of the Income Fund and the Texas Fund have
determined that the reorganization would be in the best interests
of each Fund's shareholders, and that the interests of existing
shareholders of each of the Funds would not be diluted as a
result of effecting the reorganization. The Trustees, including
all Trustees who are not "interested persons" of the Income Fund
and the Texas Fund, have unanimously approved the proposed
reorganization and have recommended its approval by shareholders.
The principal reasons why the Trustees are recommending the
reorganization are:
(1) ECONOMIES OF SCALE. The proposed reorganization would
achieve economies of scale for the shareholders of the Texas Fund
by permitting them to invest in a substantially larger Fund with
an identical investment objective and very similar investment
policies. Such economies of scale will have an immediate
positive impact on the Texas Fund, given its small size.
Based upon the projections of Putnam Management, the Trustees
believe that following the combination of the Funds, the expense
ratio of the Income Fund will be lower than the expenses the
Texas Fund would likely incur if the combination were not
effected. Putnam Management has advised the Trustees that it
expects, based on the projected relative sizes of the two Funds,
that the management fees paid by the Income Fund after the
proposed reorganization would likely be paid at the effective
rate of .47%. Putnam Management also believes that the projected
total annual expense rate of 1.06% (after expense limitation) of
net assets currently paid by shareholders of the Texas Fund would
decline to .77% of net assets after the contemplated
reorganization, assuming average net assets of $2,289,750,000 for
Class A shares of the Income Fund and $15,376,000 for the Texas
Fund.
(2) PERFORMANCE BENEFITS. Putnam Management believes that
the projected economies of scale achieved by the reorganization
and other factors relating to the small size of the Texas Fund
will result in performance benefits for Texas Fund shareholders
acquiring Income Fund Shares pursuant to the reorganization. The
Texas Fund had a tax-equivalent yield of 8.24% (8.06% in the
absence of the expense limitation) for the thirty-day period
ended December 31, 1993 as compared to a tax-equivalent yield for
the same period of 8.43% for Class A shares of the Income Fund.
The actual yield for the Texas Fund and the Class A shares of the
Income Fund for the same period was 5.01% (4.87% in the absence
of the expense limitation) and 5.09%, respectively. The total
return for the twelve-month period ended December 31, 1993 was
7.26% (which would have been lower in the absence of the expense
limitation) for the Texas Fund and 8.01% for Class A Shares of
the Income Fund. Putnam Management expects that over time the
relative performance advantages of the Income Fund over the Texas
Fund would increase if the reorganization were not implemented as
a result of the projected higher operating expenses of the Texas
Fund and the investment management limitations inherent in a
portfolio as small as the Texas Fund. Putnam Management does not
believe that the Texas Fund has reached (or is likely to reach in
the future) a sufficient net asset level to achieve competitive
investment returns over the long-term.
(3) ABILITY TO EXCHANGE AN INVESTMENT IN THE TEXAS FUND FOR AN
INVESTMENT IN THE INCOME FUND WITHOUT RECOGNITION OF GAIN OR LOSS
FOR FEDERAL INCOME TAX PURPOSES. If a shareholder in the Texas
Fund were to redeem an investment in the Texas Fund in order to
invest in the Income Fund or another investment product, gain or
loss would be recognized by that shareholder for federal income
tax purposes upon the redemption of those shares. If the Texas
Fund were liquidated or were reorganized in a taxable
reorganization, the transaction would likely result in a taxable
event for shareholders. By contrast, the proposed reorganization
will permit the Texas Fund's shareholders to exchange their
investment in the Texas Fund for an investment in the Income Fund
without recognition of gain or loss for federal income tax
purposes. After the reorganization, as shareholders of an open-
end fund, shareholders will be free to redeem any or all of their
the Income Fund Shares at net asset value at any time, at which
point a taxable gain or loss would be recognized.
INFORMATION ABOUT THE REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION. The proposed Agreement
and Plan of Reorganization (the "Agreement") provides that the
Income Fund will acquire all of the assets of the Texas Fund in
exchange for the assumption by the Income Fund of all of the
liabilities of the Texas Fund and for the issuance of Income Fund
Shares, all as of the Exchange Date (defined in the Agreement to
be the next full business day following the Valuation Time,
defined in the Plan as 4:00 p.m. Boston time on May 9, 1994 or
such other date as may be agreed upon by the parties). The
following discussion of the Agreement is qualified in its
entirety by the full text of the Agreement, which is attached as
Exhibit A to this Prospectus/Proxy Statement.
The Texas Fund will transfer all of its assets to the Income
Fund, and in exchange, the Income Fund will assume all of the
liabilities of the Texas Fund and deliver to the Texas Fund a
number of full and fractional Income Fund Shares having an
aggregate net asset value equal to the value of the assets of the
Texas Fund transferred to the Texas Fund, less the value of the
liabilities of the Texas Fund assumed by the Income Fund.
As a result of the proposed transaction, each shareholder of
the Texas Fund will receive that number of full and fractional
Income Fund Shares equal in aggregate value at the Exchange Date
to the value of the shares of the Texas Fund held by the
shareholder. Portfolio securities of the Income Fund and the
Texas Fund will be valued in accordance with the valuation
practices which are described under "How the Fund values its
shares" in the enclosed Income Fund Prospectus. The
reorganization is being accounted for as a tax-free business
combination. The Trustees of the Texas Fund have determined that
the interests of the Texas Fund's shareholders will not be
diluted as a result of the transactions contemplated by the
reorganization, and the Trustees of both Funds have determined
that the proposed reorganization is in the best interests of each
Fund.
Immediately following the Exchange Date, the Texas Fund will
distribute pro rata to its shareholders of record as of the close
of business on the Exchange Date the full and fractional Income
Fund Shares received by the Texas Fund. Such liquidation and
distribution will be accomplished by the establishment of
accounts on the share records of the Income Fund in the name of
such Texas Fund's shareholders, each account representing the
respective number of full and fractional the Income Fund Shares
due such shareholder. New certificates for Income Fund Shares
will be issued only upon written request.
The consummation of the reorganization is subject to the
conditions set forth in the Agreement. The Agreement may be
terminated and the reorganization abandoned at any time, before
or after approval by the shareholders, prior to the Exchange Date
by mutual consent of the Income Fund and the Texas Fund or, if
any condition set forth in the Agreement has not been fulfilled
and has not been waived by the party entitled to its benefits, by
such party.
The Income Fund will not permit any Texas Fund shareholder
holding certificates for Texas Fund shares at the Exchange Date
to receive cash dividends or other distributions, receive
certificates for Income Fund Shares, exchange Income Fund Shares
for shares of other investment companies managed by Putnam
Management or pledge or redeem Income Fund Shares until those
certificates for Texas Fund shares have been surrendered, or, in
the case of lost certificates, an adequate surety bond has been
posted. If a shareholder is not for that reason permitted to
receive cash dividends or other distributions on Income Fund
Shares, the Income Fund will pay all such dividends and
distributions in additional Income Fund Shares, notwithstanding
any election the shareholder may have made previously to receive
dividends and distributions on Texas Fund shares in cash.
All fees and expenses, including legal and accounting expenses,
portfolio transfer taxes (if any) or other similar expenses
incurred in connection with the consummation of the transactions
contemplated by the Agreement will be allocated ratably between
the two Funds in proportion to their net assets as of the day of
the transfer, except that the costs of proxy materials and proxy
solicitations will be borne by the Texas Fund. However, to the
extent that any payment by the Income Fund of such fees or
expenses would result in the disqualification of the Income Fund
or the Texas Fund as a "regulated investment company" within the
meaning of Section 851 of the Internal Revenue Code of 1986, as
amended (the "Code"), such fees and expenses will be paid
directly by the party incurring them.
Full and fractional Income Fund Shares will be issued to the
Texas Fund's shareholders in accordance with the procedure under
the Agreement as described above. Income Fund Shares (as defined
above) are Class A shares of the Income Fund. Class A shares are
normally sold pursuant to sales charges in different forms and
amounts. Investors purchasing Class A shares pay a sales charge
at the time of purchase. Class A shares of the Income Fund are
not subject to redemption fees and such shares are subject to a
12b-1 fee at the annual rate of .20% of the Fund's average daily
net assets attributable to Class A shares. Shareholders holding
shares of the Texas Fund will receive Class A shares of the
Income Fund as described above, and will not pay the sales charge
otherwise attributable to Class A Income Fund shares. Each
Income Fund Share will be fully paid and nonassessable when
issued, will be transferable without restriction, and will have
no preemptive or conversion rights. Like that of the Texas Fund,
the Income Fund's Agreement and Declaration of Trust permits the
Fund to divide its shares, without shareholder approval, into two
or more series of shares representing separate investment
portfolios and to further divide any such series, without
shareholder approval, into two or more classes of shares having
such preferences and special or relative rights and privileges as
the Trustees may determine. The Income Fund's shares are
currently divided into Class A and Class B. As indicated above,
only Class A shares will be distributed by the Income Fund in
connection with the proposed reorganization. Class B shares of
the Income Fund are described in detail in the enclosed Income
Fund Prospectus.
Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of
the Income Fund. However, the Agreement and Declaration of Trust
disclaims shareholder liability for acts or obligations of the
Income Fund and requires that notice of such disclaimer be given
in each agreement, obligation, or instrument entered into or
executed by the Income 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 Income Fund. Thus,
the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which the
Income Fund would be unable to meet its obligations. The
likelihood of such circumstances is remote. The shareholders of
the Texas Fund are currently subject to this same risk of
shareholder liability.
FEDERAL INCOME TAX CONSEQUENCES. As a condition to the Income
Fund's obligations to consummate the reorganization, the Texas
Fund will receive an opinion from Ropes & Gray, counsel to the
Funds, to the effect that, on the basis of the existing
provisions of the Code, current administrative rules, and court
decisions, for federal income tax purposes: (i) under Section
361 of the Code, no gain or loss will be recognized by the Texas
Fund as a result of the reorganization, (ii) under Section 354 of
the Code, no gain or loss will be recognized by the shareholders
of the Texas Fund on the distribution of the Income Fund Shares
to them in exchange for their shares of the Texas Fund, (iii)
under Section 358 of the Code, the basis of the Income Fund
Shares that the Texas Fund shareholders receive in place of their
Texas Fund Shares will be the same as the basis of Texas Fund
Shares exchanged, and (iv) under Section 1223(1) of the Code, a
shareholder's holding period for Income Fund Shares received
pursuant to the Agreement will be determined by including the
holding period for the Texas Fund Shares exchanged for Income
Fund Shares, provided that the shareholder held the Texas Fund
shares as a capital asset.
CAPITALIZATION. The following tables show the capitalization
of the Income Fund and the Texas Fund as of December 31, 1993:
(UNAUDITED)
The Income Fund
CLASS A CLASS B TEXAS FUND
Net assets......
(000's omitted)
$ 2,459,676 $173,307 $18,403
Shares
outstanding ..
(000's omitted) 259,025 18,262 1,946
Net asset value
per share.....
$ 9.50 $ 9.49 $ 9.46
VOTING INFORMATION
Proxies are being solicited from the Texas Fund's
shareholders by the Trustees for the Meeting of Shareholders to
be held on May 5, 1994 at 1:00 p.m., at One Post Office Square,
8th Floor, Boston, Massachusetts, or at such later time made
necessary by adjournment. A proxy may be revoked at any time at
or before the meeting by oral or written notice to Beverly
Marcus, Clerk of the Fund, c/o Putnam Texas Fund Trust, One Post
Office Square, Boston, Massachusetts 02109 or as otherwise
described in the "Introduction", above. Unless revoked, all
valid proxies will be voted in accordance with the specification
thereon or, in the absence of specifications, FOR approval of the
Agreement and Plan of Reorganization. The transactions
contemplated by the Agreement will be consummated only if
approved by the affirmative vote of the holders of at least two-
thirds (66 2/3%) of the outstanding shares of the Texas Fund that
are entitled to vote thereon at the Meeting. In the event the
shareholders do not approve the reorganization, the Texas Fund's
Trustees will consider possible alternative arrangements in the
best interests of the Texas Fund and its shareholders.
Proxies are being solicited by mail. Additional
solicitations may be made by telephone, telegraph, or personal
contact by officers or employees of Putnam Management and its
affiliates or by proxy soliciting firms retained by the Texas
Fund or the Income Fund. The Texas Fund may also arrange to have
votes recorded by telephone. If this procedure were subject to a
successful legal challenge, such votes would not be wanted at the
meeting. The Texas Fund has retained at its expense Tritech
Services, Four Corporate Place, Corporate Park 287, Piscataway,
New Jersey 08854, to aid in the solicitation of proxies for a fee
not to exceed $ plus reasonable out-of-pocket expenses.
Shareholders of record of the Texas Fund at the close of
business on February 11, 1994 (the "record date") will be
entitled to vote at the Meeting or any adjournment thereof. The
holders of 30% of the shares of the Texas Fund outstanding at the
close of business on the record date present in person or
represented by proxy will constitute a quorum for the meeting;
however, as noted above, the affirmative vote of at least two-
thirds (66 2/3%) of the shares outstanding at the close of
business on the record date is necessary to approve the
reorganization. Shareholders are entitled to one vote for each
share held, with fractional shares voting proportionally.
Votes cast by proxy or in person at the meeting will be
counted by persons appointed by the Texas Fund as tellers for the
meeting. The tellers will count the total number of votes cast
"for" approval of the proposal for purposes of determining
whether sufficient affirmative votes have been cast. The tellers
will count shares represented by proxies that reflect abstentions
and "broker non-votes" (i.e., shares held by brokers or nominees
as to which (i) instructions have not been received from the
beneficial owners or the persons entitled to vote and (ii) the
broker or nominee does not have the discretionary voting power on
a particular matter) as shares that are present and entitled to
vote on the matter for purposes of determining the presence of a
quorum. Abstentions and broker non-votes have the effect of a
negative vote on the proposal.
As of February 11, 1994 as shown on the books of the Texas
Fund, there were issued and outstanding shares of
beneficial interest of the Texas Fund. As of , 199 , the
officers and Trustees of the Texas Fund as a group beneficially
owned less than 1% of the outstanding shares of the Texas Fund.
At , 1994, to the best of the knowledge of the Texas
Fund, no person owned beneficially 5% or more of the outstanding
shares of the Texas Fund.
The votes of the shareholders of the Income Fund are not
being solicited, since their approval or consent is not necessary
for this transaction. As of , 1994, the officers and
Trustees of the Income Fund as a group beneficially owned less
than 1% of the outstanding shares of the Income Fund. At
, 1994, to the best of the knowledge of the Income Fund, no
person beneficially owned 5% or more of the outstanding shares of
the Income Fund.
THE BOARD OF TRUSTEES OF PUTNAM TEXAS FUND TRUST, INCLUDING THE
INDEPENDENT TRUSTEES, UNANIMOUSLY RECOMMEND APPROVAL OF THE PLAN.
<PAGE>
PUTNAM TEXAS TAX EXEMPT INCOME FUND
PROXY FOR A MEETING OF
SHAREHOLDERS, MAY 5, 1994
THIS PROXY IS SOLICITED ON BEHALF OF THE TRUSTEES OF THE
FUND.
The undersigned hereby appoints George Putnam, Hans H. Estin and
William F. Pounds, and each of them separately, proxies, with
power of substitution, and hereby authorizes them to represent
and to vote, as designated below, at the Meeting of Shareholders
of Putnam Texas Tax Exempt Income Fund on May 5, 1994, at 1:00
p.m., Boston time, and at any adjournments thereof, all of the
shares of the Fund which the undersigned would be entitled to
vote if personally present.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION
IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSAL 1. IN THEIR
DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
MATTERS AS MAY PROPERLY COME BEFORE THE MEETING. THE TRUSTEES
RECOMMEND A VOTE FOR THE PROPOSAL ON THE REVERSE SIDE.
PLEASE VOTE AND SIGN ON OTHER SIDE AND RETURN PROMPTLY IN
ENCLOSED ENVELOPE.
NOTE: Please sign exactly as name appears on this card. All
joint owners should sign. When signing as executor,
administrator, attorney, trustee or guardian or as custodian for
a minor, please give full title as such, if a corporation, please
sign in full corporate name and indicate the signer's office. If
a partner, sign in the partnership name.
CHANGE OF ADDRESS NOTIFICATION. Please use this form to inform
us of any change in address or telephone number or to provide us
with your comments. Detach this form from the Proxy Ballot and
return it with your executed proxy in the enclosed envelope.
Has your address changed?
Do you have any comments?
1. Approval of the Agreement and Plan of Reorganization providing
for the transfer of all of the assets of Putnam Texas Tax Exempt
Income Fund (the "Fund") to Putnam Tax Exempt Income Fund (the
"Income Fund") in exchange for Class A shares of the Income Fund
and the assumption by the Income Fund of all of the liabilities
of the Fund, and the distribution of such Class A shares to the
shareholders of the Fund in liquidation of the Fund.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Please be sure to sign and date this Proxy.
--------------------------
Shareholder sign here
--------------------------
Co-owner sign here
Dated: , 199
<PAGE>
PUTNAM TAX EXEMPT INCOME FUND
Statement of Additional Information
February , 1994
This Statement of Additional Information contains material
which may be of interest to investors but which is not included
in the Prospectus/Proxy Statement (the "Prospectus") of Putnam
Tax Exempt Income Fund ("Income Fund") dated February , 1994
relating to the sale of all or substantially all of the assets of
Putnam Texas Tax Exempt Income Fund ("Texas Fund") to Income
Fund. The Texas Fund's Statement of Additional Information dated
March , 1994 and The Income Fund's Statement of Additional
Information dated February , 1994 respectively, have been filed
with the Securities and Exchange Commission and are incorporated
herein by reference. This Statement is not a Prospectus and is
authorized for distribution only when it accompanies or follows
delivery of the Prospectus. This Statement should be read in
conjunction with the Prospectus. Investors may obtain a free
copy of the Prospectus or either or both of the Statements of
Additional Information by writing Putnam Investor Services, One
Post Office Square, Boston, MA 02109 or by calling 1-800-225-
1581.
INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS
Coopers & Lybrand are each Fund's independent accountants,
providing audit services, tax return review and other tax
consulting services and assistance, and consultation in
connection with the review of various Securities and Exchange
Commission filings. The Report of Independent Accountants and
financial statements included in the Income Fund's Annual Report
for the fiscal year ended September 30, 1993, filed
electronically on December 2, 1993 (811-2675) are incorporated by
reference into this Statement of Additional Information. The
Report of Independent Accountants and financial statements
included in the Texas Fund's Annual Report for the fiscal year
ended January 31, 1993 filed electronically on April 1, 1993
(811-6228) are incorporated by reference into this Statement of
Additional Information. The Report of Independent Accountants
and financial statements included in the Texas Fund's semi-annual
report for the six-month period ended July 31, 1993, filed
electronically on October 1, 1993, are incorporated by reference
into this Statement of Additional Information. The financial
statements referred to above, and the financial highlights or
selected per share data and ratios, as appropriate, of each Fund
incorporated by reference into the Prospectus/Proxy Statements
and the Statement of Additional Information have been so
incorporated in reliance upon the report of Coopers & Lybrand,
given on the authority of that firm as experts in auditing and
accounting.
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (the "Agreement")
is made as of February , 1994 in Boston, Massachusetts, by and
between Putnam Tax Exempt Income Fund, a Massachusetts business
trust (the "Income Fund"), and Putnam Texas Tax Exempt Income
Fund, a Massachusetts business trust (the "Texas Fund").
PLAN OF REORGANIZATION
(a) The Texas Fund will sell, assign, convey, transfer and
deliver to the Income Fund on the Exchange Date (as defined in
Section 7) all of its properties and assets existing at the
Valuation Time. In consideration therefor, the Income Fund
shall, on the Exchange Date, assume all of the liabilities of the
Texas Fund existing at the Valuation Time and deliver to the
Texas Fund, a number of full and fractional Class A shares of
beneficial interest of the Income Fund ("Income Fund Shares")
having an aggregate net asset value equal to the value of the
assets of the Texas Fund transferred to the Income Fund on such
date less the value of the liabilities of the Texas Fund assumed
by the Income Fund on that date. It is intended that the
reorganization described in this Plan shall be a tax-free
reorganization under the Internal Revenue Code of 1986, as
amended (the "Code").
(b) Upon consummation of the transactions described in
paragraph (a) of this Plan, the Texas Fund shall distribute in
complete liquidation to its shareholders of record as of the
Exchange Date the Income Fund Shares, each shareholder being
entitled to receive that proportion of such Income Fund Shares
which the number of shares of beneficial interest of the Texas
Fund held by such shareholder bears to the number of shares of
the Texas Fund outstanding on such date. Certificates
representing the Income Fund Shares will be issued only if the
shareholder so requests.
(c) As promptly as practicable after the liquidation of the
Texas Fund as aforesaid, the Texas Fund shall be dissolved
pursuant to the provisions of its Agreement and Declaration of
Trust, as amended, and applicable law, and its legal existence
terminated.
AGREEMENT
The Income Fund and the Texas Fund agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE INCOME FUND. The
Income Fund represents and warrants to and agrees with the Texas
Fund that:
(a) The Income Fund is a business trust duly established
and validly existing under the laws of The Commonwealth of
Massachusetts and has power to own all of its properties and
assets and to carry out its obligations under this Agreement.
The Income Fund is not required to qualify as a foreign
association in any jurisdiction. The Income Fund has all
necessary federal, state and local authorizations to carry on its
business as now being conducted and to carry out this Agreement.
(b) The Income Fund is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end
management investment company, and such registration has not been
revoked or rescinded and is in full force and effect.
(c) A statement of assets and liabilities, statements of
operations, and statements of changes in net assets and schedules
of investments (indicating their market values) of the Income
Fund for the year ended September 30, 1993, such statements and
schedules having been audited by Coopers & Lybrand, independent
accountants, have been furnished to the Texas Fund. Such
statements of assets and liabilities and schedules fairly present
the financial position of the Income Fund as of their dates and
said statements of operations and changes in net assets fairly
reflect the results of its operations and changes in net assets
for the periods covered thereby in conformity with generally
accepted accounting principles.
(d) Post-Effective Amendment No. 25 (File No. 811-2675) to
the Registration Statement of the Income Fund under the 1940 Act,
as filed with the Securities and Exchange Commission (the
"Commission") on February , 1994, previously furnished to the
Texas Fund, did not as of such date and does not contain any
untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading.
(e) There are no material legal, administrative or other
proceedings pending or, to the knowledge of the Income Fund,
threatened against the Income Fund which assert liability on the
part of the Income Fund.
(f) There are no material contracts outstanding to which the
Income Fund is a party, other than as will be disclosed in the
Proxy Statement.
(g) The Income Fund has no known liabilities of a material
nature, contingent or otherwise, other than those shown as
belonging to it on its statement of assets and liabilities as of
September 30, 1993 and those incurred in the ordinary course of
the Income Fund's business as an investment company since
September 30, 1993.
(h) No consent, approval, authorization or order of any
court or governmental authority is required for the consummation
by the Income Fund of the transactions contemplated by this
Agreement, except such as may be required under the 1933 Act, the
Securities Exchange Act of 1934, as amended (the "1934 Act"), the
1940 Act, state securities or blue sky laws (which term as used
herein shall include the laws of the District of Columbia and of
Puerto Rico) or the Hart-Scott-Rodino Antitrust Improvements Act
of 1976 (the "H-S-R Act").
(i) The registration statement (the "Registration
Statement") filed with the Commission by the Income Fund on Form
N-14 relating to the Income Fund Shares issuable hereunder, and
the proxy statement of the Texas Fund included therein (the
"Proxy Statement"), on the effective date of the Registration
Statement (i) will comply in all material respects with the
provisions of the 1933 Act, the 1934 Act and the 1940 Act and the
rules and regulations thereunder and (ii) will not contain any
untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading; and at the time of the
shareholders' meeting referred to in Section 8(a) and at the
Exchange Date, the prospectus contained in the Registration
Statement of which the Proxy Statement is a part (the
"Prospectus"), as amended or supplemented by any amendments or
supplements filed with the Commission by the Texas Fund, will not
contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to
make the statements therein not misleading; provided, however,
that none of the representations and warranties in this
subsection shall apply to statements in or omissions from the
Registration Statement, the Prospectus or the Proxy Statement
made in reliance upon and in conformity with information
furnished by the Texas Fund for use in the Registration
Statement, the Prospectus or the Proxy Statement.
(j) All of the issued and outstanding shares of beneficial
interest of the Income Fund have been offered for sale and sold
in conformity with all applicable federal securities laws.
(k) The Income Fund is and will at all times through the
Exchange Date qualify for taxation as a "regulated investment
company" under Sections 851 and 852 of the Code.
(l) The issuance of the Income Fund Shares pursuant to this
Agreement will be in compliance with all applicable federal
securities laws.
(m) The Income Fund shares to be issued to the Texas Fund
have been duly authorized and, when issued and delivered pursuant
to this Agreement, will be legally and validly issued and will be
fully paid and nonassessable by the Income Fund, and no
shareholder of the Income Fund will have any preemptive right of
subscription or purchase in respect thereof.
2. REPRESENTATIONS AND WARRANTIES OF THE TEXAS FUND. The
Texas Fund represents and warrants to and agrees with the Income
Fund that:
(a) The Texas Fund is a business trust duly established and
validly existing under the laws of The Commonwealth of
Massachusetts and has power to carry on its business as it is now
being conducted and to carry out this Agreement. The Texas Fund
is not required to qualify as a foreign association in any
jurisdiction. The Texas Fund has all necessary federal, state
and local authorizations to own all of its properties and assets
and to carry on its business as now being conducted and to carry
out this Agreement.
(b) The Texas Fund is registered under the 1940 Act as an
open-end management investment company and such registration has
not been revoked or rescinded and is in full force and effect.
(c) A statement of assets and liabilities, statements of
operations, and statements of changes in net assets and schedules
of investments (indicating their market values) of the Texas Fund
for the year ended January 31, 1994, such statements and
schedules having been audited by Coopers & Lybrand, independent
accountants, have been furnished to the Income Fund. Such
statements of assets and liabilities and schedules fairly present
the financial position of the Texas Fund as of their dates, and
said statements of operations and changes in net assets fairly
reflect the results of its operations and changes in financial
position for the periods covered thereby in conformity with
generally accepted accounting principles.
(d) Post-Effective Amendment No. 2 (File No. P11-6228) to
the Registration Statement of the Texas Fund under the 1940 Act,
to be as filed with the Commission on or about April , 1994.
(e) There are no material legal, administrative or other
proceedings pending or, to the knowledge of the Texas Fund,
threatened against the Texas Fund which assert liability or may,
if successfully prosecuted to their conclusion, result in
liability on the part of the Texas Fund, other than as have been
disclosed in the Prospectus.
(f) There are no material contracts outstanding to which
the Texas Fund is a party, other than as will be disclosed in the
Proxy Statement.
(g) The Texas Fund has no known liabilities of a material
nature, contingent or otherwise, other than those shown on the
Texas Fund's statement of assets and liabilities as of February
, 1993 referred to above and those incurred in the ordinary
course of the business of the Texas Fund as an investment company
since such date. Prior to the Exchange Date, the Texas Fund will
advise the Income Fund of all material liabilities, contingent or
otherwise, incurred by it subsequent to February , 1994,
whether or not incurred in the ordinary course of business.
(h) As used in this Agreement, the term "Investments" shall
mean the Texas Fund's investments shown on the schedule of its
investments as of February , 1994 referred to in Section 2(c)
hereof, as supplemented with such changes as the Texas Fund shall
make after advising the Income Fund of such proposed changes, and
changes resulting from stock dividends, stock split-ups, mergers
and similar corporate actions.
(i) The Texas Fund has filed or will file all federal and
state tax returns which, to the knowledge of the Texas Fund's
officers, are required to be filed by the Texas Fund and has paid
or will pay all federal and state taxes shown to be due on said
returns or on any assessments received by the Texas Fund. All
tax liabilities of the Texas Fund have been adequately provided
for on its books, and no tax deficiency or liability of the Texas
Fund has been asserted, and no question with respect thereto has
been raised, by the Internal Revenue Service or by any state or
local tax authority for taxes in excess of those already paid.
(j) At both the Valuation Time (as defined in Section 3(c))
and the Exchange Date, the Texas Fund will have full right, power
and authority to sell, assign, transfer and deliver the
Investments and any other assets and liabilities of the Income
Fund to be transferred to the Texas Fund pursuant to this
Agreement. At the Exchange Date, subject only to the delivery of
the Investments and any such other assets and liabilities as
contemplated by this Agreement, the Income Fund will acquire the
Investments and any such other assets subject to no encumbrances,
liens or security interests whatsoever and without any
restrictions upon the transfer thereof.
(k) No registration under the Securities Act of 1933, as
amended (the "1933 Act"), of any of the Investments would
be required if they were, as of the time of such transfer,
the subject of a public distribution by either of the Income Fund
or the Texas Fund, except as previously disclosed to the Income
Fund by the Texas Fund.
(l) No consent, approval, authorization or order of any
court or governmental authority is required for the consummation
by the Texas Fund of the transactions contemplated by this
Agreement, except such as may be required under the 1933 Act, the
1934 Act, the 1940 Act, state securities laws or the H-S-R Act.
(m) The Registration Statement, the Prospectus and the
Proxy Statement, on the Effective Date of the Registration
Statement and insofar as they do not relate to the Income Fund
(i) will comply in all material respects with the provisions of
the 1933 Act, the 1934 Act and the 1940 Act and the rules and
regulations thereunder and (ii) will not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading; and at the time of the shareholders'
meeting referred to in Section 8(a) below and on the Exchange
Date, the Prospectus, as amended or supplemented by any
amendments or supplements filed with the Commission by the Income
Fund, insofar as it does not relate to the Income Fund, will not
contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to
make the statements therein not misleading; provided, however,
that the representations and warranties in this subsection shall
apply only to statements of fact relating to the Texas Fund
contained in the Registration Statement, the Prospectus or the
Proxy Statement, or omissions to state in any thereof a material
fact relating to the Texas Fund, as such Registration Statement,
Prospectus and Proxy Statement shall be furnished to the Texas
Fund in definitive form as soon as practicable following
effectiveness of the Registration Statement and before any public
distribution of the Prospectus or Proxy Statement.
(n) The Texas Fund is and will at all times through the
Exchange Date qualify for taxation as a "regulated investment
company" under Sections 851 and 852 of the Code.
(o) At the Exchange Date, the Texas Fund will have sold
such of its assets, if any, as necessary to assure that, after
giving effect to the acquisition of the assets of the Texas Fund
pursuant to this Agreement, the Income Fund will remain a
"diversified company" within the meaning of Section 5(b)(1) of
the 1940 Act and in compliance with such other mandatory
investment restrictions as are set forth in the prospectus and
statement of additional information of the Income Fund dated
February , 1994 (collectively, the "Income Fund Prospectus"),
previously furnished to the Texas Fund. The Income Fund Shares
to be issued to the Texas Fund have been duly authorized and,
when issued and delivered pursuant to this Agreement, will be
legally and validly issued and will be fully paid and
nonassessable by the Texas Fund, and no shareholder of the Income
Fund will have any preemptive right of subscription or purchase
in respect thereof.
3. REORGANIZATION. (a) Subject to the requisite approval
of the shareholders of the Texas Fund and to the other terms and
conditions contained herein (including the Texas Fund's
obligation to distribute to its shareholders all of its
investment company taxable income and net capital gain as
described in Section 9(m) hereof), the Texas Fund agrees to sell,
assign, convey, transfer and deliver to the Income Fund, and the
Income Fund agrees to acquire from the Texas Fund, on the
Exchange Date all of the Investments and all of the cash and
other properties and assets of the Texas Fund, whether accrued or
contingent, in exchange for that number of shares of beneficial
interest of the Income Fund provided for in Section 4 and the
assumption by the Income Fund of all of the liabilities of the
Texas Fund. Pursuant to this Agreement, the Texas Fund will, as
soon as practicable after the Exchange Date, distribute all of
the Income Fund Shares received by it to the shareholders of the
Texas Fund in exchange for their shares of beneficial interest of
the Texas Fund.
(b) The Texas Fund will pay or cause to be paid to the
Income Fund any interest, cash dividends and other payments
received by it on or after the Exchange Date with respect to the
Investments and other properties and assets of the Texas Fund,
whether accrued or contingent, transferred to the Income Fund
hereunder received by it on or after the Exchange Date. The
Texas Fund will transfer to the Income Fund any rights, stock
dividends or other securities received by the Texas Fund after
the Exchange Date as stock dividends or other distributions on or
with respect to the Investments transferred, which rights, stock
dividends and other securities shall be deemed included in the
assets transferred to the Income Fund at the Exchange Date and
shall not be separately valued unless the securities in respect
of which such distribution is made shall have gone "ex" such
distribution prior to the Valuation Time, in which case any such
distribution which remains unpaid at the Exchange Date shall be
included in the determination of the value of the assets of the
Texas Fund acquired by the Income Fund.
(c) The Valuation Time shall be 4:00 p.m. Boston time on
May 6, 1994 or such earlier or later day as may be mutually
agreed upon in writing by the parties hereto (the "Valuation
Time").
4. EXCHANGE DATE; VALUATION TIME. On the Exchange Date,
the Income Fund will deliver to the Texas Fund, a number of full
and fractional Income Fund Shares having an aggregate net asset
value equal to the value of assets of the Texas Fund transferred
to the Income Fund on such date less the value of the liabilities
of the Texas Fund attributable to shares of the Texas Fund
assumed by the Income Fund on that date, determined as hereafter
provided in this Section 4.
(a) The net asset value of the Income Fund Shares to be
delivered to the Texas Fund, the value of the assets of the Texas
Fund and the value of the liabilities of the Texas Fund to be
assumed by the Income Fund shall in each case be determined as of
the Valuation Time.
(b) The net asset value of the Income Fund Shares shall be
computed in the manner set forth in the current Income Fund
Prospectus. The value of the assets and liabilities of the Texas
Fund shall be determined by the Income Fund, in cooperation with
the Texas Fund, pursuant to procedures customarily used by the
Income Fund in valuing the Income Fund's assets.
(c) No formula will be used to adjust the net asset value
of either the Texas Fund or the Income Fund to take into account
differences in realized and unrealized gains and losses.
(d) The Income Fund shall issue the Income Fund Shares to
the Texas Fund in one certificate (excluding any fractional
share) registered in the name of the Texas Fund. The Texas Fund
shall distribute the Income Fund Shares to the shareholders of
the Texas Fund by redelivering such certificate to the Income
Fund's transfer agent which will as soon as practicable set up
open accounts for each Texas Fund shareholder in accordance with
written instructions furnished by the Texas Fund. With respect
to any Texas Fund shareholder holding the Texas Fund share
certificates as of the Exchange Date, the Income Fund will not
permit such shareholder to receive dividends and other
distributions on the Income Fund Shares (although such dividends
and other distributions shall be credited to the account of such
shareholder), receive certificates representing the Income Fund
Shares, exchange the Income Fund Shares credited to such
shareholder's account for shares of other investment companies
managed by Putnam, or pledge or redeem such Shares until notified
by the Texas Fund or the shareholder's agent that such
shareholder has surrendered his or her outstanding Texas Fund
certificates or, in the event of lost, stolen or destroyed
certificates, posted adequate bond. In the event that a
shareholder shall not be permitted to receive dividends and other
distributions on the Income Fund Shares as provided in the
preceding sentence, the Income Fund shall pay any such dividends
or distributions in additional Income Fund Shares,
notwithstanding any election such shareholder shall have made
previously with respect to the payment, in cash or otherwise, of
dividends and distributions on shares of the Texas Fund. The
Texas Fund will, at its expense, request the shareholders of the
Texas Fund to surrender their outstanding Texas Fund
certificates, or post adequate bond, as the case may be.
(e) The Income Fund shall assume all liabilities of the
Texas Fund, whether accrued or contingent, in connection with the
acquisition of assets and subsequent dissolution of the Texas
Fund or otherwise.
5. EXPENSES, FEES, ETC. (a) All fees and expenses,
including legal and accounting expenses, portfolio transfer taxes
(if any) or other similar expenses incurred in connection with
the consummation by the Texas Fund and the Income Fund of the
transactions contemplated by this Agreement will be allocated
ratably between the two Funds in proportion to their net assets
as of the Valuation Time, except that the costs of proxy
materials and proxy solicitation will be borne by the Texas Fund;
PROVIDED, HOWEVER, that such expenses will in any event be paid
by the party directly incurring such expenses if and to the
extent that the payment by the other party of such expenses would
result in the disqualification of the Income Fund or the Texas
Fund, as the case may be, as a "regulated investment company"
within the meaning of Section 851 of the Code.
(b) In the event the transactions contemplated by this
Agreement are not consummated by reason of the Income Fund's
being either unwilling or unable to go forward (other than by
reason of the nonfulfillment or failure of any condition to the
Income Fund's obligations referred to in Section 8(a) or
Section 9) the Income Fund shall pay directly all reasonable fees
and expenses incurred by the Texas Fund in connection with such
transactions, including, without limitation, legal, accounting
and filing fees.
(c) In the event the transactions contemplated by this
Agreement are not consummated by reason of the Texas Fund's being
either unwilling or unable to go forward (other than by reason of
the nonfulfillment or failure of any condition to the Texas
Fund's obligations referred to in Section 8(a) or Section 10),
the Texas Fund shall pay directly all reasonable fees and
expenses incurred by the Income Fund in connection with such
transactions, including without limitation legal, accounting and
filing fees.
(d) In the event the transactions contemplated by this
Agreement are not consummated for any reason other than (i) the
Income Fund's or the Texas Fund's being either unwilling or
unable to go forward or (ii) the nonfulfillment or failure of any
condition to the Income Fund's or the Texas Fund's obligations
referred to in Section 8(a), Section 9 or Section 10 of this
Agreement, then each of the Income Fund and the Texas Fund shall
bear all of its own expenses incurred in connection with such
transactions.
(e) Notwithstanding any other provisions of this Agreement,
if for any reason the transactions contemplated by this Agreement
are not consummated, no party shall be liable to the other party
for any damages resulting therefrom, including without limitation
consequential damages, except as specifically set forth above.
6. PERMITTED ASSETS. The Income Fund agrees to advise the
Texas Fund promptly if at any time prior to the Exchange Date the
assets of the Texas Fund include any assets that the Income Fund
is not permitted, or reasonably believes to be unsuitable for it,
to acquire, including without limitation any security that, prior
to its acquisition by the Texas Fund, the Income Fund has
informed the Texas Fund is unsuitable for the Income Fund to
acquire.
7. EXCHANGE DATE. Delivery of the assets of the Texas
Fund to be transferred, assumption of the liabilities of the
Texas Fund to be assumed and the delivery of the Income Fund
Shares to be issued shall be made at the offices of Ropes & Gray,
One International Place, Boston, Massachusetts, at 10:00 A.M. on
the next full business day following the Valuation Time, or at
such other time and date agreed to by the Income Fund and the
Texas Fund, the date and time upon which such delivery is to take
place being referred to herein as the "Exchange Date."
8. MEETING OF SHAREHOLDERS; DISSOLUTION. (a) The Texas
Fund agrees to call a meeting of its shareholders as soon as is
practicable after the effective date of the Registration
Statement for the purpose of considering the sale of all of its
assets to and the assumption of all of its liabilities by the
Income Fund as herein provided, adopting this Agreement, and
authorizing the liquidation and dissolution of the Texas Fund,
and it shall be a condition to the obligations of each of the
parties hereto that the holders of at least two-thirds (66 2/3%)
of the shares of beneficial interest of the Texas Fund shall have
approved such vote at such a meeting on or before the Valuation
Time.
(b) The Texas Fund agrees that the liquidation and
dissolution of the Texas Fund will be effected in the manner
provided in the Texas Fund's Agreement and Declaration of Trust
in accordance with applicable law, and that on and after the
Exchange Date, the Texas Fund shall not conduct any business
except in connection with its liquidation and dissolution.
(c) The Income Fund will, as promptly as practicable after
the preparation and delivery to the Income Fund by the Texas Fund
of a preliminary version of the Proxy Statement which is
satisfactory to the Income Fund and to Ropes & Gray for inclusion
in the Registration Statement, file the Registration Statement
with the Commission. Each of the Texas Fund and the Income Fund
will cooperate with the other, and each will furnish to the other
the information relating to itself required by the 1933 Act, the
1934 Act and the 1940 Act and the rules and regulations
thereunder to be set forth in the Registration Statement,
including the Prospectus and the Proxy Statement.
9. CONDITIONS TO THE INCOME FUND'S OBLIGATIONS. The
obligations of the Income Fund hereunder shall be subject to the
following conditions:
(a) That this Agreement shall have been adopted and the
transactions contemplated hereby shall have been approved by the
affirmative vote of the holders of at least two-thirds (66 2/3%)
of the outstanding shares of beneficial interest of the Texas
Fund.
(b) That the Texas Fund shall have furnished to the Income
Fund a statement of the Texas Fund's assets and liabilities, with
values determined as provided in Section 4 of this Agreement,
together with a list of Investments and all other properties and
assets of the Texas Fund, whether accrued or contingent, with
their respective tax costs (if applicable), all as of the
Valuation Time, certified on the Texas Fund's behalf by its
President (or any Vice President) and Treasurer, and a
certificate of both such officers, dated the Exchange Date, that
there has been no material adverse change in the financial
position of the Texas Fund since February , 1994 other than
changes in the Investments and other properties and assets of the
Texas Fund since that date or changes in the market value of the
Investments and other properties and assets of the Texas Fund, or
changes due to net redemptions of shares of the Texas Fund,
dividends paid or losses from operations.
(c) That the Texas Fund shall have furnished to the Income
Fund a statement, dated the Exchange Date, signed by the Texas
Fund's President (or any Vice President) and Treasurer certifying
that as of the Valuation Time and as of the Exchange Date all
representations and warranties of the Texas Fund made in this
Agreement are true and correct in all material respects as if
made at and as of such dates and the Texas Fund has complied with
all the agreements and satisfied all the conditions on its part
to be performed or satisfied at or prior to such dates.
(d) That the Texas Fund shall have delivered to the Income
Fund a letter from Coopers & Lybrand dated the Exchange Date
stating that such firm reviewed the federal and state income tax
returns of the Texas Fund for the year ended January 31, 1994,
and for the period from February , 1994 to the Exchange Date,
and that, in the course of such review, nothing came to their
attention which caused them to believe that such returns did not
properly reflect, in all material respects, the federal and state
income taxes of the Texas Fund for the periods covered thereby,
or that the Texas Fund would not qualify as a regulated
investment company for federal income tax purposes.
(e) That there shall not be any material litigation pending
with respect to the matters contemplated by this Agreement.
(f) That the Income Fund shall have received an opinion of
Ropes & Gray, in form satisfactory to the Income Fund and dated
the Exchange Date, to the effect that (i) the Texas Fund is a
business trust duly established and validly existing under the
laws of The Commonwealth of Massachusetts, and the Texas Fund is
not, to the knowledge of such counsel, required to qualify to do
business as a foreign association in any jurisdiction, (ii) this
Agreement has been duly authorized, executed, and delivered by
the Texas Fund and, assuming that the Registration Statement, the
Prospectus and the Proxy Statement comply with the 1933 Act, the
1934 Act and the 1940 Act and assuming due authorization,
execution and delivery of this Agreement by the Income Fund, is a
valid and binding obligation of the Texas Fund, (iii) the Texas
Fund has power to sell, assign, convey, transfer and deliver the
assets contemplated hereby and, upon consummation of the
transactions contemplated hereby in accordance with the terms of
this Agreement, the Texas Fund will have duly sold, assigned,
conveyed, transferred and delivered such assets to the Income
Fund, (iv) the execution and delivery of this Agreement did not,
and the consummation of the transactions contemplated hereby will
not, violate the Texas Fund's Agreement and Declaration of Trust,
as amended, or any provision of any agreement known to such
counsel to which the Texas Fund is a party or by which it is
bound, and (v) no consent, approval, authorization or order of
any court or governmental authority is required for the
consummation by the Texas Fund of the transactions contemplated
hereby, except such as have been obtained under the 1933 Act, the
1934 Act and the 1940 Act and such as may be required under state
securities or blue sky laws and the H-S-R Act, it being
understood that with respect to investment restrictions as
contained in the Texas Fund's Agreement and Declaration of Trust,
Bylaws or then-current prospectus or statement of additional
information, such counsel may rely upon a certificate of an
officer of the Texas Fund whose responsibility it is to advise
the Texas Fund with respect to such matters.
(g) That the Income Fund shall have received an opinion of
Ropes & Gray, in form satisfactory to the Income Fund, with
respect to the matters specified in Section 10(f) of this
Agreement, and such other matters as the Income Fund may
reasonably deem necessary or desirable.
(h) That the Income Fund shall have received an opinion of
Ropes & Gray to the effect that for federal income tax purposes
(i) no gain or loss will be recognized by the Income Fund upon
receipt of the Investments and other assets transferred to the
Income Fund pursuant to this Agreement in exchange for the Income
Fund Shares, (ii) the basis to the Income Fund of the Investments
and such other assets will be the same as the basis of the assets
in the hands of the Texas Fund immediately prior to such
exchange, and (iii) the Income Fund's holding periods with
respect to the Investments and such other assets will include the
respective periods for which the Investments and such other
assets were held by the Texas Fund.
(i) That the assets of the Texas Fund to be acquired by the
Income Fund will include no assets which the Income Fund, by
reason of charter limitations or of investment restrictions
disclosed in the Income Fund Prospectus in effect on the Exchange
Date, may not properly acquire.
(j) That the Registration Statement shall have become
effective under the 1933 Act, and no stop order suspending such
effectiveness shall have been instituted or, to the knowledge of
the Income Fund, contemplated by the Commission.
(k) That the Income Fund shall have received from the
Commission, any relevant state securities administrator, the
Federal Trade Commission (the "FTC") and the Department of
Justice (the "Department") such order or orders as Ropes & Gray
deems reasonably necessary or desirable under the 1933 Act, the
1934 Act, the 1940 Act, any applicable state securities or blue
sky laws and the H-S-R Act in connection with the transactions
contemplated hereby, and that all such orders shall be in full
force and effect.
(l) That all proceedings taken by the Texas Fund in
connection with the transactions contemplated by this Agreement
and all documents incidental thereto shall be satisfactory in
form and substance to the Income Fund and Ropes & Gray.
(m) That, prior to the Exchange Date, the Texas Fund shall
have declared a dividend or dividends which, together with all
previous such dividends, shall have the effect of distributing to
the shareholders of the Texas Fund all of the Texas Fund's
investment company taxable income for its taxable years ending on
or after February , 1994 and on or prior to the Exchange Date
(computed without regard to any deduction for dividends paid),
and all of its net capital gain realized in each of its taxable
years ending on or after February , 1994 and on or prior to the
Exchange Date.
(n) That the Texas Fund shall have furnished to the Income
Fund a certificate, signed by the President (or any Vice
President) and the Treasurer of the Texas Fund, as to the tax
cost to the Texas Fund of the securities delivered to the Income
Fund pursuant to this Agreement, together with any such other
evidence as to such tax cost as the Income Fund may reasonably
request.
(o) That the Texas Fund's custodian shall have delivered to
the Income Fund a certificate identifying all of the assets of
the Texas Fund held by such custodian as of the Valuation Time.
(p) That the Texas Fund's transfer agent shall have
provided to the Income Fund (i) the originals or true copies of
all of the records of the Texas Fund in the possession of such
transfer agent as of the Exchange Date, (ii) a certificate
setting forth the number of shares of the Texas Fund outstanding
as of the Valuation Time and (iii) the name and address of each
holder of record of any such shares and the number of shares held
of record by each such shareholder.
(q) That all of the issued and outstanding shares of
beneficial interest of the Texas Fund shall have been offered for
sale and sold in conformity with all applicable state securities
or blue sky laws and, to the extent that any audit of the records
of the Texas Fund or its transfer agent by the Income Fund or its
agents shall have revealed otherwise, the Texas Fund shall have
taken all actions that in the opinion of the Income Fund or its
counsel are necessary to remedy any prior failure on the part of
the Texas Fund to have offered for sale and sold such shares in
conformity with such laws.
(r) That the Income Fund shall have received from Coopers &
Lybrand a letter addressed to the Income Fund dated as of the
Exchange Date satisfactory in form and substance to the Income
Fund to the effect that, on the basis of limited procedures
agreed upon by the Income Fund and described in such letter (but
not an examination in accordance with generally accepted auditing
standards), as of the Valuation Time the value of the assets of
the Texas Fund to be exchanged for the Income Fund Shares has
been determined in accordance with the provisions of the Income
Fund's Agreement and Declaration of Trust, pursuant to the
procedures customarily utilized by the Income Fund in valuing its
assets and issuing its shares.
10. CONDITIONS TO THE TEXAS FUND'S OBLIGATIONS. The
obligations of the Texas Fund hereunder shall be subject to the
following conditions:
(a) That this Agreement shall have been adopted and the
transactions contemplated hereby shall have been approved by the
affirmative vote of the holders of at least two-thirds (66 2/3%)
of the outstanding shares of beneficial interest of the Texas
Fund.
(b) That the Income Fund shall have furnished to the Texas
Fund a statement of the Income Fund's net assets, together with a
list of portfolio holdings with values determined as provided in
Section 4, all as of the Valuation Time, certified on the Income
Fund's behalf by its President (or any Vice President) and
Treasurer (or any Assistant Treasurer), and a certificate of both
such officers, dated the Exchange Date, to the effect that as of
the Valuation Time and as of the Exchange Date there has been no
material adverse change in the financial position of the Income
Fund since September 30, 1993, other than changes in its
portfolio securities since that date, changes in the market value
of its portfolio securities, changes due to net redemptions,
dividends paid or losses from operations.
(c) That the Income Fund shall have executed and delivered
to the Texas Fund an Assumption of Liabilities dated as of the
Exchange Date pursuant to which the Income Fund will assume all
of the liabilities of the Texas Fund existing at the Valuation
Time in connection with the transactions contemplated by this
Agreement.
(d) That the Income Fund shall have furnished to the Texas
Fund a statement, dated the Exchange Date, signed by the Income
Fund's President (or any Vice President) and Treasurer (or any
Assistant Treasurer) certifying that as of the Valuation Time and
as of the Exchange Date all representations and warranties of the
Income Fund made in this Agreement are true and correct in all
material respects as if made at and as of such dates, and that
the Income Fund has complied with all of the agreements and
satisfied all of the conditions on its part to be performed or
satisfied at or prior to each of such dates.
(e) That there shall not be any material litigation
pending with respect to the matters contemplated by this
Agreement.
(f) That the Texas Fund shall have received an opinion of
Ropes & Gray, in form satisfactory to the Texas Fund and dated
the Exchange Date, to the effect that (i) the Income Fund is an
unincorporated voluntary association duly established and validly
existing in conformity with the laws of The Commonwealth of
Massachusetts, and, to the knowledge of such counsel, is not
required to qualify to do business as a foreign association in
any jurisdiction except as may be required by state securities or
blue sky laws, (ii) the Income Fund Shares to be delivered to the
Texas Fund as provided for by this Agreement are duly authorized
and upon such delivery will be validly issued and will be fully
paid and nonassessable by the Income Fund and no shareholder of
the Income Fund has any preemptive right to subscription or
purchase in respect thereof, (iii) this Agreement has been duly
authorized, executed and delivered by the Income Fund and,
assuming that the Prospectus, the Registration Statement and the
Proxy Statement comply with the 1933 Act, the 1934 Act and the
1940 Act and assuming due authorization, execution and delivery
of this Agreement by the Texas Fund, is a valid and binding
obligation of the Income Fund, (iv) the execution and delivery of
this Agreement did not, and the consummation of the transactions
contemplated hereby will not, violate the Income Fund's Agreement
and Declaration of Trust, as amended, or By-laws, or any
provision of any agreement known to such counsel to which the
Income Fund is a party or by which it is bound, it being
understood that with respect to investment restrictions as
contained in the Income Fund's Agreement and Declaration of
Trust, as amended, By-Laws or then-current prospectus or
statement of additional information, such counsel may rely upon a
certificate of an officer of the Income Fund whose responsibility
it is to advise the Income Fund with respect to such matters, (v)
no consent, approval, authorization or order of any court or
governmental authority is required for the consummation by the
Income Fund of the transactions contemplated herein, except such
as have been obtained under the 1933 Act, the 1934 Act and the
1940 Act and such as may be required under state securities or
blue sky laws, and (vi) the Registration Statement has become
effective under the 1933 Act, and to the best of the knowledge of
such counsel, no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for
that purpose have been instituted or are pending or contemplated
under the 1933 Act.
(g) That the Texas Fund shall have received an opinion of
Ropes & Gray dated the Exchange Date to the effect that (i) no
gain or loss will be recognized by the Texas Fund as a result of
the transaction contemplated by this Agreement, (ii) no gain or
loss will be recognized by the shareholders of the Texas Fund on
the distribution to them by the Texas Fund of the Income Fund
Shares in exchange for their shares of the Texas Fund as
contemplated by this Agreement, (iii) the basis of the Income
Fund Shares a shareholder receives in place of his or her Texas
Fund shares will be the same as the basis of his or her Texas
Fund shares exchanged, and (iv) a shareholder's holding period
for the Income Fund Shares received by him or her will be
determined by including the period for which he or she held the
Texas Fund shares exchanged therefor, provided that he or she
held such the Texas Fund shares as a capital asset.
(h) That all proceedings taken by the Income Fund in
connection with the transactions contemplated by this Agreement
and all documents incidental thereto shall be satisfactory in
form and substance to the Texas Fund and Ropes & Gray.
(i) That the Registration Statement shall have become
effective under the 1933 Act, and no stop order suspending such
effectiveness shall have been instituted or, to the knowledge of
the Income Fund, contemplated by the Commission.
(j) That the Texas Fund shall have received from the
Commission, any relevant state securities administrator, the FTC
and the Department such order or orders as Ropes & Gray deems
reasonably necessary or desirable under the 1933 Act, the 1934
Act, the 1940 Act, any applicable state securities or blue sky
laws and the H-S-R Act in connection with the transactions
contemplated hereby, and that all such orders shall be in full
force and effect.
11. INDEMNIFICATION. (a) The Texas Fund will indemnify and
hold harmless the Income Fund, its trustees and its officers (for
purposes of this subparagraph, the "Indemnified Parties") against
any and all expenses, losses, claims, damages and liabilities at
any time imposed upon or reasonably incurred by any one or more
of the Indemnified Parties in connection with, arising out of, or
resulting from any claim, action, suit or proceeding in which any
one or more of the Indemnified Parties may be involved or with
which any one or more of the Indemnified Parties may be
threatened by reason of any untrue statement or alleged untrue
statement of a material fact relating to the Texas Fund contained
in the Registration Statement, the Prospectus or the Proxy
Statement or any amendment or supplement to any of the foregoing,
or arising out of or based upon the omission or alleged omission
to state in any of the foregoing a material fact relating to the
Texas Fund required to be stated therein or necessary to make the
statements relating to the Texas Fund therein not misleading,
including, without limitation, any amounts paid by any one or
more of the Indemnified Parties in a reasonable compromise or
settlement of any such claim, action, suit or proceeding, or
threatened claim, action, suit or proceeding made with the
consent of the Texas Fund. The Indemnified Parties will notify
the Texas Fund in writing within ten days after the receipt by
any one or more of the Indemnified Parties of any notice of legal
process or any suit brought against or claim made against such
Indemnified Party as to any matters covered by this Section
11(a). The Texas Fund shall be entitled to participate at its
own expense in the defense of any claim, action, suit or
proceeding covered by this Section 11(a), or, if it so elects, to
assume at its expense by counsel satisfactory to the Indemnified
Parties the defense of any such claim, action, suit or
proceeding, and if the Texas Fund elects to assume such defense,
the Indemnified Parties shall be entitled to participate in the
defense of any such claim, action, suit or proceeding at their
expense. The Texas Fund's obligation under this Section 11(a) to
indemnify and hold harmless the Indemnified Parties shall
constitute a guarantee of payment so that the Texas Fund will pay
in the first instance any expenses, losses, claims, damages and
liabilities required to be paid by it under this Section 11(a)
without the necessity of the Indemnified Parties' first paying
the same.
(b) The Income Fund will indemnify and hold harmless, out
of the assets of the Income Fund but no other assets, the Texas
Fund, its trustees and its officers (for purposes of this
subparagraph, the "Indemnified Parties") against any and all
expenses, losses, claims, damages and liabilities at any time
imposed upon or reasonably incurred by any one or more of the
Indemnified Parties in connection with, arising out of, or
resulting from any claim, action, suit or proceeding in which any
one or more of the Indemnified Parties may be involved or with
which any one or more of the Indemnified Parties may be
threatened by reason of any untrue statement or alleged untrue
statement of a material fact relating to the Income Fund
contained in the Registration Statement, the Prospectus or the
Proxy Statement, or any amendment or supplement to any thereof,
or arising out of, or based upon, the omission or alleged
omission to state in any of the foregoing a material fact
relating to the Income Fund required to be stated therein or
necessary to make the statements relating to the Income Fund
therein not misleading, including without limitation any amounts
paid by any one or more of the Indemnified Parties in a
reasonable compromise or settlement of any such claim, action,
suit or proceeding, or threatened claim, action, suit or
proceeding made with the consent of the Income Fund. The
Indemnified Parties will notify the Income Fund in writing within
ten days after the receipt by any one or more of the Indemnified
Parties of any notice of legal process or any suit brought
against or claim made against such Indemnified Party as to any
matters covered by this Section 11(b). The Income Fund shall be
entitled to participate at its own expense in the defense of any
claim, action, suit or proceeding covered by this Section 11(b),
or, if it so elects, to assume at its expense by counsel
satisfactory to the Indemnified Parties the defense of any such
claim, action, suit or proceeding, and, if the Income Fund elects
to assume such defense, the Indemnified Parties shall be entitled
to participate in the defense of any such claim, action, suit or
proceeding at their own expense. The Income Fund's obligation
under this Section 11(b) to indemnify and hold harmless the
Indemnified Parties shall constitute a guarantee of payment so
that the Income Fund will pay in the first instance any expenses,
losses, claims, damages and liabilities required to be paid by it
under this Section 11(b) without the necessity of the Indemnified
Parties' first paying the same.
12. NO BROKER, ETC. Each of the Texas Fund and the Income
Fund represents that there is no person who has dealt with it who
by reason of such dealings is entitled to any broker's or
finder's or other similar fee or commission arising out of the
transactions contemplated by this Agreement.
13. TERMINATION. The Texas Fund and the Income Fund may,
by mutual consent of their respective trustees, terminate this
Agreement, and the Texas Fund or the Income Fund, after
consultation with counsel and by consent of their respective
trustees or an officer authorized by such trustees, may waive any
condition to their respective obligations hereunder. If the
transactions contemplated by this Agreement have not been
substantially completed by December 31, 1994, this Agreement
shall automatically terminate on that date unless a later date is
agreed to by the Texas Fund and the Income Fund.
14. RULE 145. Pursuant to Rule 145 under the 1933 Act, the
Income Fund will, in connection with the issuance of any Income
Fund Shares to any person who at the time of the transaction
contemplated hereby is deemed to be an affiliate of a party to
the transaction pursuant to Rule 145(c), cause to be affixed upon
the certificates issued to such person (if any) a legend as
follows:
"THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD
OR OTHERWISE TRANSFERRED EXCEPT TO PUTNAM TAX EXEMPT
INCOME FUND OR ITS PRINCIPAL UNDERWRITER UNLESS (i) A
REGISTRATION STATEMENT WITH RESPECT THERETO IS
EFFECTIVE UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR (ii) IN THE OPINION OF COUNSEL REASONABLY
SATISFACTORY TO PUTNAM TEXAS TAX EXEMPT INCOME FUND
SUCH REGISTRATION IS NOT REQUIRED."
and, further, the Income Fund will issue stop transfer
instructions to the Income Fund's transfer agent with respect to
such shares. the Texas Fund will provide the Income Fund on the
Exchange Date with the name of any Texas Fund shareholder who is
to the knowledge of the Texas Fund an affiliate of the Texas Fund
on such date.
15. COVENANTS, ETC. DEEMED MATERIAL. All covenants,
agreements, representations and warranties made under this
Agreement and any certificates delivered pursuant to this
Agreement shall be deemed to have been material and relied upon
by each of the parties, notwithstanding any investigation made by
them or on their behalf.
16. SOLE AGREEMENT; AMENDMENTS. This Agreement supersedes
all previous correspondence and oral communications between the
parties regarding the subject matter hereof, constitutes the only
understanding with respect to such subject matter, may not be
changed except by a letter of agreement signed by each party
hereto, and shall be construed in accordance with and governed by
the laws of The Commonwealth of Massachusetts.
17. AGREEMENTS AND DECLARATIONS OF TRUST. Copies of the
Agreements and Declarations of Trust of the Texas Fund and the
Income Fund, respectively, 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 the trustees
of the Texas Fund and the Income Fund, respectively, as trustees
and not individually and that the obligations of this instrument
are not binding upon any of the trustees, officers or
shareholders of the Texas Fund or the Income Fund individually
but are binding only upon the assets and property of the Texas
Fund and the Income Fund, respectively.
This Agreement may be executed in any number of
counterparts, each of which, when executed and delivered, shall
be deemed to be an original.
PUTNAM TAX EXEMPT INCOME FUND
By: /S/ GORDON H. SILVER
Vice President
PUTNAM TEXAS TAX EXEMPT INCOME FUND
By: /S/ GORDON H. SILVER
Vice President
Part C. OTHER INFORMATION
Item 15. INDEMNIFICATION
The information required by this item is incorporated herein by
reference to the Registrant's initial Registration Statement on
Form N-1A (File No. 2-57165) under the Securities Act of 1933 and
the Investment Company Act of 1940 (File No. 811-2675).
Item 16. EXHIBITS
(1) Agreement and Declaration of Trust, as amended
through November 9, 1992 -- Incorporated by
reference to Post-Effective Amendment No. 25 to
the Registrant's Registration Statement on Form N-
1A (File No. 2-57165).
(2) By-Laws, as amended through September 9, 1993 --
Incorporated by reference to Post-Effective
Amendment No. 25 to the Registrant's Registration
Statement on Form N-1A (File No. 2-57165).
(3) a. Copy of Class A specimen share certificate --
Incorporated by reference to Post-Effective
Amendment No. 25 to the Registrant's Registration
Statement on Form N-1A (File No. 2-57165).
b. Copy of Class B specimen share certificate --
Incorporated by reference to Post-Effective
Amendment No. 25 to the Registrant's Registration
Statement on Form N-1A (File No. 2-57165).
(4) Agreement and Plan of Reorganization constitutes
Exhibit A included in Part A hereof.
(5) Portions of By-Laws Relating to Shareholders'
Rights Incorporated by reference to Post-Effective
Amendment No. 25 to the Registrant's Registration
Statement on Form N-1A (File No. 2-57165).
(6) Copy of Management Contract dated July 11, 1991 --
Incorporated by reference to Post-Effective
Amendment No. 23 to the Registrant's Registration
Statement on Form N-1A (File No. 2-57165).
(7) Form of Distributor's Contract dated January 1,
1993 -- Incorporated by reference to Post-
Effective Amendment No. 25 to the Registrant's
Registration Statement on Form N-1A (File No.
2-57165).
(8) Not Applicable.
(9) Copy of Custodian Agreement with Putnam Fiduciary
Trust Company dated May 3, 1991, as amended
July 13, 1992 -- Incorporated by reference to
Post-Effective Amendment No. 25 to the
Registrant's Registration Statement on Form N-1A
(File No. 2-57165).
(10) a. Copy of Class A Distribution Plan and Agreement
dated January 1, 1993 -- Incorporated by reference
to Post-Effective Amendment No. 25 to the
Registrant's Registration Statement on Form N-1A
(File No. 2-57165).
b. Form of Class B Distribution Plan and Agreement
dated January 1, 1993 -- Incorporated by reference
to Post-Effective Amendment No. 25 to the
Registrant's Registration Statement on Form N-14
(File No. 33-49721).
(11) Opinion of Ropes & Gray, including consent --
filed herewith.
(12) Opinion of Ropes & Gray as to Tax Matters -- to be
filed by Pre-Effective Amendment to Registrant's
Registration Statement on Form N-14.
(13) a. Specimen Dealer Sales Contract -- Incorporated by
reference to Post-Effective Amendment No. 23 to
the Registrant's Registration Statement on Form N-
1A (File No. 2-57165).
b. Specimen Financial Institution Sales Contract --
Incorporated by reference to Post-Effective
Amendment No. 23 to the Registrant's Registration
Statement on Form N-1A (File No. 2-57165).
c. Copy of Investor Servicing Agreement dated June 3,
1991 -- Incorporated by reference to Post-
Effective Amendment No. 23 to the Registrant's
Registration Statement on Form N-1A (File No. 2-
57165).
(14) Consent of Independent Accountants -- Filed
herewith.
(15) a. Financial Schedules in support of most recent
balance sheet incorporated by reference to Post-
Effective Amendment No. 23 to the Registrant's
Registration Statement on Form N-1A (File No. 2-
57165)
(16) Power of Attorney -- Filed herewith.
(17) Copy of Registrant's Declaration under Rule 24f-2
-- Incorporated by reference to the Registrant's
initial Registration Statement on Form N-1A (File
No. 2-57165).
Item 17. UNDERTAKINGS
(1) The undersigned Registrant agrees that prior to any public
reoffering of the securities registered through the use of a
prospectus which is a part of this Registration Statement by
any person or party who is deemed to be an underwriter
within the meaning of Rule 145(c) under the Act, the
reoffering prospectus will contain the information called
for by the applicable registration form for reofferings by
persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable
form.
(2) The undersigned Registrant agrees that every prospectus that
is filed under paragraph (1) above will be filed as a part
of an amendment to this Registration Statement and will not
be used until the amendment is effective, and that, in
determining any liability under the Act, each post-effective
amendment shall be deemed to be a new Registration Statement
for the securities offered therein, and the offering of the
securities at that time shall be deemed to be the initial
bona fide offering of them.
<PAGE>
NOTICE
A copy of the Agreement and Declaration of Trust, as
amended, of Putnam Tax Exempt Income Trust (the "Fund"), is on
file with the Secretary of State of The Commonwealth of
Massachusetts, and notice is hereby given that this Registration
Statement has been executed on behalf of the Fund by officers of
the Fund as officers and by its Trustees as trustees and not
individually, and the obligations of or arising out of this
Registration Statement are not binding upon any of the Trustees,
officers, or shareholders of the Fund individually, but are
binding only upon the assets and property of the Fund.<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant has duly caused this Registration Statement to be
signed on its behalf by the undersigned, in the City of Boston
and The Commonwealth of Massachusetts on the day of February,
1994.
PUTNAM TAX EXEMPT INCOME TRUST
/S/GORDON H. SILVER
Gordon H. Silver
Vice President
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed below by the
following persons in the capacities and on the date indicated.
SIGNATURE TITLE DATE
* President and Chairman February 1, 1994
George Putnam of the Trustees;
Principal Executive
Officer; Trustee
* Vice Chairman and February 1, 1994
William F. Pounds Trustee
* Principal Financial February 1, 1994
John D. Hughes Officer; Vice President;
Treasurer
* Principal Accounting February 1, 1994
Paul G. Bucuvalas Officer; Assistant
Treasurer
<PAGE>
SIGNATURE TITLE DATE
* Trustee February 1, 1994
Jameson Adkins Baxter
* Trustee February 1, 1994
Hans H. Estin
* Trustee February 1, 1994
John A. Hill
* Trustee February 1, 1994
Elizabeth T. Kennan
* Trustee February 1, 1994
Lawrence J. Lasser
* Trustee February 1, 1994
Robert E. Patterson
* Trustee February 1, 1994
Donald S. Perkins
* Trustee February 1, 1994
George Putnam, III
* Trustee February 1, 1994
A.J.C. Smith
* Trustee February 1, 1994
W. Nicholas Thorndike
*By /S/GORDON H. SILVER
Gordon H. Silver
Attorney-in-fact
<PAGE>
EXHIBIT INDEX
EXHIBIT
11 Opinion of Ropes & Gray, including consent
14 Consent of Independent Accountants
16 Power of Attorney
<PAGE>
February 1, 1994
Putnam Tax-Exempt Income Fund
One Post Office Square
Boston, Massachusetts 02109
Ladies and Gentlemen:
We have acted as counsel to Putnam Tax-Exempt Income Fund (the
"Fund") in connection with the Registration Statement of the Fund on
Form N-14 (File Nos. 2-57165 and 811-2675) (the "Registration
Statement"), under the Securities Act of 1933, as amended (the "Act"),
relating to the proposed combination of the Fund with the Putnam Texas
Tax-Exempt Income Fund (the "Texas Fund"), and the issuance of shares
of the Fund in connection therewith (the "Shares"), all in accordance
with the terms of the Agreement and Plan of Reorganization between the
Fund and the Texas Fund dated on or about February 1, 1994 (the
"Agreement").
We have examined the Fund's Agreement and Declaration of Trust on
file in the office of the Secretary of State of The Commonwealth of
Massachusetts and the Clerk of the City of Boston and the Fund's By-
Laws, as amended, and are familiar with the actions taken by the
Fund's Trustees in connection with the issuance and sale of the
Shares. We have also examined such other documents and records as we
have deemed necessary for the purpose of this opinion.
Based upon the foregoing, we are of the opinion that:
1. The Fund is a duly organized and validly existing
unincorporated association under the laws of The Commonwealth of
Massachusetts and is authorized to issue an unlimited number of its
shares of beneficial interest.
2. The Shares have been duly authorized and, when issued in
accordance with the Agreement, will be validly issued, fully paid, and
nonassessable by the Fund.
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<PAGE>
Putnam Tax Exempt Income Fund -2- February 1, 1994
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
note, bond, contract, instrument, certificate, or undertaking 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 solely by reason of his being or having been a
shareholder. Thus, the risk of a shareholder's incurring financial
loss on account of being a shareholder 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
Act. We consent to the filing of this opinion with and as part of the
Registration Statement and to the references to our firm in the
related prospectus under the captions "Taxation" and "Legal Matters."
Very truly yours,
/s/ Ropes & Gray
ROPES & GRAY
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of
Putnam Tax Exempt Income Fund:
We consent to the Incorporation by reference in the Registration
Statement of Putnam Tax Exempt Income Fund on Form N-14 (File No. 2-
57165) of our report dated November 17, 1993, on our audit of the
financial statements and "Financial highlights" of Putnam Tax Exempt
Income Fund, which report is included in the Annual Report to
Shareholders, for the year ended September 30, 1993, which is
incorporated by reference in the Registration Statement, our report
dated March 18, 1993, on our audit of the financial statements and
"Selected per share data and ratios" of Putnam Texas Tax Exempt Income
Fund, which report is included in the Annual Report to Shareholders,
for the year ended January 31, 1993, which is Incorporated by
reference in the Registration Statement, and our report dated
September 15, 1993, on our audit of the financial statements and
"Financial highlights" of Putnam Texas Tax Exempt Income Fund, which
report is included in the Semi-annual Report to Shareholders, for the
six months ended July 31, 1993, which is incorporated by reference in
the Registration Statement. We also consent to the reference to our
Firm under the caption "Independent Accountants and financial
statements" in the Statement of Additional Information.
COOPERS & LYBRAND
Boston, Massachusetts
February 1, 1994
<PAGE>
POWER OF ATTORNEY
We, the undersigned Officers and Trustees of Putnam 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, our true and
lawful attorneys, with full power to them and each of them, to sign
for us, and in our names and in the capacities indicated below, the
Registration Statement on Form N-14 of Putnam 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 our 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 our hands and common seal on the date set forth below.
SIGNATURE TITLE DATE
/s/George Putnam
Principal Executive
GEORGE PUTNAM Officer; President and
Chairman of the Trustees January 6, 1994
/s/ William F. Pounds Trustee; Vice Chairman January 6, 1994
WILLIAM F. POUNDS
/s/ John D. Hughes Principal Financial
JOHN D. HUGHES Officer; Treasurer January 6, 1994
/s/ Paul G. Bucuvalas Principal Accounting
PAUL G. BUCUVALAS Officer; Assistant
Treasurer January 6, 1994
<PAGE>
/s/ Jameson A Baxter
JAMESON A. BAXTER Trustee January 6, 1994
/s/ Hans H. Estin Trustee January 6, 1994
HANS H. ESTIN
/s/ John A. Hill Trustee January 6, 1994
JOHN A. HILL
/s/ Elizabeth T. Kennan Trustee January 6, 1994
ELIZABETH T. KENNAN
/s/ Lawrence J. Lasser Trustee January 6, 1994
LAWRENCE J. LASSER
/s/ Robert E. Patterson Trustee January 6, 1994
ROBERT E. PATTERSON
/s/ Donald S. Perkins Trustee January 6, 1994
DONALD S. PERKINS
/s/ George Putnam, III Trustee January 6, 1994
GEORGE PUTNAM, III
/s/ A.J.C. Smith Trustee January 6, 1994
A.J.C. SMITH
/s/ W. Nicholas Thorndike Trustee January 6, 1994
W. NICHOLAS THORNDIKE
