AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON
APRIL 1 , 1994
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-1A
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
/ X /
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Pre-Effective Amendment No. / /
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Post-Effective Amendment No. 16 / X /
and
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY / X /
ACT OF 1940
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Amendment No. 17
/ X /
(Check appropriate box or boxes) ----
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PUTNAM NEW YORK TAX EXEMPT INCOME FUND
Registration No. 2-83909
811-3741
(Exact name of registrant as specified in charter)
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
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Pre-Effective Amendment No. / /
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Post-Effective Amendment No. 9 / X /
and
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY / X /
ACT OF 1940
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Amendment No. 9
/ X /
(Check appropriate box or boxes) ----
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PUTNAM NEW YORK TAX EXEMPT MONEY MARKET FUND
Registration No. 33-17344
811-5335
(Exact name of registrant as specified in charter)
One Post Office Square, Boston, Massachusetts 02109
(Address of principal executive offices)
Registrant's Telephone Number, including Area Code (617) 292-1000
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It is proposed that this filing will become effective
(check appropriate box)
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/ / immediately upon filing pursuant to paragraph
(b)
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/ / on (date) pursuant to paragraph (b)
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/ / 60 days after filing pursuant to paragraph (a)
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/ X / on June 1, 1994 pursuant to paragraph
(a) of Rule 485
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JOHN R. VERANI, Vice President
Putnam New York Tax Exempt Income Fund
Putnam New York Tax Exempt Money Market Fund
One Post Office Square
Boston, Massachusetts 02109
(Name and address of agent for service)
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Copy to:
JOHN W. GERSTMAYR, Esquire
ROPES & GRAY
One International Place
Boston, Massachusetts 02110
Each Registrant has registered an indefinite number or
amount of securities under the Securities Act of 1933 pursuant to
Rule 24f-2. Rule 24f-2 notices for Putnam New York Tax Exempt
Income Fund and Putnam New York Tax Exempt Money Market Fund for
the fiscal year ended November 30, 1993 were filed on January 27,
1994.<PAGE>
<TABLE>
<CAPTION>
PUTNAM NEW YORK TAX EXEMPT MONEY MARKET FUND
CALCULATION OF REGISTRATION FEE
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Proposed Proposed
maximum maximum
Amount offering aggregate Amount of
Title of securities being price per offering registration
being registeredregistered unit* price** fee
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<C> <C> <C> <C> <C>
Shares of Beneficial
Interest 19,132,987 shs. $1.00 $290,000 $100.00
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* Based on offering price per share.
** Calculated pursuant to Rule 24e-2 under the Investment Company Act of 1940. The
total amount of securities redeemed or repurchased during the Registrant's
previous fiscal year was 184,737,957 shares, 165,894,970 of which have been used
for reductions pursuant to Rule 24e-2(a) or 24f-2(c) under said Act in the current
fiscal year, and 18,842,987 of which are being used for such reduction in this
Amendment.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
PUTNAM NEW YORK TAX EXEMPT INCOME FUND
PUTNAM NEW YORK TAX EXEMPT MONEY MARKET FUND
CROSS REFERENCE SHEET
(as required by Rule 481(a))
PART A
N - 1A ITEM NO. LOCATION
PUTNAM NEW YORK TAX EXEMPT PUTNAM
NEW YORK TAX EXEMPT
INCOME FUND INCOME FUND
PUTNAM NEW YORK TAX EXEMPT PUTNAM
NEW YORK TAX EXEMPT
MONEY MARKET FUND
INTERMEDIATE FUND
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<C> <C> <C>
1. Cover Page. ...................... Cover Page Cover Page
2. Synopsis. ........................ Expenses summary Expenses summary
3. Condensed Financial Information. . Financial highlights : Financial
highlights:
The Income Fund; The Income Fund;
The Money Market Fund ; How performance is
How performance is shown : shown
-The Income Fund-
-The Money Market Fund
4. General Description of
Registrant. ..................... . Objectives; How objectives Objectives;
How
are pursued; Organization objectives are pursued;
and history Organization and history
</TABLE>
<TABLE>
<CAPTION>
<C> <C> <C>
5. Management of the Fund. ......... . Expenses summary; How the Expenses
summary; How
Funds are managed; the Funds are managed;
About Putnam Investments, Inc. About Putnam Investments, Inc.
5a . Management's Discussion of Fund
Performance....................... (Contained in the Annual The Income Fund - (Contained in the
Reports of the Registrants) Annual Report of the Registrant)
The Intermediate Fund - Not
applicable
6. Capital Stock and Other
Securities....................... Cover Page; Organization Cover Page; Organization
and history; How distributions and history; How distributions
are made; tax information are made; tax information
7. Purchase of Securities Being
Offered.......................... How to buy shares: How to buy shares; Distribution
-The Income Fund- Plans; How to sell shares; How
-The Money Market Fund; to exchange shares; How the Funds
Distribution Plans: value their shares
-The Income Fund-
-The Money Market Fund;
How to sell shares:
-The Income Fund-
-The Money Market Fund;
How to exchange shares:
-The Income Fund-
-The Money Market Fund;
How each Fund values
its shares
</TABLE>
[C] [C] [C]
<PAGE>
<TABLE>
<CAPTION>
<C> <C>
8. Redemption or Repurchase. ....... . How to buy shares : How to buy
shares; How
-The Income Fund- to sell shares; How to
-The Money Market Fund; exchange shares; Organization
How to sell shares: and history
-The Income Fund-
-The Money Market Fund;
How to exchange shares:
-The Income Fund-
-The Money Market Fund;
Organization and history
9. Pending Legal Proceedings. ....... Not Applicable Not Applicable
PART B
N - 1A ITEM NO. LOCATION
PUTNAM NEW YORK TAX EXEMPT PUTNAM NEW YORK TAX EXEMPT
INCOME FUND INCOME FUND
PUTNAM NEW YORK TAX EXEMPT PUTNAM NEW YORK TAX EXEMPT
MONEY MARKET FUND INTERMEDIATE
FUND
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10. Cover Page. ...................... Cover Page Cover Page
11. Table of Contents. ............... Cover Page Cover Page
12. General Information and History. . Organization and Organization and
history (Part A) history (Part A)
/TABLE
<PAGE>
<TABLE>
<CAPTION>
<C> <C> <C>
13. Investment Objectives and
Policies. ........................ How objectives are How objectives
are
pursued (Part A); pursued (Part A);
Investment Restrictions Investment Restrictions
of the Funds; of the Funds;
Miscellaneous Investment Miscellaneous Investment
Practices Practices
14. Management of the Registrant. .... Management of the Management of the
Fund (Trustees; Fund (Trustees;
Officers); Additional Officers); Additional
Officers of the Fund Officers of the Trust
15. Control Persons and Principal
Holders of Securities. .......... . Management of the Management of the
Fund
Fund (Trustees and (Trustees and Officers) ;
Officers); Fund Fund Charges and Expenses
Charges and Expenses (Ownership of Fund Shares)
(Ownership of Fund Shares)
16. Investment Advisory and Other
Services......................... Management of the Fund Management of the Fund
(Trustees; Officers; (Trustees; Officers; The
The Management Contract; Management Contract;
Principal Underwriter); Principal Underwriter);
Fund Charges and Fund Charges and Expenses
Expenses; Distribution Distribution Plans; Independent
Plans; Independent Accountants and Financial
Accountants and Statements; Custodian
Financial Statements;
Custodians
/TABLE
<PAGE>
<TABLE>
<C> <C> <C>
<CAPTION>
17. Brokerage Allocation. ............ Management of the Fund
Management of the Fund<R
(Portfolio Transactions); (Portfolio Transactions);
Fund Charges and Expenses Fund Charges and Expenses
18. Capital Stock and Other
Securities....................... Organization and history Organization and history
(Part A); How distributions (Part A); How distributions
are made; tax information are made; tax information
(Part A); Suspension of (Part A); Suspension of
Redemptions Redemptions
19. Purchase, Redemption and Pricing
of Securities Being Offered. ..... How to buy shares: How to buy shares (Part A);
-The Income Fund- How to sell shares (Part A);
-The Money Market Fund How to exchange shares (Part
(Part A); A); How to Buy Shares;
How to sell shares: Determination of Net Asset Value;
-The Income Fund- Suspension of Redemptions
-The Money Market Fund
(Part A);
How to exchange shares:
-The Income Fund-
-The Money Market Fund
(Part A); How to Buy
Shares; Determination
of Net Asset Value;
Suspension of Redemptions
20. Tax Status. .................... . How distributions are made; How
distributions are
tax information (Part A); made; tax information
Taxes (Part A); Taxes
/TABLE
<PAGE>
<TABLE>
<CAPTION>
<C> <C> <C>
21. Underwriters. ................... Management of the Fund
Management of the Fund<R
(Principal Underwriter); (Principal Underwriter);
Fund Charges and Expenses Fund Charges and Expenses
22. Calculation of Performance Data. . How performance is shown How
performance is shown
(Part A); Investment (Part A); Investment Performance
Performance of the of the Funds; Standard Performance
Funds; Standard Measures
Performance Measures
23. Financial Statements. ............ Independent Accountants
Independent Accountants<
and Financial Statements and Financial Statements; Statement
of Assets and Liabilities
<PAGE>
PART C
Information required to be included in Part C is set forth
under the appropriate Item, so numbered, in Part C of the
Registration Statement.
<PAGE>
PROSPECTUS
JUNE 1, 1994
PUTNAM NEW YORK TAX EXEMPT INCOME TRUST
PUTNAM NEW YORK TAX EXEMPT INCOME FUND
PUTNAM NEW YORK INTERMEDIATE TAX EXEMPT FUND
INVESTMENT STRATEGY: TAX-ADVANTAGED
This Prospectus explains concisely what you should know before
investing in the Funds. Please read it carefully and keep it for
future reference. You can find more detailed information about
the Trust in the June 1, 1994 Statement of
Additional Information, as amended from time to time. For a free
copy of the Statement, call Putnam Investor Services at 1-800-
225-1581. The Statement has been filed with the Securities and
Exchange Commission and is incorporated into this Prospectus by
reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY FINANCIAL INSTITUTION, ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY, AND INVOLVE RISK, INCLUDING
THE POSSIBLE LOSS OF PRINCIPAL.
BOSTON * LONDON * TOKYO<PAGE>
Putnam New York Tax Exempt Income Trust (the "Trust") is a
series investment company currently offering two separate
portfolios: Putnam New York Tax Exempt Income Fund and
Putnam New York Intermediate Tax Exempt Fund (the "Funds").
Putnam New York Tax Exempt Income Fund (the "Income Fund") and
Putnam New York Intermediate Tax Exempt Fund (the "Intermediate
Fund") both seek as high a level of current income exempt
from federal income tax and New York State and City personal
income taxes as Putnam Investment Management, Inc., the Fund's
investment manager ("Putnam Management"), believes is consistent
with preservation of capital .
PUTNAM NEW YORK TAX EXEMPT INCOME FUND , invests primarily
in a diversified portfolio of longer-term New York Tax Exempt
Securities.
PUTNAM NEW YORK INTERMEDIATE TAX EXEMPT FUND, invests
primarily in a non-diversified portfolio of intermediate-term New
York Tax Exempt Securities.
Each Fund offers two classes of shares: Class A and Class B.
Each class is sold pursuant to different sales arrangements
and bears different expenses. For more information about
the different sales arrangements, see "Alternative sales
arrangements." For information about various expenses borne
by each class, see "Expenses summary."
The Funds are separate, open-end investment companies. Each is
described in this Prospectus in order to help investors
understand the similarities and differences between the Funds and
determine which Fund--or combination of Funds--best meets their
investment objectives. See "Organization and history."<PAGE>
ABOUT THE FUNDS
Expenses summary
............................................................
Financial highlights
............................................................
Objectives
............................................................
How objectives are pursued
............................................................
How performance is shown
............................................................
How the Funds are managed
............................................................
Organization and history
ABOUT YOUR INVESTMENT
Alternative sales arrangements
............................................................
How to buy shares
............................................................
Distribution Plans
............................................................
How to sell shares
............................................................
How to exchange shares
............................................................
How each Fund values its shares
............................................................
How distributions are made; tax information
<PAGE>
ABOUT PUTNAM INVESTMENTS, INC.
ABOUT THE FUND
EXPENSES SUMMARY
PUTNAM NEW YORK TAX EXEMPT INCOME FUND
Expenses are one of several factors to consider when investing
in a Fund. The following table summarizes your maximum
transaction costs from investing in the Income Fund and
the expenses incurred by the Income Fund based on its
most recent fiscal year. The expenses shown in the table for the
Class B shares of the Income Fund have been annualized based on
expense information for its most recent fiscal period. The
Examples show the cumulative expenses attributable to a
hypothetical $1,000 investment in the Income Fund over
specified periods.
<PAGE>
CLASS A SHARES CLASS B SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed
on Purchases (as a percentage
of offering price) 4 .75%
NONE*
5.0% in the first
Deferred Sales Charge (as a year, declining
percentage of the lower of to 1.0% in the
original purchase price or sixth year, and
redemption proceeds) NONE** eliminated thereafter
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees 0 .48% 0 .47%
12b-1 Fees 0 .20% 0 .85%
Other Expenses 0 .10% 0 .11%
Total Fund Operating Expenses 0 .78% 1 .43%
EXAMPLES
Your investment of $1,000 would incur the following expenses,
assuming 5% annual return and redemption at the end of each
period:
1 3 5 10
year years years years
CLASS A $55 $71 $89 $140
CLASS B $65 $75 $98 $154***
Your investment of $1,000 would incur the following expenses,
assuming 5% annual return but no redemption:
1 3 5 10
year years years years
CLASS A $55 $71 $89 $140
CLASS B $15 $45 $78 $154***
<PAGE>
The table is provided to help you understand the expenses of
investing in the Income Fund and your share of the operating
expenses which the Income Fund incurs. The 12b-1 fees for Class
A shares of the Income Fund shown in the table reflect the
amounts to which the Fund's Trustees currently limit payments
under the Fund's Class A Distribution Plan. Actual 12b-1 fees
and total Fund operating expenses for the Income Fund's Class A
shares were 0.18% and 0.76%, respectively. The Examples do not
represent past or future expense levels. Actual expenses may be
greater or less than those shown. Federal regulations require
the Examples to assume a 5% annual return, but actual annual
return has varied.
* Class B shares of the Income Fund are sold
without a front-end sales charge, but their 12b-1 fees may
cause long-term shareholders to pay more than the economic
equivalent of the maximum permitted front-end sales
charge.
** A deferred sales charge of up to 1.00% is assessed on
certain redemptions of Class A shares of the Income Fund
that were purchased without an initial sales charge as
part of an investment of $1 million or more. See "How to
buy shares -- Class A shares."
*** Reflects conversion of Class B shares to Class A shares
(which pay lower ongoing expenses) approximately eight
years after purchase. See "How to buy shares -
Class B shares - Conversion of Class B shares."
PUTNAM NEW YORK INTERMEDIATE TAX EXEMPT FUND
Expenses are one of several factors to consider when
investing in the Intermediate Fund. The following table
summarizes your maximum transaction costs from investing in the
Intermediate Fund and expenses which the Intermediate Fund
expects to incur in its first fiscal year. The Examples show the
estimated cumulative expenses attributable to a hypothetical
$1,000 investment in the Intermediate Fund over specified
periods.
<PAGE>
CLASS A SHARES CLASS B SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed
on Purchases (as a percentage
of offering price) 3 .25% NONE*
3.0% in the first
Deferred Sales Charge (as a
year, declining
percentage of the lower of to 1.0% in the
original purchase price or
fourth year, and
redemption proceeds) NONE ** eliminated
thereafter
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees
(after expense limitation) 0 .39% 0 .39%
12b -1 Fees 0 .15% 0 .75%
Other Expenses 0 .45% 0 .45%
Total Fund Operating Expenses
(after expense limitation) 0 .99% 1 .59%
EXAMPLES
Your investment of $1,000 would incur the following expenses,
assuming 5% annual return and redemption at the
end of each period:
1 3
year years
CLASS A $42 $63
CLASS B $46 $70
Your investment of $1,000 would incur the following expenses,
assuming 5% annual return but no redemption:
1 3
year years
CLASS A $42 $63
CLASS B $16 $50
The table is provided to help you understand the
expenses of investing in the Intermediate Fund and your
share of the operating expenses which the Intermediate Fund
expects to incur during its first fiscal year. The annual
management fees shown in the table reflect an expense
limitation currently in effect. In the absence of the expense
limitation, estimated management fees would be 0.60% and
estimated total Fund operating expenses would be 1.20% for Class
A shares and 1.80% for Class B shares. The 12b-1 fees shown in
the table reflect the amount to which the Trustees currently
limit payments under the Class A Distribution Plan and the
maximum amount permitted under the Class B Distribution Plan.
"Other expenses" are based on estimated amounts for the
Intermediate Fund's first fiscal year . The Examples do not
represent past or future expense levels. Actual expenses
incurred by the Intermediate Fund may be greater or less than
those shown. Federal regulations require the Examples to assume
a 5% annual return, but actual annual return will vary.
* Class B shares of the Intermediate Fund are sold without
a front-end sales charge, but their 12b-1 fees may cause
long-term shareholders to pay more than the economic
equivalent of the maximum permitted front-end sales
charge.
** A deferred sales charge of up to 1.00% is assessed on
certain redemptions of Class A shares of the Intermediate
Fund that were purchased without an initial sales charge
as part of an investment of $1 million or more. See "How
to buy shares."
*** Reflects conversion of Class B shares to Class A shares
(which pay lower ongoing expenses) approximately eight
years after purchase. See "How to buy shares -- Conversion
of Class B shares."
FINANCIAL HIGHLIGHTS
The table on the following page presents per
share financial information for the ten most recent fiscal years
of the Income Fund . This information has been audited
and reported on by the Trust's independent accountants.
The Report of Independent Accountants and financial statements
included in the Trust's Annual Report to shareholders
for the 1993 fiscal year are incorporated by reference into this
Prospectus. The Trust's Annual Report, which
contains additional unaudited performance information,
will be made available without charge upon request. No shares
of the Intermediate Fund were outstanding during these
periods.
FINANCIAL HIGHLIGHTS *
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<PAGE>
(The tables appear on page 8a)
</TABLE>
<TABLE>
<CAPTION>
<C>
PUTNAM NEW YORK TAX EXEMPT INCOME FUND
FINANCIAL HIGHLIGHTS*
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
FOR THE PERIOD
JANUARY 4, 1993
(COMMENCEMENT
OF OPERATIONS)
NOVEMBER 30 YEAR ENDED NOVEMBER 30
1993 1993 1992 1991 1990
CLASS B CLASS A
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $8.95 $8.98 $8.75 $8.34 $8.61
INVESTMENT OPERATIONS
NET INVESTMENT INCOME .40 .53 .57 .58 .58
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS .42 .52 .32 .42 (.23)
TOTAL FROM INVESTMENT OPERATIONS .82 1.05 .89 1.00 .35
LESS DISTRIBUTIONS FROM:
NET INVESTMENT INCOME (.40) (.53) (.58) (.59) (.56)
NET REALIZED GAIN ON INVESTMENTS -- (.10) (.08) -- (.06)
IN EXCESS OF NET REALIZED
GAIN ON INVESTMENTS -- (.02) -- -- --
TOTAL DISTRIBUTIONS (.40) (.65) (.66) (.59) (.62)
NET ASSET VALUE,
END OF PERIOD $9.37 $9.38 $8.98 $8.75 $8.34
TOTAL INVESTMENT RETURN AT
NET ASSET VALUE (%) (A) 10.16(B) 12.02 10.60 12.44 4.37
<PAGE>
NET ASSETS, END OF PERIOD
(IN THOUSANDS) $146,665 $2,280,604 $1,960,500 $1,659,383 $1,416,555
RATIO OF EXPENSES TO AVERAGE
NET ASSETS (%) 1.44(B) .76 .66 .63 .56
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET ASSETS (%) 4.83(B) 5.67 6.44 6.84 6.96
PORTFOLIO TURNOVER (%) 26.60 26.60 20.13 49.91 17.22
SEE PAGE 8 FOR NOTES TO FINANCIAL HIGHLIGHTS.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
TWO TEN
MONTHS MONTHS YEAR
ENDED ENDED ENDED
YEAR ENDED NOVEMBER 30 NOV. 30 YEAR ENDED SEPT. 30 SEPT. 30 NOV. 30
1989 1988 1987 1987 1986 1985 1984
CLASS A
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $8.33 $7.99 $7.76 $8.56 $7.57 $7.10 $7.11
INVESTMENT OPERATIONS
NET INVESTMENT INCOME .60 .61 .11 .60 .65 .56 .65
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS .27 .39 .22 (.72) .99 .47 (.01)
TOTAL FROM INVESTMENT OPERATIONS .87 1.00 .33 (.12) 1.64 1.03 .64
LESS DISTRIBUTIONS FROM:
NET INVESTMENT INCOME (.59) (.60) (.10) (.61) (.65) (.56) (.65)
NET REALIZED GAIN ON INVESTMENTS -- (.06) -- (.07) -- -- --
IN EXCESS OF NET REALIZED
GAIN ON INVESTMENTS -- -- -- -- -- -- --
TOTAL DISTRIBUTIONS (.59) (.66) (.10) (.68) (.65) (.56) (.65)
NET ASSET VALUE,
END OF PERIOD $8.61 $8.33 $7.99 $7.76 $8.56 $7.57 $7.10
TOTAL INVESTMENT RETURN AT
NET ASSET VALUE (%) (A) 10.77 12.99 25.41(B) (1.76) 22.41 17.73(B) 9.47
</TABLE>
<TABLE>
<CAPTION>
<C> <C> <C> <C> <C> <C>
PUTNAM NEW YORK TAX EXEMPT INCOME FUND
NET ASSETS, END OF PERIOD
(IN THOUSANDS) $1,313,050 $1,063,650 $958,201 $950,417 $701,799 $397,735 $241,698
RATIO OF EXPENSES TO AVERAGE
NET ASSETS (%) .57 .54 .48(B) .55 .56 .64(B) .71
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET ASSETS (%) 6.94 7.34 7.95(B) 7.08 7.81 8.67(B) 9.05
PORTFOLIO TURNOVER (%) 42.87 31.91 12.90(C) 43.28 50.45 58.95(C) 122.21
*FINANCIAL HIGHLIGHTS FOR PERIODS ENDED THROUGH NOVEMBER 30, 1992 HAVE BEEN RESTATED TO CONFORM WITH REQUIREMENTS ISSUED
BY THE SEC IN APRIL 1993. THE TABLE HAS BEEN RESTATED TO REFLECT A 3-FOR-1 SHARE SPLIT, CLASS A ONLY, DECLARED BY THE
FUND TO SHAREHOLDERS OF RECORD ON OCTOBER 27, 1989 PAYABLE ON OCTOBER 28, 1989.
(A)TOTAL INVESTMENT RETURN ASSUMES DIVIDEND REINVESTMENT AND DOES NOT REFLECT THE EFFECT OF SALES CHARGES.
(B)ANNUALIZED.
(C)NOT ANNUALIZED.
/TABLE
<PAGE>
OBJECTIVES
PUTNAM NEW YORK TAX EXEMPT INCOME TRUST PROVIDES INVESTORS
WITH A CHOICE OF SEPARATE INVESTMENT PORTFOLIOS SEEKING AN
INVESTMENT OBJECTIVE OF HIGH CURRENT INCOME EXEMPT FROM
FEDERAL INCOME TAX AND NEW YORK STATE AND CITY PERSONAL INCOME
TAX. THE TRUST CURRENTLY OFFERS TWO PORTFOLIOS: PUTNAM NEW
YORK TAX EXEMPT INCOME FUND AND PUTNAM NEW YORK INTERMEDIATE TAX
EXEMPT FUND.
EACH OF THE FUNDS SEEKS AS HIGH A LEVEL OF CURRENT INCOME EXEMPT
FROM FEDERAL INCOME TAX AND NEW YORK STATE AND CITY PERSONAL
INCOME TAXES AS PUTNAM MANAGEMENT BELIEVES IS CONSISTENT WITH
PRESERVATION OF CAPITAL . Under current law, to the
extent distributions by the Funds are derived from interest on
New York Tax Exempt Securities (which are described below) and
are designated as such, they shall be exempt from federal income
tax and New York State and City personal income taxes. Neither
Fund is intended to be a complete investment program, and there
is no assurance that either Fund will achieve its objective.
HOW OBJECTIVES ARE PURSUED
EACH FUND SEEKS ITS OBJECTIVE BY INVESTING PRIMARILY IN A
PORTFOLIO OF NEW YORK TAX EXEMPT SECURITIES (AS DEFINED BELOW).
The Funds have separate investment policies involving differing
levels of yield and risk.
PUTNAM NEW YORK TAX EXEMPT INCOME FUND
PUTNAM NEW YORK TAX EXEMPT INCOME FUND, A DIVERSIFIED FUND,
INVESTS PRIMARILY IN LONGER-TERM NEW YORK TAX EXEMPT SECURITIES.
It is a fundamental policy of the Income Fund that 90% of the
Income Fund's investment income distributions will be exempt from
federal income tax and New York State and City personal income
taxes, except during times of adverse market conditions when more
than 10% of the Income Fund's investment income distributions
could be subject to federal income tax and/or New York State and
City personal income taxes. For temporary or liquidity purposes,
the Income Fund may also invest in taxable obligations, provided
that not more than 10% of the Income Fund's investment income
distributions are subject to federal income tax and/or New York
State and City personal income taxes (except during adverse
market conditions). The Income Fund may also hold its assets in
cash or money market instruments. The Income Fund's investments
in New York Tax Exempt Securities and taxable obligations will be
limited to securities rated at the time of purchase not lower
than the five highest grades assigned by Moody's Investors
Service, Inc. ("Moody's") (Aaa, Aa, A, Baa or Ba) and Standard &
Poor's Corporation ("Standard & Poor's") (AAA, AA, A, BBB or BB),
or unrated securities which Putnam Management determines are of
comparable quality. The Income Fund will not necessarily dispose
of a security when its rating is reduced below its rating at the
time of purchase, although Putnam Management will monitor the
investment to determine whether continued investment in the
security will assist in meeting the Fund's objective. During
fiscal 1993, all of the Income Fund's distributions from net
investment income were exempt from federal income tax and New
York State and City personal income taxes. However,
distributions from capital gains were taxable.
PUTNAM NEW YORK INTERMEDIATE TAX EXEMPT FUND
PUTNAM NEW YORK INTERMEDIATE TAX EXEMPT FUND, A NON-
DIVERSIFIED FUND, INVESTS PRIMARILY IN INTERMEDIATE-TERM NEW
YORK TAX EXEMPT SECURITIES . It is a fundamental policy of
the Intermediate Fund that 80% of the Intermediate Fund's
investment income distributions will be exempt from federal
income tax and New York State and City personal income taxes,
except during times of adverse market conditions when more than
20% of the Intermediate Fund's investment income distributions
could be subject to federal income tax and/or New York State and
City personal income taxes. For temporary or liquidity purposes,
the Intermediate Fund may also invest in taxable obligations,
provided that not more than 20% of the Intermediate Fund's
investment income distributions are subject to federal income tax
and/or New York State and City personal income taxes (except
during adverse market conditions). The Intermediate Fund may
also hold its assets in cash or money market instruments. The
Intermediate Fund's investments in New York Tax Exempt Securities
and taxable obligations will be limited to securities rated at
the time of purchase not lower than the five highest grades
assigned by Moody's (Aaa, Aa, A, Baa or Ba), Standard & Poor's
(AAA, AA, A, BBB or BB), and Fitch Investors Service, Inc.
("Fitch") (AAA, AA, A, BBB and BB) or unrated securities which
Putnam Management determines are of comparable quality. The
Intermediate Fund will not necessarily dispose of a security when
its rating is reduced below its rating at the time of purchase,
although Putnam Management will monitor the investment to
determine whether continued investment in the security will
assist in meeting the Fund's objective.
Under normal market conditions, the Intermediate Fund
expects to maintain a portfolio of New York Tax Exempt Securities
with an intermediate-term dollar-weighted average maturity (i.e.,
six to ten years). Subject to the foregoing limitations, Putnam
Management will adjust the average maturity of the investments
held in the portfolio from time to time, depending on its
assessment of relative yields and risks of securities of
different maturities and its expectations of future changes in
interest rates.
RISK FACTORS FOR THE FUNDS
INVESTORS SHOULD CAREFULLY CONSIDER THEIR ABILITY TO ASSUME THE
RISKS OF OWNING SHARES OF A MUTUAL FUND WHICH INVESTS IN LOWER-
RATED SECURITIES BEFORE MAKING AN INVESTMENT IN THE
FUNDS . The lower ratings of certain securities held by the
Funds reflect a greater possibility that adverse changes
in the financial condition of the issuer, or in general economic
conditions, or both, or an unanticipated rise in interest rates,
may impair the ability of the issuer to make payments of interest
and principal. The inability (or perceived inability) of issuers
to make timely payments of interest and principal would likely
make the values of securities held by the Funds more
volatile and could limit each Fund's ability to sell its
securities at prices approximating the values each Fund
had placed on such securities. In the absence of a liquid
trading market for securities held by it, the Funds may
be unable at times to establish the fair value of such
securities. The rating assigned to a security by Moody's
, Standard & Poor's or Fitch, in the case of the
Intermediate Fund, does not reflect an assessment of the
volatility of the security's market value or of the liquidity of
an investment in the security.
EACH FUND MAY INVEST IN BOTH HIGHER-RATED AND LOWER-
RATED NEW YORK 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 Funds will not purchase a New York Tax
Exempt Security rated both Ba by Moody's , BB by
Standard & Poor's and, in the case of the Intermediate Fund,
BB by Fitch at the time of purchase, or, if unrated,
determined to be of comparable quality if, as a result, more than
25% of each Fund's total assets would be of that
quality. The rating services' descriptions of the five highest
grades of debt securities and other rating information are
described in the Statement of Additional Information. New York
Tax Exempt Securities rated Ba or BB are considered to have
speculative elements, with large uncertainties or major risk
exposures to adverse conditions. Putnam Management seeks to
minimize the risks of investing in lower-rated securities through
investment analysis and attention to current developments in
interest rates and economic conditions.
At times, a portion of each Fund's assets may be
invested in securities as to which such Fund, by itself
or together with other funds and accounts managed by Putnam
Management and its affiliates, holds a major portion or all of an
issue of New York Tax Exempt Securities. Under adverse market or
economic conditions or in the event of adverse changes in the
financial condition of the issuer, either Fund could
find it more difficult to sell such securities when Putnam
Management believes it advisable to do so or may be able to sell
such securities only at prices lower than if such securities were
more widely held. Under such circumstances, it may also be more
difficult to determine the fair value of such securities for
purposes of computing such Fund's net asset value. In
order to enforce its rights in the event of a default under such
securities, the Funds may be required to take possession
of and manage assets securing the issuer's obligations on such
securities, which may increase the Funds' operating
expenses and adversely affect the Funds' net asset
value. Any income derived from a Fund's ownership or
operation of such assets would not be tax-exempt. When
a Fund invests in New York Tax Exempt Securities in the lower
rating categories, the achievement of such Fund's goals
is more dependent on Putnam Management's investment analysis than
would be the case if a Fund were investing in New York
Tax Exempt Securities in the higher rating categories. The
amount of information about the financial condition of an issuer
of New York Tax Exempt Securities may not be as extensive as
information about corporations whose securities are publicly
traded.
Some of the securities in which the Funds invest may
include so-called "zero-coupon" bonds whose values are subject to
greater fluctuation in response to changes in market interest
rates than bonds which pay interest currently. Zero-coupon bonds
are issued at a significant discount from face value and pay
interest only at maturity rather than at intervals during the
life of the security. Zero-coupon bonds allow an issuer to avoid
the need to generate cash to meet current interest payments.
Accordingly, such bonds may involve greater credit risks than
bonds paying interest currently. The Funds are required
to accrue and distribute income from zero-coupon bonds on a
current basis, even though it does not receive that income
currently in cash. Thus, the Funds may have to sell
investments to obtain cash needed to make income distributions.
The Funds may also invest in securities representing
interests in New York Tax Exempt Securities, known as "inverse
floating obligations" or "residual interest bonds," paying
interest rates that vary inversely to changes in the interest
rates of specified short-term tax exempt securities or an index
of short-term tax exempt securities. The interest rates on
inverse floating obligations or residual interest bonds will
typically decline as short-term market interest rates increase
and increase as short-term market rates decline. Such securities
have the effect of providing a degree of investment leverage,
since they will generally increase or decrease in value in
response to changes in market interest rates at a rate which is a
multiple (typically two) of the rate at which fixed-rate long-
term tax exempt securities increase or decrease in response to
such changes. As a result, the market values of inverse floating
obligations and residual interest bonds will generally be more
volatile than the market values of fixed-rate tax exempt
securities.
Certain securities held by the Funds may permit the
issuer at its option to "call," or redeem, such securities. If
an issuer were to redeem securities held by a Fund
during a time of declining interest rates, such Fund may
not be able to reinvest the proceeds in securities providing the
same investment return as the securities redeemed.
For additional information concerning the risks associated with
investments by the Funds in securities in the lower
rating categories, see the Statement of Additional Information.
INVESTMENTS IN PREMIUM SECURITIES. During a period of declining
interest rates, many of each Fund's portfolio
investments will likely bear coupon rates which are higher than
current market rates, regardless of whether such securities were
originally purchased at a premium. Such securities would
generally carry premium market values which would be reflected in
the net asset value of each Fund's shares. As a result,
an investor who purchases shares of the Funds during
such periods would initially receive higher monthly distributions
(derived from the higher coupon rates payable on a
Fund's investments) than might be available from alternative
investments bearing current market interest rates, but may face
an increased risk of capital loss as these higher coupon
securities approach maturity (or first call date). In evaluating
the potential performance of an investment in the Funds
, investors may find it useful to compare each Fund's
current dividend rate with such Fund's "yield," which is
computed on a yield-to-maturity basis in accordance with
Securities and Exchange Commission ("SEC") regulations and which
reflects amortization of market premiums. See "How performance
is shown."
ALTERNATIVE INVESTMENT STRATEGIES
At times Putnam Management may judge that conditions in
the markets for New York Tax Exempt Securities make pursuing the
Funds' basic investment strategy inconsistent with the
best interests of their shareholders. At such times
Putnam Management may temporarily use alternative strategies,
primarily designed to reduce fluctuations in the value of
each Fund's assets. In implementing these "defensive"
strategies, the Funds may invest in taxable obligations,
and more than 10% of the Income Fund's and more than 20% of
the Intermediate Fund's investment income distributions could
be subject to federal income tax and/or New York State and City
personal income taxes. Such taxable obligations may include:
obligations of the U.S. government, its agencies or
instrumentalities; other debt securities rated within the four
highest grades by either Moody's or Standard & Poor's; commercial
paper rated in the highest grade by either rating service (Prime-
1 or A-1+, respectively); certificates of deposit and bankers'
acceptances; repurchase agreements with respect to any of the
foregoing investments; or any other securities that Putnam
Management considers consistent with such defensive strategies.
It is impossible to predict when, or for how long, the
Funds will use such alternative strategies.
As indicated above, the Intermediate Fund under current market
conditions expects to maintain a portfolio of securities with an
intermediate-term average-weighted maturity, because an
intermediate-term portfolio of securities generally provides a
higher yield than a short-term portfolio of securities of
comparable quality. The Intermediate Fund may, however, be
primarily invested in short-term securities when yields on such
securities are greater than the yields available on intermediate-
term securities, to stabilize net asset value and for temporary
defensive purposes.
SHORT-TERM TRADING
UNDER CERTAIN MARKET CONDITIONS, THE FUNDS MAY SEEK
PROFITS BY SHORT-TERM TRADING. The length of time each
Fund has held a particular security is not generally a
consideration in investment decisions. A change in the
securities owned by a Fund is known as "portfolio
turnover." To the extent short-term trading strategies are used,
a Fund's portfolio turnover rate may be higher than that
of other mutual funds. Portfolio turnover generally involves
some expense to a Fund, including brokerage commissions
or dealer mark-ups and other transaction costs on the sale of
securities and reinvestment in other securities. Such
transactions may result in realization of taxable gains.
Portfolio turnover rates for the ten most recent fiscal years of
the Income Fund are shown in the section "Financial highlights."
While it is impossible to predict the Intermediate Fund's
portfolio turnover rate, Putnam Management, based on its
experience, believes that such rate will not exceed 100%.
Putnam Management believes that in general the secondary market
for New York Tax Exempt Securities is less liquid than that for
taxable fixed-income securities. Accordingly, the ability of
a Fund to buy and sell securities may, at any particular
time and with respect to any particular securities, be limited.
NEW YORK TAX EXEMPT SECURITIES
NEW YORK TAX EXEMPT SECURITIES INCLUDE OBLIGATIONS OF THE STATE
OF NEW YORK AND ITS POLITICAL SUBDIVISIONS OR THEIR AGENCIES OR
INSTRUMENTALITIES OR OTHER GOVERNMENTAL UNITS, THE INTEREST WITH
RESPECT TO WHICH, IN THE OPINION OF BOND COUNSEL, IS EXEMPT FROM
FEDERAL INCOME TAX AND NEW YORK STATE AND CITY PERSONAL INCOME
TAXES. These securities are issued to obtain funds for various
public purposes, such as the construction of public facilities,
the payment of general operating expenses or the refunding of
outstanding debts. They may also be issued to finance various
private activities, including the lending of funds to public or
private institutions for the construction of housing, educational
or medical facilities, and may include certain types of
industrial development bonds, private activity bonds or notes
issued by public authorities to finance privately owned or
operated facilities, or to fund short-term cash requirements.
Short-term New York Tax Exempt Securities are generally issued as
interim financing in anticipation of tax collections, revenue
receipts or bond sales to finance such public purposes. New York
Tax Exempt Securities also include debt obligations issued by
other governmental entities (for example, United States
territories) if such debt obligations generate interest income
which is exempt from federal income tax and New York State and
City personal income taxes.
THE TWO PRINCIPAL CLASSIFICATIONS OF NEW YORK TAX EXEMPT
SECURITIES ARE GENERAL OBLIGATION AND SPECIAL OBLIGATION (OR
SPECIAL REVENUE OBLIGATION) SECURITIES. GENERAL OBLIGATION
securities involve a pledge of the credit of an issuer possessing
taxing power and are payable from the issuer's general
unrestricted revenues. Their payment may depend on an
appropriation by the issuer's legislative body. The
characteristics and methods of enforcement of general obligation
securities vary according to the law applicable to the particular
issuer. SPECIAL OBLIGATION (or SPECIAL REVENUE OBLIGATION)
securities are payable only from the revenues derived from a
particular facility or class of facilities, or a specific revenue
source, and generally are not payable from the unrestricted
revenues of the issuer. Industrial development bonds and private
activity bonds are in most cases special obligation securities,
the credit quality of which is directly related to the private
user of the facilities.
DIVERSIFICATION AND CONCENTRATION POLICIES. The Income Fund is a
"diversified" investment company and the Intermediate
Fund is a "non-diversified" investment company. Under the
Investment Company Act of 1940 and the Internal Revenue Code of
1986, as amended, this means that with respect to 75% of its
total assets in the case of the Income Fund, and with respect to
50% of its total assets in the case of the Intermediate
Fund, the Funds may not invest more than 5% of
their total assets in the securities of any one issuer
(except U.S. government obligations). The balance of a Fund's
assets is not subject to this limitation. In addition, under the
Internal Revenue Code of 1986, a regulated investment company,
such as the Funds, at the close of each quarter of the taxable
year may not hold more than 25% of its total assets in securities
of any one issuer (other than U.S. government securities or the
securities of other regulated investment companies). Thus, the
Income Fund may invest up to 25% of its total assets in the
securities of any one issuer, and the Intermediate Fund
may invest up to 25% of its total assets in the securities of
each of any two issuers. Because of the relatively small number
of issuers of New York Tax Exempt Securities, each Fund is more
likely to invest a higher percentage of its assets in the
securities of a single issuer than an investment company which
invests in a broad range of tax-exempt securities. This practice
involves an increased risk of loss to the Fund if the issuer is
unable to make interest or principal payments or if the market
value of such securities declines.
A Fund will not invest more than 25% of its total assets in any
industry. Governmental issuers of New York Tax Exempt Securities
are not considered part of any "industry." However, New York Tax
Exempt Securities backed only by the assets and revenues of
nongovernmental users may for this purpose (and for
diversification purposes discussed above) be deemed to be issued
by such nongovernmental users, and the 25% limitation would apply
to such obligations.
It is nonetheless possible that a Fund may invest more
than 25% of its assets in a broader segment of the New York Tax
Exempt Securities market, such as revenue obligations of
hospitals and other health care facilities, housing agency
revenue obligations, or airport revenue obligations. This would
be the case only if Putnam Management determined that the yields
available from obligations in a particular segment of the market
justified the additional risks associated with such
concentration. Although such obligations could be supported by
the credit of governmental users or by the credit of
nongovernmental users engaged in a number of industries,
economic, business, political and other developments generally
affecting the revenues of such users (for example, proposed
legislation or pending court decisions affecting the financing of
such projects and market factors affecting the demand for their
services or products) may have a general adverse effect on all
New York Tax Exempt Securities in such a market segment.
Each Fund reserves the right to invest more than 25% of its
assets in industrial development securities and private activity
bonds.
SINCE THE FUNDS INVEST PRIMARILY IN NEW YORK TAX EXEMPT
SECURITIES, THE PERFORMANCE OF EACH FUND MAY BE ESPECIALLY
AFFECTED BY FACTORS PERTAINING TO THE NEW YORK ECONOMY AND OTHER
FACTORS SPECIFICALLY AFFECTING THE ABILITY OF ISSUERS OF NEW YORK
TAX EXEMPT SECURITIES TO MEET THEIR OBLIGATIONS. As a result,
the value of the Funds' shares may fluctuate more widely
than the value of shares of a portfolio investing in securities
relating to a number of different states. The ability of state,
county, or local governments to meet their obligations will
depend primarily on the availability of tax and other revenues to
those governments and on their fiscal conditions generally. The
amounts of tax and other revenues available to governmental
issuers of New York Tax Exempt Securities may be affected from
time to time by economic, political, and demographic conditions.
In addition, constitutional or statutory restrictions may limit a
government's power to raise revenues or increase taxes. The
availability of federal, state, and local aid to issuers of New
York Tax Exempt Securities may also affect their ability to meet
their obligations. Payments of principal and interest on special
obligation securities will depend on the economic condition of
the facility or specific revenue source from whose revenues the
payments will be made, which in turn could be affected by
economic, political, and demographic conditions in the State of
New York. Any reduction in the actual or perceived ability of an
issuer of New York Tax Exempt Securities to meet its obligations
(including a reduction in the rating of its outstanding
securities) would likely affect adversely the market value and
marketability of its obligations and could affect adversely the
values of other New York Tax Exempt Securities as well.
ALTERNATIVE MINIMUM TAX. As part of the Income Fund's
fundamental 90% policy on investments in New York
Tax Exempt Securities and the Intermediate Fund's fundamental 80%
policy on investments in New York Tax Exempt Securities ,
described above, neither Fund will treat exempt interest income
that is regarded as a preference item and thereby subject to
federal alternative minimum tax in the hands of individuals as
tax-exempt interest income for purposes of measuring compliance
with the policy. To the extent that either Fund earns such
income, individual and corporate shareholders, depending on their
own tax status, may be subject to alternative minimum tax on that
part of the Fund's distributions attributable to such income.
More generally, corporate shareholders may be subject to federal
alternative minimum tax on distributions of exempt interest from
the Fund. Neither Fund's distributions will be subject to New
York State or City minimum income tax on individuals.
FINANCIAL FUTURES AND OPTIONS
EACH FUND MAY PURCHASE AND SELL FINANCIAL FUTURES
CONTRACTS FOR HEDGING PURPOSES. Futures contracts on a Municipal
Bond Index are traded on the Chicago Board of Trade. This Index
is intended to represent a numerical measure of market
performance for long-term tax exempt bonds. An "index future" is
a contract to buy or sell units of a particular securities index
at an agreed price on a specified future date. Depending on the
change in value of the index between the time when the Fund
enters into and terminates an index futures contract, the Fund
realizes a gain or loss. The Funds may purchase and
sell futures contracts on the Index (or any other tax-exempt bond
index approved for trading by the Commodity Futures Trading
Commission) to hedge against general changes in market values of
New York Tax Exempt Securities which a Fund owns or
expects to purchase. The Funds may also purchase and
sell put and call options on index futures or on the indices
directly, in addition to or as an alternative to purchasing and
selling index futures.
Each Fund may also, for hedging purposes, purchase and
sell futures contracts and related options with respect to U.S.
Treasury securities, including U.S. Treasury bills, notes and
bonds ("U.S. Government Securities") and options directly on U.S.
Government Securities.
THE USE OF FUTURES AND OPTIONS INVOLVES CERTAIN SPECIAL RISKS AND
MAY RESULT IN REALIZATION OF TAXABLE INCOME OR CAPITAL GAINS.
FUTURES AND OPTIONS TRANSACTIONS INVOLVE COSTS AND MAY RESULT IN
LOSSES. Certain risks arise because of the possibility of
imperfect correlations between movements in the prices of
financial futures and options and movements in the prices of the
underlying bond index or U.S. Government Securities or of the New
York Tax Exempt Securities which are the subject of the hedge.
The successful use of futures and options further depends on
Putnam Management's ability to forecast interest rate movements
correctly. Other risks arise from the Fund's potential inability
to close out its futures or related options positions, and there
can be no assurance that a liquid secondary market will exist
for any futures contract or option at a particular time. Certain
provisions of the Internal Revenue Code and certain regulatory
requirements may limit the Fund's ability to engage in futures
and options transactions.
A MORE DETAILED EXPLANATION OF FINANCIAL FUTURES AND OPTIONS
TRANSACTIONS AND THE RISKS ASSOCIATED WITH THEM IS INCLUDED IN
THE STATEMENT OF ADDITIONAL INFORMATION.
OTHER INVESTMENT PRACTICES
THE FUNDS MAY ALSO ENGAGE TO A LIMITED EXTENT IN THE FOLLOWING
INVESTMENT PRACTICES, WHICH MAY RESULT IN TAXABLE INCOME OR
CAPITAL GAINS AND WHICH INVOLVE CERTAIN SPECIAL RISKS. THE
STATEMENT OF ADDITIONAL INFORMATION CONTAINS MORE DETAILED
INFORMATION ABOUT THESE PRACTICES, INCLUDING LIMITATIONS DESIGNED
TO REDUCE THESE RISKS.
REPURCHASE AGREEMENTS AND FORWARD COMMITMENTS. Each Fund may
enter into repurchase agreements on up to 25% of its assets.
These transactions must be fully collateralized at all times.
Each Fund may also purchase securities for future delivery, which
may increase its overall investment exposure and involves a risk
of loss if the value of the securities declines prior to the
settlement date. These transactions involve some risk to a Fund
if the other party should default on its obligation and that Fund
is delayed or prevented from recovering the collateral or
completing the transaction.
LIMITING INVESTMENT RISK
SPECIFIC INVESTMENT RESTRICTIONS HELP THE FUNDS LIMIT INVESTMENT
RISKS FOR THEIR SHAREHOLDERS. THESE RESTRICTIONS PROHIBIT EACH
FUND FROM INVESTING MORE THAN: (a) (for the Intermediate
Fund with respect to 50% of its assets) 5% of its total
assets in the securities of any one issuer (other than securities
of the U.S. government or its agencies or instrumentalities or
New York Tax Exempt Securities);* (b) 5% of its net assets in
securities of any issuers if the party responsible for payment,
together with any predecessors, has been in operation for less
than three years (except U.S. government and agency obligations
and obligations backed by the full faith, credit and taxing power
of any person authorized to issue New York Tax Exempt
Securities); (c) (with respect to the Income Fund* and with
respect to the Intermediate Fund) 15% of its net assets in
securities restricted as to resale (excluding restricted
securities that have been determined by the Fund's Trustees (or
the person designated by them to make such determinations) to be
readily marketable) ; or (d) 15% of its net assets in any
combination of securities that are not readily marketable, in
securities restricted as to resale (excluding restricted
securities determined by the Fund's Trustees (or the person
designated by them to make such determinations) to be readily
marketable), and in repurchase agreements maturing in more than
seven days.
Restrictions marked with an asterisk (*) above are summaries of
fundamental policies. See the Statement of Additional
Information for the full text of these policies and the Funds'
other fundamental policies. Except for investment policies
designated as fundamental in this Prospectus or the Statement,
the investment policies described in this Prospectus and in the
Statement are not fundamental policies. The Trustees may change
any non-fundamental investment policies without shareholder
approval. As a matter of policy, the Trustees would not
materially change a Fund's investment objective without
shareholder approval.
HOW PERFORMANCE IS SHOWN
YIELD , TAX-EQUIVALENT YIELD AND TOTAL RETURN DATA MAY
FROM TIME TO TIME BE INCLUDED IN ADVERTISEMENTS ABOUT ONE OR
BOTH FUNDS . "Yield" for each class of shares is calculated
by dividing the annualized net investment income per share during
a recent 30-day period by the maximum public offering price per
share of such class on the last day of that period. For this
purpose, net investment income is calculated in accordance with
SEC regulations and may differ from a Fund's net
investment income as determined for financial reporting purposes.
SEC regulations require that net investment income be calculated
on a "yield-to-maturity" basis, which has the effect of
amortizing any premiums or discounts in the current market value
of fixed-income securities. Each Fund's current
dividend rate is based on the Fund's net investment income as
determined for financial statement purposes, which may not
reflect amortization in the same manner. See "How objectives are
pursued -- Investments in premium securities." The
Funds' yield reflects the deduction of the maximum initial
sales charge in the case of Class A shares, but does not reflect
the deduction of any contingent deferred sales charge in the case
of Class B shares. "Tax-equivalent yield" for each class of
shares shows the effect on performance of the tax-exempt status
of distributions received from each Fund. It reflects
the approximate yield that a taxable investment must earn for
shareholders at stated income levels to produce an after-tax
yield equivalent to each Fund's tax-exempt yield.
"Total return" for the one-, five- and ten-year periods
and for the life of the Income Fund (or since the
commencement of the public offering of such shares, if
shorter) and "total return" for the life of the Intermediate
Fund, through the most recent calendar quarter represents the
average annual compounded rate of return on an investment of
$1,000 in a Fund invested at the maximum public offering
price (in the case of Class A shares) or reflecting the deduction
of any applicable contingent deferred sales charge (in the case
of Class B shares). Total return may also be presented for other
periods or based on investment at reduced sales charge levels or
net asset value. Any quotation of yield, tax-equivalent yield or
total return not reflecting the maximum initial sales charge or a
contingent deferred sales charge would be reduced if such sales
charges were used. Quotations of yield, tax-equivalent yield or
total return for any period when an expense limitation was in
effect will be greater than if the limitation had not been in
effect. Each Fund's performance may be compared to
various indices. See the Statement of Additional Information.
GENERAL
ALL DATA IS BASED ON EACH FUND'S PAST INVESTMENT RESULTS AND DOES
NOT PREDICT FUTURE PERFORMANCE. Investment performance, which
will vary, is based on many factors, including market conditions,
the composition of each Fund's portfolio, each Fund's operating
expenses, and which class of shares you purchase.
Investment performance also often reflects the risks associated
with each Fund's investment objective and policies. These
factors should be considered when comparing each Fund's
investment results to those of other mutual funds and other
investment vehicles.
HOW THE FUNDS ARE MANAGED
THE TRUSTEES OF THE TRUST ARE RESPONSIBLE FOR GENERALLY
OVERSEEING THE CONDUCT OF EACH FUND'S BUSINESS. Subject to such
policies as the Trustees may determine, Putnam Management
furnishes a continuing investment program for each Fund and makes
investment decisions on that Fund's behalf. Subject to the
control of the Trustees, Putnam Management also manages the
Funds' other affairs and business. David J. Eurkus, Senior Vice
President of Putnam Management and Vice President of the Income
Fund, has had primary responsibility for the day-to-day
management of the Income Fund's portfolio since 1985. Mr. Eurkus
has been employed by Putnam Management for more than five
years. Thomas C. Goggins , Vice President of Putnam
Management and Vice President of the Trust , has had
primary responsibility for the day-to-day management of the
Intermediate Fund's portfolio since the Trust's
inception in May, 1994. Mr. Goggins has been employed by
Putnam Management since June, 1993. Prior to that date, Mr.
Goggins was a portfolio Manager at Transamerica Investments
Services, Inc for more than five years.
Each Fund pays all expenses not assumed by Putnam Management,
including Trustees' fees, auditing, legal, custodial, investor
servicing , shareholder reporting expenses, and payments
under any Distribution Plan which, are in turn allocated
to the relevant class of shares . Expenses of the Trust
directly charged or attributable to a Fund will be paid from the
assets of that Fund. General expenses of the Trust will be
allocated among and charged to the assets of each Fund on a basis
that the Trustees deem fair and equitable, which may be based on
the relative assets of each Fund or the nature of the services
performed and relative applicability to each Fund . Each
Fund also reimburses Putnam Management for the compensation and
related expenses of certain officers of the Funds and their
staffs who provide administrative services to the Funds. The
total reimbursement is determined annually by the Trustees.
Putnam Management places all orders for purchases and sales of
the Funds' securities. In selecting broker-dealers, Putnam
Management may consider research and brokerage services furnished
to it and its affiliates. Subject to seeking the most favorable
price and execution available, Putnam Management may consider
sales of shares of each Fund (and, if permitted by law, of the
other Putnam funds) as a factor in the selection of broker-
dealers.
ORGANIZATION AND HISTORY
The Trust is a Massachusetts business trust
organized on May 12, 1983. A copy of the Agreement and
Declaration of Trust, which is governed by Massachusetts law, is
on file with the Secretary of State of The Commonwealth of
Massachusetts. Prior to March , 1994, the Trust was known
as Putnam New York Tax Exempt Income Fund.
The Trust is an open-end management investment company with
an unlimited number of authorized shares of beneficial
interest. Shares of the Trust may, without shareholder
approval, be divided into an unlimited number of series of such
shares and are currently divided into two series of shares:
Putnam New York Tax Exempt Income Fund and Putnam New York
Intermediate Tax Exempt Fund. Any such series of shares may
be further divided, without shareholder approval, into two or
more classes of shares having such preferences and special or
relative rights and privileges as the Trustees determine.
Each Fund's shares are currently divided into two
classes. Each share has one vote, with fractional shares
voting proportionally. Shares vote by individual Fund on all
matters except (i) when required by the Investment Company Act of
1940, shares of all Funds shall be voted in the aggregate and
(ii) when the Trustees have determined that the matter affects
only the interests of one or more Funds, in which case only
shareholders of such Fund or Funds shall be entitled to vote.
Shares of each class of a Fund will vote together as a
single class except when required otherwise by
law or as determined by the Trustees. Shares of each Fund are
freely transferable, are entitled to dividends as declared by the
Trustees, and, if a Fund were liquidated, would receive the net
assets of that Fund. Either Fund may suspend the sale of shares
at any time and may refuse any order to purchase shares.
Although the Trust is not required to hold
annual meetings of its shareholders, shareholders holding at
least 10% of the outstanding shares of the Trust entitled
to vote have the right to call a meeting to elect or remove
Trustees, or to take other actions as provided in the Declaration
of Trust.
If you own fewer shares than a minimum amount set by the Trustees
of a either Fund (presently 20 shares ), the
Trust may choose to redeem your shares and pay you for them.
You will receive at least 30 days' written notice before a Fund
redeems your shares, and you may purchase additional shares at
any time to avoid a redemption. Each Fund may also
redeem shares if you own shares above a maximum amount set by the
Trustees. There is presently no maximumfor either Fund
, but the Trustees may establish one at any time, which
could apply to both present and future shareholders .
THE TRUST'S TRUSTEES: GEORGE PUTNAM,* CHAIRMAN.
President of the Putnam funds. Chairman and Director of Putnam
Management and Putnam Mutual Funds Corp. ("Putnam Mutual Funds").
Director, Marsh & McLennan Companies, Inc.; WILLIAM F. POUNDS,
VICE CHAIRMAN. Professor of Management, Alfred P. Sloan School
of Management, M.I.T.; JAMESON ADKINS BAXTER, President, Baxter
Associates, Inc.; HANS H. ESTIN, Vice Chairman, North American
Management; JOHN A. HILL, Principal and Managing Director, First
Reserve Corporation; ELIZABETH T. KENNAN, President, Mount
Holyoke College; LAWRENCE J. LASSER,* Vice President of the
Putnam funds. President, Chief Executive Officer and Director of
Putnam Investments, Inc. and Putnam Management. Director, Marsh
& McLennan Companies, Inc.; ROBERT E. PATTERSON, Executive Vice
President, Cabot Partners Limited Partnership; DONALD S. PERKINS,
Director of various corporations, including AT&T, K mart
Corporation and Time Warner Inc.; GEORGE PUTNAM, III,* President,
New Generation Research, Inc.; A.J.C. SMITH,* Chairman, Chief
Executive Officer and Director, Marsh & McLennan Companies, Inc.;
and W. NICHOLAS THORNDIKE, Director of various corporations and
charitable organizations, including Providence Journal Co. Also,
Trustee and President, Massachusetts General Hospital and Trustee
of Eastern Utilities Associates. The Trust's Trustees
are also Trustees of the other Putnam funds. Those marked with
an asterisk (*) are "interested persons" of the Trust ,
Putnam Management or Putnam Mutual Funds.
ABOUT YOUR INVESTMENT
ALTERNATIVE SALES ARRANGEMENTS
Each Fund offers investors two classes of shares which
bear sales charges in different forms and amounts and which bear
different levels of expenses:
CLASS A SHARES. An investor who purchases Class A shares pays a
sales charge at the time of purchase. As a result, Class A
shares are not subject to any charges when they are redeemed
(except for sales at net asset value in excess of $1 million
which are subject to a contingent deferred sales charge).
Certain purchases of Class A shares qualify for reduced sales
charges. Class A shares of the Income Fund currently
bear a 12b-1 fee at the annual rate of 0.20% of the Income Fund's
average net assets attributable to Class A shares. Class A
shares of the Intermediate Fund currently bear a 12b-1 fee at the
annual rate of 0.15% of the Intermediate Fund's average net
assets attributable to Class A shares. See "How to buy
shares -- Class A shares."
CLASS B SHARES. Class B shares of the Income Fund are
sold without an initial sales charge, but are subject to a
contingent deferred sales charge of up to 5% if redeemed within
six years. Class B shares of the Intermediate Fund are also
sold without an initial sales charge of up to 3% if redeemed
within four years. Class B shares also bear a higher 12b-1
fee than Class A shares, currently at the annual rate of 0.85% of
the Income Fund's average net assets attributable to
its Class B shares and 0.75% of the Intermediate Fund's average
net assets attributable to its Class B shares. Class B
shares of each Fund will automatically convert into Class
A shares of each Fund , based on relative net asset
value, approximately eight years after purchase. Class B shares
provide an investor the benefit of putting all of the investor's
dollars to work from the time the investment is made, but (until
conversion) will have a higher expense ratio and pay lower
dividends than Class A shares due to the higher 12b-1 fee. See
"How to buy shares -- Class B shares."
WHICH ARRANGEMENT IS BETTER FOR YOU? The decision as to which
class of shares provides a more suitable investment for an
investor depends on a number of factors, including the amount and
intended length of the investment. Investors making investments
that qualify for reduced sales charges might consider Class A
shares. Investors who prefer not to pay an initial sales charge
might consider Class B shares. Orders for Class B shares for
$250,000 or more will be treated as orders for Class A shares or
declined. For more information about these sales arrangements,
consult your investment dealer or Putnam Investor Services.
Sales personnel may receive different compensation depending on
which class of shares they sell. Shares may only be exchanged
for shares of the same class of another Putnam fund. See "How to
exchange shares."
HOW TO BUY SHARES
You can open an account with as little as $500 and make
additional investments at any time with as little as $50. You
can buy shares three ways - through most investment
dealers, through Putnam Mutual Funds (at 1-800-225-1581), or
through a systematic investment plan. If you do not have a
dealer, Putnam Mutual Funds can refer you to one.
BUYING SHARES THROUGH PUTNAM MUTUAL FUNDS. Complete an order
form and return it with a check payable to the Fund to
Putnam Mutual Funds, which will act as your agent in purchasing
shares through your designated investment dealer.
BUYING SHARES THROUGH SYSTEMATIC INVESTING. You can make regular
investments of $25 or more per month through automatic deductions
from your bank checking account. Application forms are available
from your investment dealer or through Putnam Investor Services.
Shares are sold at the public offering price based on the net
asset value next determined after Putnam Investor Services
receives your order. In most cases, in order to receive that
day's public offering price, Putnam Investor Services must
receive your order before the close of regular trading on the New
York Stock Exchange. If you buy shares through your investment
dealer, the dealer must receive your order before the close of
regular trading on the New York Stock Exchange to receive that
day's public offering price.
CLASS A SHARES
The public offering price of Class A shares is the net
asset value plus a sales charge. Each Fund receives the
net asset value. The sales charge varies depending on the size
of your purchase and is allocated between your investment dealer
and Putnam Mutual Funds. The current sales charges for each
Fund are:<PAGE>
<TABLE>
<CAPTION>
THE INCOME FUND
SALES CHARGE AMOUNT OF
AS A PERCENTAGE OF: SALES CHARGE
--------------------- REALLOWED
NET TO DEALERS
AMOUNT OF TRANSACTION AMOUNT OFFERING AS A PERCENTAGE
AT OFFERING PRICE INVESTED PRICE OF OFFERING PRICE*
---------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
Less than $ 25,000 4 .99% 4 .75% 4 .50%
$ 25,000 but less than 100,000 4 .71 4 .50 4 .25
100,000 but less than 250,000 3 .90 3 .75 3 .50
250,000 but less than 500,000 3 .09 3 .00 2 .75
500,000 but less than 1,000,000 2 .04 2 .00 1 .85
----------------------------------------------------------------------------------------
THE INTERMEDIATE FUND
SALES CHARGE AMOUNT OF
AS A PERCENTAGE OF: SALES CHARGE
---------------------- REALLOWED
NET TO DEALERS
AMOUNT OF TRANSACTION AMOUNT OFFERING AS A PERCENTAGE
AT OFFERING PRICE INVESTED PRICE OF OFFERING PRICE*
-----------------------------------------------------------------------------------------
<C> <C> <C> <C>
Less than $ 100,000 3 .36% 3 .25% 3 .00%
$ 100,000 but less than 250,000 2 .56 2 .50 2 .25
250,000 but less than 500,000 2 .04 2 .00 1 .75
500,000 but less than 1,000,000 1 .52 1 .50 1 .25
---------------------------------------------------------------------------------------
/TABLE
<PAGE>
* At the discretion of Putnam Mutual Funds, however, the
entire sales charge may at times be reallowed to dealers.
The Staff of the Securities and Exchange Commission has
indicated that dealers who receive more than 90% of the
sales charge may be considered underwriters.
There is no initial sales charge on purchases of Class A shares
of $1 million or more. However, a contingent deferred sales
charge ("CDSC") of 1.00% or 0.50%, respectively, is imposed on
redemptions of such shares within the first or second year after
purchase, based on the lower of the shares' cost and current net
asset value. Any shares acquired by reinvestment of
distributions will be redeemed without a CDSC. In addition,
shares purchased by certain investors investing $1 million or
more that have made arrangements with Putnam Mutual Funds and
whose dealer of record waived the commission described in the
next paragraph are not subject to the CDSC. In determining
whether a CDSC is payable, the Fund will first redeem shares not
subject to any charge. Putnam Mutual Funds receives the entire
amount of any CDSC you pay. See the Statement of Additional
Information for more information about the CDSC.
Except as stated below, Putnam Mutual Funds pays investment
dealers of record commissions on sales of Class A shares of $1
million or more based on an investor's cumulative purchases
during consecutive one-year periods beginning with the date of
the initial purchase at net asset value. Such commissions are
paid at the rate of 1.00% of the amount under $3 million, 0.50%
of the next $47 million and 0.25% thereafter. On sales at net
asset value to a participant-directed qualified retirement plan
initially investing less than $20 million in Putnam funds and
other investments managed by Putnam Management or its affiliates
(including a plan sponsored by an employer with more than 750
employees), Putnam Mutual Funds pays commissions on cumulative
purchases during the life of the account at the rate of 1.00% of
the amount under $3 million and 0.50% thereafter. On sales at
net asset value to all other participant-directed qualified
retirement plans, Putnam Mutual Funds pays commissions on the
initial investment and on subsequent net quarterly sales at the
rate of 0.15%.
YOU MAY BE ELIGIBLE TO BUY CLASS A SHARES OF EITHER
FUND AT REDUCED SALES CHARGES. Consult your investment
dealer or Putnam Mutual Funds for details about Putnam's Combined
Purchase Privilege, Cumulative Quantity Discount, Statement of
Intention, Group Sales Plan, Employee Benefit Plans and other
plans. Descriptions are also included in the order form and in
the Statement of Additional Information. Shares may be sold at
net asset value to certain categories of investors, and the CDSC
may be waived under certain circumstances. See "How to buy
shares --General" below.
CLASS B SHARES
Class B shares of each Fund are sold without an initial
sales charge, although a CDSC will be imposed if you redeem
shares of the Income Fund within six years of purchase
or if you redeem shares of the Intermediate Fund within four
years of purchase . The following types of shares may be
redeemed without charge at any time: (i) shares acquired by
reinvestment of distributions and (ii) shares otherwise exempt
from the CDSC, as described below. Subject to the foregoing
exclusions, the amount of the charge is determined as a
percentage of the lesser of the current market value or the cost
of the shares being redeemed. Therefore, when a
share is redeemed, any increase in value above the initial
purchase price is not subject to any CDSC. The amount of the
CDSC will depend on the number of years since you invested and
the dollar amount being redeemed, according to the following
tables :
THE INCOME FUND
CONTINGENT DEFERRED
SALES CHARGE AS A
PERCENTAGE OF
YEARS SINCE PURCHASE DOLLAR AMOUNT
PAYMENT MADE SUBJECT TO CHARGE
------------------- -------------------
0-1. . . . . . . . . . . . . . . . . . 5.0%
1-2. . . . . . . . . . . . . . . . . . 4.0%
2-3. . . . . . . . . . . . . . . . . . 3.0%
3-4. . . . . . . . . . . . . . . . . . 3.0%
4-5. . . . . . . . . . . . . . . . . . 2.0%
5-6. . . . . . . . . . . . . . . . . . 1.0%
6 and thereafter . . . . . . . . . . . . . . NONE
THE INTERMEDIATE FUND
CONTINGENT DEFERRED
SALES CHARGE AS A
PERCENTAGE OF
YEARS SINCE PURCHASE DOLLAR AMOUNT
PAYMENT MADE SUBJECT TO CHARGE
------------------- -------------------
0-1. . . . . . . . . . . . . . . . . . 3.0%
1-2. . . . . . . . . . . . . . . . . . 3.0%
2-3. . . . . . . . . . . . . . . . . . 2.0%
3-4. . . . . . . . . . . . . . . . . . 1.0%
4 and thereafter . . . . . . . . . . . . . NONE
<PAGE>
In determining whether a CDSC is payable on any redemption,
a Fund will first redeem shares not subject to any charge,
and then shares held longest during the relevant period
subject to the CDSC . For information on how sales
charges are calculated if you exchange your shares, see "How to
exchange shares." Putnam Mutual Funds receives the entire amount
of any CDSC you pay.
CONVERSION OF CLASS B SHARES. Class B shares of each
Fund will automatically convert into Class A shares of
such Fund at the end of the month eight years after the
purchase date, except as noted below. Class B shares acquired by
exchange from Class B shares of another Putnam fund will convert
into Class A shares based on the time of the initial purchase.
Class B shares acquired through reinvestment of distributions
will convert into Class A shares based on the date of the initial
purchase to which such shares relate. For this purpose, Class B
shares acquired through reinvestment of distributions will be
attributed to particular purchases of Class B shares in
accordance with such procedures as the Trustees may determine
from time to time. The conversion of Class B shares to Class A
shares is subject to the continuing availability of a ruling from
the Internal Revenue Service or an opinion of counsel that such
conversions will not constitute taxable events for Federal tax
purposes. There can be no assurance that such ruling or opinion
will be available, and the conversion of Class B shares to Class
A shares will not occur if such ruling or opinion is not
available. In such event, Class B shares would continue to be
subject to higher expenses than Class A shares for an indefinite
period.
GENERAL
Each Fund may sell Class A and Class B shares at net
asset value without an initial sales charge or a CDSC to the
Trust's current and retired Trustees (and their families),
current and retired employees (and their families) of Putnam
Management and affiliates, registered representatives and other
employees (and their families) of broker-dealers having sales
agreements with Putnam Mutual Funds, employees (and their
families) of financial institutions having sales agreements with
Putnam Mutual Funds (or otherwise having an arrangement with a
broker-dealer or financial institution with respect to sales of
a Fund's shares), financial institution trust departments
investing an aggregate of $1 million or more in Putnam funds,
clients of certain administrators of tax-qualified plans,
employee benefit plans of companies with more than 750 employees,
tax-qualified plans when proceeds from repayments of loans to
participants are invested (or reinvested) in Putnam funds, "wrap
accounts" for the benefit of clients of broker-dealers, financial
institutions or financial planners adhering to certain standards
established by Putnam Mutual Funds, and investors meeting
certain requirements who sold shares of certain Putnam closed-end
funds pursuant to a tender offer by the closed-end fund. In
addition, each Fund may sell shares at net asset value
without an initial sales charge or a CDSC in connection with the
acquisition by each Fund of assets of an investment
company or personal holding company, and the CDSC will be waived
on redemptions of shares rising out of death or
disability or in connection with certain withdrawals from IRA or
other retirement plans. Up to 12% of the value of Class B shares
of each Fund subject to a Systematic Withdrawal Plan may
also be redeemed each year without a CDSC. See the Statement of
Additional Information.
Shareholders of other Putnam funds may be entitled to exchange
their shares for, or reinvest distributions from their funds in,
shares of either Fund at net asset value.
If you are considering redeeming or exchanging shares or
transferring shares to another person shortly after purchase, you
should pay for those shares with a certified check to avoid any
delay in redemption, exchange or transfer. Otherwise a
Fund may delay payment until the purchase price of those shares
has been collected or, if you redeem by telephone, until 15
calendar days after the purchase date.
To eliminate the need for safekeeping, the Trust will
not issue certificates for your shares unless you request them.
Putnam Mutual Funds may, at its expense, provide additional
promotional incentives or payments to dealers that sell shares of
the Putnam funds. In some instances, these incentives or
payments may be offered only to certain dealers who have sold or
may sell significant amounts of shares. Certain dealers may not
sell all classes of shares.
DISTRIBUTION PLANS
CLASS A DISTRIBUTION PLANS . The purpose of
each Fund's Class A Plan is to permit such Fund
to compensate Putnam Mutual Funds for services provided and
expenses incurred by it in promoting the sale of its
Class A shares , reducing redemptions, or maintaining or
improving services provided to shareholders by Putnam Mutual
Funds or dealers. Each Fund's Class A Plan provides for
payments by the Fund to Putnam Mutual Funds at the
annual rate of up to 0.35% of such Fund's average net
assets attributable to its Class A shares, subject to the
authority of the Trustees to reduce the amount of
payments or to suspend such Class A Plan for such
periods as they may determine. Subject to these limitations, the
amount of such payments and the specific purposes for which they
are made shall be determined by the Trustees of the Income Fund.
At present, the Trustees have approved payments under
Income Fund's Class A Plan at the annual rate of 0.20% of
the Fund's average net assets attributable to Class A shares
and under the Intermediate Fund's Class A Plan at the annual rate
of 0.15% of the Intermediate Fund's average net assets
attributable to Class A shares, both for the purpose of
compensating Putnam Mutual Funds for services provided and
expenses incurred by it as principal underwriter of the
each Fund's Class A shares, including payments made by it to
dealers under the Service Agreements referred to below. Should
the Trustees decide in the future to approve payments in
excess of this amount, shareholders will be notified and this
Prospectus will be revised.
In order to compensate investment dealers (including, for this
purpose, certain financial institutions) for services provided in
connection with sales of Class A shares of each Fund and
the maintenance of shareholder accounts, Putnam Mutual Funds
makes quarterly payments to qualifying dealers based on the
average net asset value of Class A shares of each Fund
which are attributable to shareholders for whom the dealers are
designated as the dealer of record. This calculation excludes
shares purchased at net asset value by
shareholders investing $1,000,000 or more and defined
contribution plans investing lower amounts but sponsored by
employers with more than 750 employees ("NAV Shares") until
one year after purchase ( except for shares owned by
municipalities, defined benefit plans and bank trust departments
on which the dealer waived the sales commission) . Except as
stated below, Putnam Mutual Funds makes such payments at the
annual rate of 0.15% of such average net asset value for Class A
shares of the Income Fund outstanding as of December 31,
1992 and 0.20% of the average net asset value of shares acquired
after that date (including shares acquired through reinvestment
of distributions). Except as stated below, Putnam Mutual
Funds makes such payments at the annual rate of 0.15% of such
average net asset value for Class A shares of the Intermediate
Fund. For defined contribution plans initially investing
less than $20 million in Putnam funds and other investments
managed by Putnam Management or its affiliates, Putnam Mutual
Funds' payments to qualifying dealers on NAV Shares are 100% of
the rate stated above if average plan assets invested in
Putnam funds during the quarter are less than $20
million, 60% of the stated rate if such average plan
assets are at least $20 million but less than $30 million, and
40% of the stated rate , if such average plan
assets are $30 million or more. For all other defined
contribution plans purchasing NAV Shares, Putnam Mutual Funds
makes quarterly payments to qualifying dealers at the annual rate
of 0.10% of the net asset value of such shares.
CLASS B DISTRIBUTION PLANS . The Class B Plan
provides for payments by the Income Fund to Putnam Mutual Funds
at the annual rate of up to 1.00% of the Income Fund's average
net assets attributable to Class B shares, subject to the
authority of the Trustees to reduce the amount of payments or to
suspend the Class B Plan for such periods as they may determine.
The Trustees currently limit payments under the Income
Fund's Class B Plan to 0.85% of such assets. The
Intermediate Fund's Class B Plan provides for payments by the
Intermediate Fund to Putnam Mutual Funds at the annual rate of up
to 0.75% of the Intermediate Fund's average net assets
attributable to Class B shares, subject to the authority of the
Trustees to reduce the amount of payments or to suspend the Class
B Plan for such periods as they may determine. Should the
Trustees decide in the future to approve payments in excess of
these amounts , shareholders will be notified and this
Prospectus will be revised. Putnam Mutual Funds also receives
the proceeds of any CDSC imposed on redemptions of shares.
Although Class B shares of each Fund are sold without an
initial sales charge, Putnam Mutual Funds pays a sales commission
equal to 4.00% of the amount invested (including a prepaid
service fee of 0.20% of the amount invested) to dealers who sell
Class B shares of the Income Fund and a sales commission
equal to 2.75% of the amount invested to dealers who sell Class B
shares of the Intermediate Fund . These commissions are not
paid on exchanges from other Putnam funds and sales to investors
exempt from the CDSC. In addition, in order to further
compensate dealers (including, for this purpose, certain
financial institutions) for services provided in connection with
sales of Class B shares of each Fund and the maintenance
of shareholder accounts, Putnam Mutual Funds makes quarterly
payments to qualifying dealers based on the average net asset
value of Class B shares of each Fund which are
attributable to shareholders for whom the dealers are designated
as the dealer of record, except for the first year's service fees
in respect of Class B shares of the Income Fund , which
are prepaid as described above. Putnam Mutual Funds makes such
payments at an annual rate of 0.20% of such average net asset
value of Class B shares of the Income Fund and 0.15% of
such average net asset value of Class B shares of the
Intermediate Fund .
GENERAL. Putnam Mutual Funds may suspend or modify the payments
made to dealers described above, and such payments are subject to
the continuation of the relevant Plan described above, the terms
of Service Agreements between dealers and Putnam Mutual Funds,
and any applicable limits imposed by the National Association of
Securities Dealers, Inc.
<PAGE>
HOW TO SELL SHARES
You can sell your shares to each Fund any day the New
York Stock Exchange is open, either directly to a Fund
or through your investment dealer. Either Fund will
only repurchase shares for which it has received payment.
SELLING SHARES DIRECTLY TO A FUND. Send a signed
letter of instruction or stock power form to Putnam Investor
Services, along with any certificates that represent shares you
want to sell. The price you will receive is the next net asset
value calculated after the Fund receives your request in
proper form less any applicable CDSC. In order to receive that
day's net asset value, Putnam Investor Services must receive your
request before the close of regular trading on the New York Stock
Exchange. If you sell shares having a net asset value of
$100,000 or more, the signatures of registered owners or their
legal representatives must be guaranteed by a bank, broker-dealer
or certain other financial institutions. See the Statement of
Additional Information for more information about where to obtain
a signature guarantee. Stock power forms are available from your
investment dealer, Putnam Investor Services and many commercial
banks. If you want your redemption proceeds sent to an address
other than your address as it appears on Putnam's records, a
signature guarantee is required. Putnam Investor Services
usually requires additional documentation for the sale of shares
by a corporation, partnership, agent or fiduciary, or a surviving
joint owner. Contact Putnam Investor Services for details.
BOTH FUNDS GENERALLY SEND YOU PAYMENT FOR YOUR
SHARES THE BUSINESS DAY AFTER YOUR REQUEST IS RECEIVED. Under
unusual circumstances, either Fund may suspend
repurchases, or postpone payment for more than seven days, as
permitted by federal securities law.
You may use Putnam's Telephone Redemption Privilege to redeem
shares valued up to $100,000 from your account unless you have
notified Putnam Investor Services of an address change within the
preceding 15 days. Unless an investor indicates otherwise on
the Account Application, Putnam Investor Services will be
authorized to act upon redemption and transfer instructions
received by telephone from a shareholder, or any person claiming
to act as his or her representative, who can provide Putnam
Investor Services with his or her account registration and
address as it appears on Putnam Investor Services' records.
Putnam Investor Services will employ these and other reasonable
procedures to confirm that instructions communicated by telephone
are genuine; if it fails to employ reasonable procedures, Putnam
Investor Services may be liable for any losses due to
unauthorized or fraudulent instructions. For information,
consult Putnam Investor Services. During periods of unusual
market changes and shareholder activity, you may experience
delays in contacting Putnam Investor Services by telephone in
which case you may wish to submit a written redemption request,
as described above, or contact your investment dealer, as
described below. The Telephone Redemption Privilege is not
available if you were issued certificates for your shares which
remain outstanding. The Telephone Redemption Privilege may be
modified or terminated without notice.
SELLING SHARES THROUGH YOUR INVESTMENT DEALER. Your dealer must
receive your request before the close of regular trading on the
New York Stock Exchange and transmit it to Putnam Mutual Funds
before 5 p.m. Boston time to receive that day's net asset value.
Your dealer will be responsible for furnishing all necessary
documentation to Putnam Investor Services, and may charge for its
services.
HOW TO EXCHANGE SHARES
You can exchange your shares for shares of the same class of
certain other Putnam funds at net asset value beginning 15
days after purchase. Not all Putnam funds offer more
than one class of shares . If the other Putnam fund
offers only one class of shares, only Class A shares may be
exchanged for such class. If you exchange shares subject to a
CDSC, the transaction will not be subject to the CDSC. However,
when you redeem the shares acquired through the exchange, the
redemption may be subject to the CDSC, depending upon
when you originally purchased the shares and using the schedule
of any fund into or from which you have exchanged your shares
that would result in your paying the highest CDSC applicable to
your class of shares. For purposes of computing the CDSC, the
length of time you have owned your shares will be measured from
the date of original purchase and will not be affected by
any exchange.
To exchange your shares, simply complete an Exchange
Authorization Form and send it to Putnam Investor Services.
Exchange Authorization Forms are available by calling or writing
Putnam Investor Services. A Telephone Exchange Privilege is
currently available for amounts up to $500,000. Putnam Investor
Services' procedures for telephonic transactions are described
above under "How to sell shares". The Telephone Exchange
Privilege is not available if you were issued certificates of
a Fund for shares which remain outstanding. For federal
income tax purposes, an exchange is treated as a sale of shares
and may result in a capital gain or loss. Ask your investment
dealer or Putnam Investor Services for prospectuses of other
Putnam funds. Shares of certain Putnam funds are not available
to residents of all states.
The exchange privilege is not intended as a vehicle for short-
term trading. Excessive exchange activity may interfere with
portfolio management and have an adverse effect on all
shareholders. In order to limit excessive exchange activity and
in other circumstances where the Trustees or Putnam Management
believes doing so would be in the best interests of a Fund, each
Fund reserves the right to revise or terminate the exchange
privilege, limit the amount or number of exchanges or reject any
exchange. Shareholders would be notified of any such action to
the extent required by law. Consult Putnam Investor Services
before requesting an exchange. See the Statement of Additional
Information to find out more about the exchange privilege.
HOW EACH FUND VALUES ITS SHARES
Tax-exempt securities (including New York Tax
Exempt Securities) are stated on the basis of valuations provided
by a pricing service approved by the Trustees, which uses
information with respect to transactions in bonds, quotations
from bond dealers, market transactions in comparable securities
and various relationships between securities in determining
value. Each Fund believes that reliable market
quotations are generally not readily available for purposes of
valuing its portfolio securities. As a result, it is likely that
most of the valuations provided by such pricing service will be
based upon fair value determined on the basis of the factors
listed above. Non-tax-exempt securities for which market
quotations are readily available are stated at market value.
Short-term investments that will mature in 60 days or less are
stated at amortized cost, which approximates market value. All
other securities and assets are valued at their fair value
following procedures approved by the Trustees.
HOW DISTRIBUTIONS ARE MADE; TAX INFORMATION
Each Fund declares all of its net interest income as a
distribution on each day it is open for business. Net interest
income consists of interest accrued on portfolio investments of
each Fund, less accrued expenses, computed in each case
since the most recent determination of net asset value.
Normally, each Fund pays distributions of net interest
income on the last business day of each month. Each
Fund will distribute at least annually all net realized capital
gains, if any, after applying any available capital loss
carryovers. Distributions paid by each Fund with
respect to Class A shares will generally be greater than those
paid with respect to Class B shares because expenses attributable
to Class B shares will generally be higher. You begin earning
distributions on the business day that Putnam Mutual Funds
receives payment for your shares.
YOU CAN CHOOSE THREE DISTRIBUTION OPTIONS: (1)
reinvest all distributions in additional Fund shares without a
sales charge; (2) receive distributions from net
interest income in cash while reinvesting capital gains
distributions in additional shares of the Fund without a sales
charge; or (3) receive all distributions in cash. You can change
your distribution option by notifying Putnam Investor Services in
writing. If you do not select an option when you open your
account, all distributions will be reinvested. All distributions
of the Funds not paid in cash will be reinvested in
shares of the class on which the distribution is paid. You will
receive a statement confirming reinvestment of distributions in
additional Fund shares (or in shares of other Putnam funds for
Dividends Plus accounts) promptly following the quarter in which
the reinvestment occurs.
If a check representing a Fund distribution is not cashed within
a specified period, Putnam Investor Services will notify you that
you have the option of requesting another check or reinvesting
the distribution in that Fund or in another Putnam fund. If
Putnam Investor Services does not receive your election, the
distribution will be reinvested in the Fund. Similarly, if
correspondence sent by the Fund or Putnam Investor Services is
returned as "undeliverable," Fund distributions will
automatically be reinvested in the Fund or in another Putnam
fund.
Each Fund intends to qualify as a "regulated investment company"
for federal income tax purposes and to meet all other
requirements that are necessary for it to be relieved of federal
taxes on income and gains it distributes to shareholders. Each
Fund will distribute substantially all of its ordinary income and
capital gain net income on a current basis.
Distributions designated by a Fund as "exempt-interest dividends"
are not generally subject to federal income tax. However, an
investment in either Fund may result in liability for federal
alternative minimum tax, both for individual and corporate
investors. See New York Tax Exempt Securities--Alternative
Minimum Tax . To the extent that exempt-interest dividends
are derived from interest on New York Tax Exempt Securities, such
distributions will also be exempt from New York State and New
York City personal income taxes. However, an investment in
a Fund may result in liability for state and local taxes for
individual shareholders subject to taxation by states other than
New York State or cities outside of New York State because the
exemption from New York State and New York City personal income
taxes does not prevent such other jurisdictions from taxing
individual shareholders on dividends received from a
Fund. In addition, distributions derived from interest on tax
exempt securities other than New York Tax Exempt Securities will
be treated as taxable ordinary income for purposes of the New
York State and New York City personal income taxes. Exempt-
interest dividends, including those derived from New York Tax
Exempt Securities, are included in a corporation's net investment
income for purposes of calculating such corporation's New York
State corporate franchise tax and New York City general
corporation tax and will be subject to such taxes to the extent
that a corporation's net investment income is allocated to New
York State and/or New York City.
All or a portion of interest on indebtedness incurred or
continued to purchase or carry a Fund's shares generally
will not be deductible for federal or New York State and New York
City personal income tax purposes.
If you receive Social Security or railroad retirement benefits,
you should consult your tax adviser to determine what effect, if
any, an investment in either Fund may have on the taxation of
your benefits.
For federal income tax purposes, all Fund distributions other
than exempt-interest dividends will be taxable to you as ordinary
income, except that any distributions of net long-term capital
gains will be taxable to you as such, regardless of how long you
have held your shares. For New York State and City personal
income tax purposes, distributions of net long-term gains will be
taxable at the same rates as ordinary income. Distributions will
be taxable as described above whether received in cash or in
shares through the reinvestment of distributions.
Early in each year each Fund will notify you of the amount and
tax status of distributions paid to you by that Fund for the
preceding year.
Gain or loss realized upon the taxable disposition of Fund shares
is generally treated as long-term capital gain or loss if the
shares have been held for more than twelve months, and otherwise
as short-term capital gain or loss. However, if a shareholder
receives one or more exempt-interest dividends with respect to a
share that is held for six months or less, any loss on the sale
or exchange of the share will be disallowed to the extent of such
exempt-interest dividend(s).
The foregoing is a summary of certain federal, New York State and
New York City income tax consequences of investing in a Fund.
You should consult your tax adviser to determine the precise
effect of an investment in a Fund on your particular tax
situation (including possible liability for alternative minimum
tax and state and local taxes).
ABOUT PUTNAM INVESTMENTS, INC.
PUTNAM MANAGEMENT HAS BEEN MANAGING MUTUAL FUNDS SINCE 1937.
Putnam Mutual Funds is the principal underwriter of the Funds and
of other Putnam funds. Putnam Fiduciary Trust Company is the
Funds' custodian. Putnam Investor Services, a division
of Putnam Fiduciary Trust Company, is the Funds'
investor servicing and transfer agent.
Putnam Management, Putnam Mutual Funds, and Putnam Fiduciary
Trust Company are subsidiaries of Putnam Investments, Inc., which
is wholly-owned by Marsh & McLennan Companies, Inc., a publicly
owned holding company whose principal businesses are
international insurance and reinsurance brokerage, employee
benefit consulting and investment management.
<PAGE>
PUTNAM NEW YORK TAX EXEMPT INCOME TRUST
PUTNAM NEW YORK TAX EXEMPT INCOME FUND
PUTNAM NEW YORK INTERMEDIATE TAX EXEMPT FUND
One Post Office Square
Boston, MA 02109
FUND INFORMATION:
INVESTMENT MANAGER
Putnam Investment Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
INVESTOR SERVICING AGENT
Putnam Investor Services
Mailing address:
P.O. Box 41203
Providence, RI 02940-1203
CUSTODIAN
Putnam Fiduciary Trust Company
One Post Office Square
Boston, MA 02109
LEGAL COUNSEL
Ropes & Gray
One International Place
Boston, MA 02110
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand
One Post Office Square
Boston, MA 02109
PUTNAMINVESTMENTS
One Post Office Square
Boston, Massachusetts 02109
Toll-free 1-800-225-1581<PAGE>
PUTNAM NEW YORK TAX EXEMPT INCOME FUND
PUTNAM NEW YORK TAX EXEMPT MONEY MARKET FUND
Prospectus Supplement dated June 1, 1994 to
Prospectus dated April 1, 1994
The date of this Prospectus has been changed to June 1, 1994. As
of June 1, 1994, the name of the Trust has changed to Putnam New
York Tax Exempt Income Trust and its shares are now divided into
two series: Putnam New York Tax Exempt Income Fund and Putnam
New York Intermediate Tax Exempt Fund.
<PAGE>
PROSPECTUS
APRIL 1, 1994
PUTNAM NEW YORK TAX EXEMPT INCOME FUND
PUTNAM NEW YORK TAX EXEMPT MONEY MARKET FUND
INVESTMENT STRATEGY: TAX-ADVANTAGED
AN INVESTMENT IN THE MONEY MARKET FUND IS NEITHER INSURED NOR
GUARANTEED BY THE U.S. GOVERNMENT. THERE CAN BE NO ASSURANCE
THAT THE FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE
OF $1.00 PER SHARE.
This Prospectus explains concisely what you should know before
investing in the Funds. Please read it carefully and keep it for
future reference. You can find more detailed information about
the Funds in the April 1, 1994 Statement of Additional
Information, as amended from time to time. For a free copy of
the Statement, call Putnam Investor Services at 1-800-225-1581.
The Statement has been filed with the Securities and Exchange
Commission and is incorporated into this Prospectus by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY FINANCIAL INSTITUTION, ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY, AND INVOLVE RISK, INCLUDING
THE POSSIBLE LOSS OF PRINCIPAL.
BOSTON * LONDON * TOKYO<PAGE>
Putnam New York Tax Exempt Income Fund and Putnam New York Tax
Exempt Money Market Fund seek as high a level of current income
exempt from federal income tax and New York State and City
personal income taxes as Putnam Investment Management, Inc., the
Fund's investment manager ("Putnam Management"), believes is
consistent with preservation of capital and, in the case of the
Money Market Fund, with maintenance of liquidity and stability of
principal.
PUTNAM NEW YORK TAX EXEMPT INCOME FUND (THE "INCOME FUND")
invests primarily in a diversified portfolio of longer-term New
York Tax Exempt Securities. The Income Fund's Class A shares are
offered at a public offering price that includes an initial sales
charge. The Income Fund's Class B shares are offered without an
initial sales charge, although a contingent deferred sales charge
may be imposed upon redemption depending upon how long the shares
have been owned. See "How to buy shares" below. Each class
bears different expenses. For information about various expenses
borne by each class, see "Expenses summary."
PUTNAM NEW YORK TAX EXEMPT MONEY MARKET FUND (THE "MONEY MARKET
FUND") invests primarily in a non-diversified portfolio of short-
term New York Tax Exempt Securities.
The Funds are separate, open-end investment companies. Each is
described in this Prospectus in order to help investors
understand the similarities and differences between the Funds and
determine which Fund--or combination of Funds--best meets their
investment objectives. See "Organization and history."
On December 3, 1993, the Trustees of the Money Market Fund and
the Putnam Tax Exempt Money Market Fund approved a proposed plan
or reorganization pursuant to which the Putnam Tax Exempt Money
Market Fund will acquire all of the assets and assume all of the
liabilities of the Money Market Fund. The proposed
reorganization is subject to the approval of the shareholders of
the Money Market Fund. Under the plan of reorganization,
shareholders would receive one share of the Putnam Tax Exempt
Money Market Fund for each share of the Money Market Fund held by
them.
The Putnam Tax Exempt Money Market Fund normally invests at least
80% of its net assets in short-term Tax-Exempt Securities (as
defined in its Prospectus). However, dividends paid by the
Putnam Tax Exempt Money Market Fund to residents of New York may
be subject to state and local income tax.<PAGE>
ABOUT THE FUNDS
Expenses summary 4
..........................................................
..
Financial highlights 6
..........................................................
..
Objectives 10
..........................................................
..
How objectives are pursued 10
..........................................................
..
How performance is shown 21
..........................................................
..
How the Funds are managed 22
..........................................................
..
Organization and history 23
ABOUT YOUR INVESTMENT
Alternative sales arrangements - The Income Fund 25
..........................................................
..
How to buy shares 26
..........................................................
..
Distribution Plans 31
..........................................................
..
How to sell shares 34
..........................................................
..
How to exchange shares 37
..........................................................
..
How each Fund values its shares 38
..........................................................
..
How distributions are made; tax information 39
ABOUT PUTNAM INVESTMENTS, INC. 41
ABOUT THE FUND
EXPENSES SUMMARY
Expenses are one of several factors to consider when investing in
a Fund. The following tables summarize your maximum transaction
costs from investing in each Fund and the expenses incurred by
each Fund based on its most recent fiscal year. The expenses
shown in the table for the Class B shares of the Income Fund have
been annualized based on expense information for its most recent
fiscal period. The Examples show the cumulative expenses
attributable to a hypothetical $1,000 investment in each Fund
over specified periods.
<PAGE>
PUTNAM NEW YORK TAX EXEMPT INCOME FUND
CLASS A SHARES CLASS B SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed
on Purchases (as a percentage
of offering price) 4.75%
NONE*
5.0% in the first
Deferred Sales Charge (as a year, declining
percentage of the lower of to 1.0% in the
original purchase price or sixth year, and
redemption proceeds) NONE** eliminated thereafter
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees 0.48% 0.47%
12b-1 Fees 0.20% 0.85%
Other Expenses 0.10% 0.11%
Total Fund Operating Expenses 0.78% 1.43%
EXAMPLES
Your investment of $1,000 would incur the following expenses,
assuming 5% annual return and redemption at the end of each
period:
1 3 5 10
year years years years
CLASS A $55 $71 $89 $140
CLASS B $65 $75 $98 $154***
Your investment of $1,000 would incur the following expenses,
assuming 5% annual return but no redemption:
1 3 5 10
year years years years
CLASS A $55 $71 $89 $140
CLASS B $15 $45 $78 $154***
<PAGE>
* Class B shares are sold without a front-end sales charge,
but their 12b-1 fees may cause long-term shareholders to
pay more than the economic equivalent of the maximum
permitted front-end sales charge.
** A deferred sales charge of up to 1.00% is assessed on
certain redemptions of Class A shares of the Income Fund
that were purchased without an initial sales charge as
part of an investment of $1 million or more. See "How to
buy shares -- The Income Fund -- Class A shares."
*** Reflects conversion of Class B shares to Class A shares
(which pay lower ongoing expenses) approximately eight
years after purchase. See "How to buy shares -- The
Income Fund -- Class B shares - Conversion of Class B
shares."
PUTNAM NEW YORK TAX EXEMPT MONEY MARKET FUND
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) NONE
Deferred Sales Charge
(as a percentage of the lower of original
purchase price or redemption proceeds) NONE
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees 0.45%
12b-1 Fees NONE
Other Expenses 0.36%
Total Fund Operating Expenses 0.81%
EXAMPLE
Your investment of $1,000 would incur the following expenses,
assuming (1) 5% annual return and (2) redemption at the end of
each period:
1 3 5 10
YEAR YEARS YEARS YEARS
$8 $26 $45 $100
The tables are provided to help you understand the expenses of
investing in each Fund and your share of the operating expenses
which that Fund incurs. The 12b-1 fees for Class A shares of the
Income Fund shown in the table reflect the amounts to which that
Fund's Trustees currently limit payments under the Class A
Distribution Plan. Actual 12b-1 fees and total Fund operating
expenses for the Income Fund's Class A shares were 0.18% and
0.76%, respectively. Payments under the Money Market Fund's
Distribution Plan have been terminated effective January 1, 1994.
Actual 12b-1 fees and total Fund operating expenses for the Money
Market Fund's last fiscal year were 0.10% and 0.91%,
respectively. The Examples do not represent past or future
expense levels. Actual expenses may be greater or less than
those shown. Federal regulations require the Examples to assume
a 5% annual return, but actual annual return will vary.
FINANCIAL HIGHLIGHTS
The tables on the following pages present per share financial
information for the ten most recent fiscal years of the Income
Fund and for the life of the Money Market Fund. This information
has been audited and reported on by the Funds' independent
accountants. The Report of Independent Accountants and financial
statements included in each Fund's Annual Report to shareholders
for the 1993 fiscal year are incorporated by reference into this
Prospectus. The Funds' Annual Reports, which contain additional
unaudited performance information, will be made available without
charge upon request.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<PAGE>
(The Income Fund's table is incorporated by reference from Post-
Effective Amendment No. 15 to the Fund's Registration Statement,
File No. 2-83909.)
(The Money Market Fund's table is incorporated by reference from
Post-Effective Amendment No. 8 to the Fund's Registration
Statement File No. 33-17344.)
OBJECTIVES
EACH OF THE FUNDS SEEKS AS HIGH A LEVEL OF CURRENT INCOME EXEMPT
FROM FEDERAL INCOME TAX AND NEW YORK STATE AND CITY PERSONAL
INCOME TAXES AS PUTNAM MANAGEMENT BELIEVES IS CONSISTENT WITH
PRESERVATION OF CAPITAL AND, IN THE CASE OF THE MONEY MARKET
FUND, WITH MAINTENANCE OF LIQUIDITY AND STABILITY OF PRINCIPAL.
Under current law, to the extent distributions by the Funds are
derived from interest on New York Tax Exempt Securities (which
are described below) and are designated as such, they shall be
exempt from federal income tax and New York State and City
personal income taxes. Neither Fund is intended to be a complete
investment program, and there is no assurance that either Fund
will achieve its objective.
HOW OBJECTIVES ARE PURSUED
EACH FUND SEEKS ITS OBJECTIVE BY INVESTING PRIMARILY IN A
PORTFOLIO OF NEW YORK TAX EXEMPT SECURITIES (AS DEFINED BELOW).
The Funds have separate investment policies involving differing
levels of yield and risk.
PUTNAM NEW YORK TAX EXEMPT INCOME FUND
PUTNAM NEW YORK TAX EXEMPT INCOME FUND, A DIVERSIFIED FUND,
INVESTS PRIMARILY IN LONGER-TERM NEW YORK TAX EXEMPT SECURITIES.
It is a fundamental policy of the Income Fund that 90% of the
Income Fund's investment income distributions will be exempt from
federal income tax and New York State and City personal income
taxes, except during times of adverse market conditions when more
than 10% of the Income Fund's investment income distributions
could be subject to federal income tax and/or New York State and
City personal income taxes. For temporary or liquidity purposes,
the Income Fund may also invest in taxable obligations, provided
that not more than 10% of the Income Fund's investment income
distributions are subject to federal income tax and/or New York
State and City personal income taxes (except during adverse
market conditions). The Income Fund may also hold its assets in
cash or money market instruments. The Income Fund's investments
in New York Tax Exempt Securities and taxable obligations will be
limited to securities rated at the time of purchase not lower
than the five highest grades assigned by Moody's Investors
Service, Inc. ("Moody's") (Aaa, Aa, A, Baa or Ba) and Standard &
Poor's Corporation ("Standard & Poor's") (AAA, AA, A, BBB or BB),
or unrated securities which Putnam Management determines are of
comparable quality. The Income Fund will not necessarily dispose
of a security when its rating is reduced below its rating at the
time of purchase, although Putnam Management will monitor the
investment to determine whether continued investment in the
security will assist in meeting the Fund's objective. During
fiscal 1993, all of the Income Fund's distributions from net
investment income were exempt from federal income tax and New
York State and City personal income taxes. However,
distributions from capital gains were taxable.
The Income Fund may also invest in securities representing
interests in New York Tax Exempt Securities, known as "inverse
floating obligations" or "residual interest bonds," paying
interest rates that vary inversely to changes in the interest
rates of specified short-term tax exempt securities or an index
of short-term tax exempt securities. The interest rates on
inverse floating obligations or residual interest bonds will
typically decline as short-term market interest rates increase
and increase as short-term market rates decline. Such securities
have the effect of providing a degree of investment leverage,
since they will generally increase or decrease in value in
response to changes in market interest rates at a rate which is a
multiple (typically two) of the rate at which fixed-rate long-
term tax exempt securities increase or decrease in response to
such changes. As a result, the market values of inverse floating
obligations and residual interest bonds will generally be more
volatile than the market values of fixed-rate tax exempt
securities.
RISK FACTORS
INVESTORS SHOULD CAREFULLY CONSIDER THEIR ABILITY TO ASSUME THE
RISKS OF OWNING SHARES OF A MUTUAL FUND WHICH INVESTS IN LOWER-
RATED SECURITIES BEFORE MAKING AN INVESTMENT IN THE INCOME FUND.
The lower ratings of certain securities held by the Income Fund
reflect a greater possibility that adverse changes in the
financial condition of the issuer, or in general economic
conditions, or both, or an unanticipated rise in interest rates,
may impair the ability of the issuer to make payments of interest
and principal. The inability (or perceived inability) of issuers
to make timely payments of interest and principal would likely
make the values of securities held by the Fund more volatile and
could limit the Fund's ability to sell its securities at prices
approximating the values the Fund had placed on such securities.
In the absence of a liquid trading market for securities held by
it, the Fund may be unable at times to establish the fair value
of such securities. The rating assigned to a security by Moody's
or Standard & Poor's does not reflect an assessment of the
volatility of the security's market value or of the liquidity of
an investment in the security.
THE INCOME FUND MAY INVEST IN BOTH HIGHER-RATED AND LOWER-RATED
NEW YORK 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 New York Tax
Exempt Security rated both Ba by Moody's and BB by Standard &
Poor's at the time of purchase, or, if unrated, determined to be
of comparable quality if, as a result, more than 25% of the
Income Fund's total assets would be of that quality. The rating
services' descriptions of the five highest grades of debt
securities and other rating information are described in the
Statement of Additional Information. New York Tax Exempt
Securities rated Ba or BB are considered to have speculative
elements, with large uncertainties or major risk exposures to
adverse conditions. Putnam Management seeks to minimize the
risks of investing in lower-rated securities through investment
analysis and attention to current developments in interest rates
and economic conditions.
At times, a portion of the Income Fund's assets may be invested
in securities as to which the Income Fund, by itself or together
with other funds and accounts managed by Putnam Management and
its affiliates, holds a major portion or all of an issue of New
York Tax Exempt Securities. Under adverse market or economic
conditions or in the event of adverse changes in the financial
condition of the issuer, the Income Fund could find it more
difficult to sell such securities when Putnam Management believes
it advisable to do so or may be able to sell such securities only
at prices lower than if such securities were more widely held.
Under such circumstances, it may also be more difficult to
determine the fair value of such securities for purposes of
computing the Income Fund's net asset value. In order to enforce
its rights in the event of a default under such securities, the
Income Fund may be required to take possession of and manage
assets securing the issuer's obligations on such securities,
which may increase the Income Fund's operating expenses and
adversely affect the Income Fund's net asset value. Any income
derived from the Income Fund's ownership or operation of such
assets would not be tax-exempt. When the Income Fund invests in
New York Tax Exempt Securities in the lower rating categories,
the achievement of the Fund's goals is more dependent on Putnam
Management's investment analysis than would be the case if the
Income Fund were investing in New York Tax Exempt Securities in
the higher rating categories. The amount of information about
the financial condition of an issuer of New York Tax Exempt
Securities may not be as extensive as information about
corporations whose securities are publicly traded.
Some of the securities in which the Income Fund invests may
include so-called "zero-coupon" bonds whose values are subject to
greater fluctuation in response to changes in market interest
rates than bonds which pay interest currently. Zero-coupon bonds
are issued at a significant discount from face value and pay
interest only at maturity rather than at intervals during the
life of the security. Zero-coupon bonds allow an issuer to avoid
the need to generate cash to meet current interest payments.
Accordingly, such bonds may involve greater credit risks than
bonds paying interest currently. The Income Fund is required to
accrue and distribute income from zero-coupon bonds on a current
basis, even though it does not receive that income currently in
cash. Thus, the Income Fund may have to sell investments to
obtain cash needed to make income distributions.
Certain securities held by the Income Fund may permit the issuer
at its option to "call," or redeem, such securities. If an
issuer were to redeem securities held by the Income Fund during a
time of declining interest rates, the Income Fund may not be able
to reinvest the proceeds in securities providing the same
investment return as the securities redeemed.
For additional information concerning the risks associated with
investments by the Income Fund in securities in the lower rating
categories, see the Statement of Additional Information.
INVESTMENTS IN PREMIUM SECURITIES. During a period of declining
interest rates, many of the Income Fund's portfolio investments
will likely bear coupon rates which are higher than current
market rates, regardless of whether such securities were
originally purchased at a premium. Such securities would
generally carry premium market values which would be reflected in
the net asset value of the Income Fund's shares. As a result, an
investor who purchases shares of the Income Fund during such
periods would initially receive higher monthly distributions
(derived from the higher coupon rates payable on the Income
Fund's investments) than might be available from alternative
investments bearing current market interest rates, but may face
an increased risk of capital loss as these higher coupon
securities approach maturity (or first call date). In evaluating
the potential performance of an investment in the Income Fund,
investors may find it useful to compare the Income Fund's current
dividend rate with the Fund's "yield," which is computed on a
yield-to-maturity basis in accordance with Securities and
Exchange Commission ("SEC") regulations and which reflects
amortization of market premiums. See "How performance is shown."
ALTERNATIVE INVESTMENT STRATEGIES. At times Putnam Management
may judge that conditions in the markets for New York Tax Exempt
Securities make pursuing the Income Fund's basic investment
strategy inconsistent with the best interests of its
shareholders. At such times Putnam Management may temporarily
use alternative strategies, primarily designed to reduce
fluctuations in the value of the Income Fund's assets. In
implementing these "defensive" strategies, the Income Fund may
invest in taxable obligations, and more than 10% of the Income
Fund's investment income distributions could be subject to
federal income tax and/or New York State and City personal income
taxes. Such taxable obligations may include: obligations of the
U.S. government, its agencies or instrumentalities; other debt
securities rated within the four highest grades by either Moody's
or Standard & Poor's; commercial paper rated in the highest grade
by either rating service (Prime-1 or A-1+, respectively);
certificates of deposit and bankers' acceptances; repurchase
agreements with respect to any of the foregoing investments; or
any other securities that Putnam Management considers consistent
with such defensive strategies. It is impossible to predict
when, or for how long, the Income Fund will use such alternative
strategies.
SHORT-TERM TRADING
UNDER CERTAIN MARKET CONDITIONS, THE FUND MAY SEEK PROFITS BY
SHORT-TERM TRADING. The length of time the Income Fund has held
a particular security is not generally a consideration in
investment decisions. A change in the securities owned by the
Income Fund is known as "portfolio turnover." To the extent
short-term trading strategies are used, the Fund's portfolio
turnover rate may be higher than that of other mutual funds.
Portfolio turnover generally involves some expense to the Income
Fund, including brokerage commissions or dealer mark-ups and
other transaction costs on the sale of securities and
reinvestment in other securities. Such transactions may result
in realization of taxable gains. Portfolio turnover rates for
the ten most recent fiscal years of the Income Fund are shown in
the section "Financial highlights."
Putnam Management believes that in general the secondary market
for New York Tax Exempt Securities is less liquid than that for
taxable fixed-income securities. Accordingly, the ability of the
Income Fund to buy and sell securities may, at any particular
time and with respect to any particular securities, be limited.
PUTNAM NEW YORK TAX EXEMPT MONEY MARKET FUND
PUTNAM NEW YORK TAX EXEMPT MONEY MARKET FUND, A NON-DIVERSIFIED
FUND, FOLLOWS THE FUNDAMENTAL POLICY THAT 90% OF THE FUND'S
INVESTMENT INCOME DISTRIBUTIONS NORMALLY WILL BE EXEMPT FROM
FEDERAL INCOME TAX AND NEW YORK STATE AND CITY PERSONAL INCOME
TAXES. Subject to this limitation, the Money Market Fund may
also invest in high quality taxable money market instruments of
the type described under "Alternative investment strategies"
below.
The Money Market Fund will invest in only the following New York
Tax Exempt Securities: (i) municipal notes rated at least MIG-2
by Moody's; (ii) municipal bonds rated Aa or better by Moody's or
AA or better by Standard & Poor's; (iii) municipal securities
backed by the U.S. government; (iv) short-term discount notes
(tax-exempt commercial paper) rated at least Prime-2 by Moody's
or A-2 by Standard & Poor's; (v) participation interests in any
of the foregoing; and (vi) unrated securities or new types of
tax-exempt instruments which become available in the future if
the Money Market Fund's Trustees determine they are of a quality
comparable to those mentioned above. In connection with the
purchase of New York Tax Exempt Securities, the Money Market Fund
may acquire stand-by commitments, which give the Money Market
Fund the right to resell the security to the dealer at a
specified price. Stand-by commitments may provide additional
liquidity for the Money Market Fund but are subject to the risk
that the dealer may fail to meet its obligations. The Money
Market Fund does not generally expect to pay additional
consideration for stand-by commitments nor to assign any value to
them.
RISK FACTORS
THE MONEY MARKET FUND FOLLOWS INVESTMENT AND VALUATION POLICIES
DESIGNED TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
There can be no assurance that the Fund will be able to maintain
a stable net asset value of $1.00 per share. The Money Market
Fund will invest in New York Tax Exempt Securities maturing in
397 days or less from the time of investment and will maintain a
dollar-weighted average portfolio maturity of 90 days or less.
The Money Market Fund may invest in variable or floating-rate New
York Tax Exempt Securities which bear interest at rates subject
to periodic adjustment or which provide for periodic recovery of
principal on demand. Under certain conditions, these securities
may be deemed to have remaining maturities equal to the time
remaining until the next interest adjustment date or the date on
which principal can be recovered on demand.
Considerations of liquidity and preservation of capital mean that
the Money Market Fund may not necessarily invest in New York Tax
Exempt Securities paying the highest available yield at a
particular time. Consistent with its investment objective, the
Money Market Fund will attempt to maximize yields by portfolio
trading and by buying and selling portfolio investments in
anticipation of or in response to changing economic and money
market conditions and trends. The Money Market Fund will also
invest to take advantage of what Putnam Management believes to be
temporary disparities in yields of different segments of the
market for New York Tax Exempt Securities or among particular
instruments within the same segment of the market. These
policies, as well as the relatively short maturity of obligations
purchased by the Money Market Fund, may result in frequent
changes in the Money Market Fund's portfolio. Portfolio turnover
may give rise to taxable gains. The Money Market Fund does not
usually pay brokerage commissions in connection with the purchase
of portfolio securities. See "Portfolio transactions - Brokerage
and research services" in the Statement of Additional Information
for a discussion of underwriters' commissions and dealers'
spreads involved in the purchase and sale of portfolio
securities.
The portfolio of the Money Market Fund will be affected by
general changes in interest rates resulting in increases or
decreases in the value of the obligations held by the Money
Market Fund. Although the Money Market Fund's investment
policies are designed to minimize these changes and to maintain a
net asset value of $1.00 per share, there is no assurance that
these policies will be successful. Withdrawals by shareholders
could require the sale of portfolio investments at a time when
such a sale might not otherwise be desirable.
ALTERNATIVE INVESTMENT STRATEGIES. At times Putnam Management
may judge that conditions in the markets for New York Tax Exempt
Securities make pursuing the Money Market Fund's basic investment
strategy inconsistent with the best interests of its
shareholders. At such times Putnam Management may temporarily
use alternative strategies. In implementing these "defensive"
strategies, the Money Market Fund may invest in taxable high
quality money market instruments, including bank certificates of
deposit, bankers' acceptances, prime commercial paper, high-
grade, short-term corporate obligations, short-term U.S.
government securities, repurchase agreements, or other securities
Putnam Management considers consistent with such defensive
strategies. The interest income from these instruments would be
subject to federal income tax and/or New York State and City
personal income taxes. It is impossible to predict when, or for
how long, the Money Market Fund will use such alternative
strategies.
NEW YORK TAX EXEMPT SECURITIES
NEW YORK TAX EXEMPT SECURITIES INCLUDE OBLIGATIONS OF THE STATE
OF NEW YORK AND ITS POLITICAL SUBDIVISIONS OR THEIR AGENCIES OR
INSTRUMENTALITIES OR OTHER GOVERNMENTAL UNITS, THE INTEREST WITH
RESPECT TO WHICH, IN THE OPINION OF BOND COUNSEL, IS EXEMPT FROM
FEDERAL INCOME TAX AND NEW YORK STATE AND CITY PERSONAL INCOME
TAXES. These securities are issued to obtain funds for various
public purposes, such as the construction of public facilities,
the payment of general operating expenses or the refunding of
outstanding debts. They may also be issued to finance various
private activities, including the lending of funds to public or
private institutions for the construction of housing, educational
or medical facilities, and may include certain types of
industrial development bonds, private activity bonds or notes
issued by public authorities to finance privately owned or
operated facilities, or to fund short-term cash requirements.
Short-term New York Tax Exempt Securities are generally issued as
interim financing in anticipation of tax collections, revenue
receipts or bond sales to finance such public purposes. New York
Tax Exempt Securities also include debt obligations issued by
other governmental entities (for example, United States
territories) if such debt obligations generate interest income
which is exempt from federal income tax and New York State and
City personal income taxes.
THE TWO PRINCIPAL CLASSIFICATIONS OF NEW YORK TAX EXEMPT
SECURITIES ARE GENERAL OBLIGATION AND SPECIAL OBLIGATION (OR
SPECIAL REVENUE OBLIGATION) SECURITIES. GENERAL OBLIGATION
securities involve a pledge of the credit of an issuer possessing
taxing power and are payable from the issuer's general
unrestricted revenues. Their payment may depend on an
appropriation by the issuer's legislative body. The
characteristics and methods of enforcement of general obligation
securities vary according to the law applicable to the particular
issuer. SPECIAL OBLIGATION (or SPECIAL REVENUE OBLIGATION)
securities are payable only from the revenues derived from a
particular facility or class of facilities, or a specific revenue
source, and generally are not payable from the unrestricted
revenues of the issuer. Industrial development bonds and private
activity bonds are in most cases special obligation securities,
the credit quality of which is directly related to the private
user of the facilities.
DIVERSIFICATION AND CONCENTRATION POLICIES. The Income Fund is a
"diversified" investment company and the Money Market Fund is a
"non-diversified" investment company. Under the Investment
Company Act of 1940 and the Internal Revenue Code of 1986, as
amended, this means that with respect to 75% of its total assets
in the case of the Income Fund, and with respect to 50% of its
total assets in the case of the Money Market Fund, the Fund may
not invest more than 5% of its total assets in the securities of
any one issuer (except U.S. government obligations). The balance
of a Fund's assets is not subject to this limitation. In
addition, under the Internal Revenue Code of 1986, a regulated
investment company, such as the Funds, at the close of each
quarter of the taxable year may not hold more than 25% of its
total assets in securities of any one issuer (other than U.S.
government securities or the securities of other regulated
investment companies). Thus, the Income Fund may invest up to
25% of its total assets in the securities of any one issuer, and
the Money Market Fund may invest up to 25% of its total assets in
the securities of each of any two issuers. Because of the
relatively small number of issuers of New York Tax Exempt
Securities, each Fund is more likely to invest a higher
percentage of its assets in the securities of a single issuer
than an investment company which invests in a broad range of tax-
exempt securities. This practice involves an increased risk of
loss to the Fund if the issuer is unable to make interest or
principal payments or if the market value of such securities
declines.
A Fund will not invest more than 25% of its total assets in any
industry. Governmental issuers of New York Tax Exempt Securities
are not considered part of any "industry." However, New York Tax
Exempt Securities backed only by the assets and revenues of
nongovernmental users may for this purpose (and for
diversification purposes discussed above) be deemed to be issued
by such nongovernmental users, and the 25% limitation would apply
to such obligations.
It is nonetheless possible that the Income Fund may invest more
than 25% of its assets in a broader segment of the New York Tax
Exempt Securities market, such as revenue obligations of
hospitals and other health care facilities, housing agency
revenue obligations, or airport revenue obligations. This would
be the case only if Putnam Management determined that the yields
available from obligations in a particular segment of the market
justified the additional risks associated with such
concentration. Although such obligations could be supported by
the credit of governmental users or by the credit of
nongovernmental users engaged in a number of industries,
economic, business, political and other developments generally
affecting the revenues of such users (for example, proposed
legislation or pending court decisions affecting the financing of
such projects and market factors affecting the demand for their
services or products) may have a general adverse effect on all
New York Tax Exempt Securities in such a market segment.
Each Fund reserves the right to invest more than 25% of its
assets in industrial development securities and private activity
bonds.
SINCE THE FUNDS INVEST PRIMARILY IN NEW YORK TAX EXEMPT
SECURITIES, THE PERFORMANCE OF EACH FUND MAY BE ESPECIALLY
AFFECTED BY FACTORS PERTAINING TO THE NEW YORK ECONOMY AND OTHER
FACTORS SPECIFICALLY AFFECTING THE ABILITY OF ISSUERS OF NEW YORK
TAX EXEMPT SECURITIES TO MEET THEIR OBLIGATIONS. As a result,
the value of the Income Fund's shares may fluctuate more widely
than the value of shares of a portfolio investing in securities
relating to a number of different states. The ability of state,
county, or local governments to meet their obligations will
depend primarily on the availability of tax and other revenues to
those governments and on their fiscal conditions generally. The
amounts of tax and other revenues available to governmental
issuers of New York Tax Exempt Securities may be affected from
time to time by economic, political, and demographic conditions.
In addition, constitutional or statutory restrictions may limit a
government's power to raise revenues or increase taxes. The
availability of federal, state, and local aid to issuers of New
York Tax Exempt Securities may also affect their ability to meet
their obligations. Payments of principal and interest on special
obligation securities will depend on the economic condition of
the facility or specific revenue source from whose revenues the
payments will be made, which in turn could be affected by
economic, political, and demographic conditions in the State of
New York. Any reduction in the actual or perceived ability of an
issuer of New York Tax Exempt Securities to meet its obligations
(including a reduction in the rating of its outstanding
securities) would likely affect adversely the market value and
marketability of its obligations and could affect adversely the
values of other New York Tax Exempt Securities as well.
ALTERNATIVE MINIMUM TAX. As part of each Fund's fundamental 90%
tax exempt policy described above, neither Fund will treat exempt
interest income that is regarded as a preference item and thereby
subject to federal alternative minimum tax in the hands of
individuals as tax-exempt interest income for purposes of
measuring compliance with the policy. To the extent that either
Fund earns such income, individual and corporate shareholders,
depending on their own tax status, may be subject to alternative
minimum tax on that part of the Fund's distributions attributable
to such income. More generally, corporate shareholders may be
subject to federal alternative minimum tax on distributions of
exempt interest from the Fund. Neither Fund's distributions will
be subject to New York State or City minimum income tax on
individuals.
<PAGE>
FINANCIAL FUTURES AND OPTIONS (THE INCOME FUND)
THE INCOME FUND MAY PURCHASE AND SELL FINANCIAL FUTURES CONTRACTS
FOR HEDGING PURPOSES. Futures contracts on a Municipal Bond
Index are traded on the Chicago Board of Trade. This Index is
intended to represent a numerical measure of market performance
for long-term tax exempt bonds. An "index future" is a contract
to buy or sell units of a particular securities index at an
agreed price on a specified future date. Depending on the change
in value of the index between the time when the Fund enters into
and terminates an index futures contract, the Fund realizes a
gain or loss. The Income Fund may purchase and sell futures
contracts on the Index (or any other tax-exempt bond index
approved for trading by the Commodity Futures Trading Commission)
to hedge against general changes in market values of New York Tax
Exempt Securities which the Income Fund owns or expects to
purchase. The Income Fund may also purchase and sell put and
call options on index futures or on the indices directly, in
addition to or as an alternative to purchasing and selling index
futures.
The Income Fund may also, for hedging purposes, purchase and sell
futures contracts and related options with respect to U.S.
Treasury securities, including U.S. Treasury bills, notes and
bonds ("U.S. Government Securities") and options directly on U.S.
Government Securities. U.S. Government Securities futures and
related options would be used in a way similar to the Income
Fund's use of index futures and options.
THE USE OF FUTURES AND OPTIONS INVOLVES CERTAIN SPECIAL RISKS AND
MAY RESULT IN REALIZATION OF TAXABLE INCOME OR CAPITAL GAINS.
FUTURES AND OPTIONS TRANSACTIONS INVOLVE COSTS AND MAY RESULT IN
LOSSES. Certain risks arise because of the possibility of
imperfect correlations between movements in the prices of
financial futures and options and movements in the prices of the
underlying bond index or U.S. Government Securities or of the New
York Tax Exempt Securities which are the subject of the hedge.
The successful use of futures and options further depends on
Putnam Management's ability to forecast interest rate movements
correctly. Other risks arise from the Fund's potential inability
to close out its futures or related options positions, and there
can be no assurance that a liquid secondary market will exist
for any futures contract or option at a particular time. Certain
provisions of the Internal Revenue Code and certain regulatory
requirements may limit the Fund's ability to engage in futures
and options transactions.
A MORE DETAILED EXPLANATION OF FINANCIAL FUTURES AND OPTIONS
TRANSACTIONS AND THE RISKS ASSOCIATED WITH THEM IS INCLUDED IN
THE STATEMENT OF ADDITIONAL INFORMATION.
OTHER INVESTMENT PRACTICES
THE FUNDS MAY ALSO ENGAGE TO A LIMITED EXTENT IN THE FOLLOWING
INVESTMENT PRACTICES, WHICH MAY RESULT IN TAXABLE INCOME OR
CAPITAL GAINS AND WHICH INVOLVE CERTAIN SPECIAL RISKS. THE
STATEMENT OF ADDITIONAL INFORMATION CONTAINS MORE DETAILED
INFORMATION ABOUT THESE PRACTICES, INCLUDING LIMITATIONS DESIGNED
TO REDUCE THESE RISKS.
REPURCHASE AGREEMENTS AND FORWARD COMMITMENTS. Each Fund may
enter into repurchase agreements on up to 25% of its assets.
These transactions must be fully collateralized at all times.
Each Fund may also purchase securities for future delivery, which
may increase its overall investment exposure and involves a risk
of loss if the value of the securities declines prior to the
settlement date. These transactions involve some risk to a Fund
if the other party should default on its obligation and that Fund
is delayed or prevented from recovering the collateral or
completing the transaction.
LIMITING INVESTMENT RISK
SPECIFIC INVESTMENT RESTRICTIONS HELP THE FUNDS LIMIT INVESTMENT
RISKS FOR THEIR SHAREHOLDERS. THESE RESTRICTIONS PROHIBIT EACH
FUND FROM INVESTING MORE THAN: (a) 5% of its total assets in
the securities of any one issuer (other than securities of the
U.S. government or its agencies or instrumentalities or New York
Tax Exempt Securities);* (b) 5% of its net assets in securities
of any issuers if the party responsible for payment, together
with any predecessors, has been in operation for less than three
years (except U.S. government and agency obligations and
obligations backed by the full faith, credit and taxing power of
any person authorized to issue New York Tax Exempt Securities);
(c) 15% of its net assets in securities restricted as to resale
(excluding restricted securities that have been determined by the
Fund's Trustees (or the person designated by them to make such
determinations) to be readily marketable)*; or (d) 15% of its net
assets in any combination of securities that are not readily
marketable, in securities restricted as to resale (excluding
restricted securities determined by the Fund's Trustees (or the
person designated by them to make such determinations) to be
readily marketable), and in repurchase agreements maturing in
more than seven days. The Money Market Fund has not invested
more than 10% of its net assets in the types of securities listed
in item (d) and has no current intention of doing so.
Restrictions marked with an asterisk (*) above are summaries of
fundamental policies. See the Statement of Additional
Information for the full text of these policies and the Funds'
other fundamental policies. Except for investment policies
designated as fundamental in this Prospectus or the Statement,
the investment policies described in this Prospectus and in the
Statement are not fundamental policies. The Trustees may change
any non-fundamental investment policies without shareholder
approval. As a matter of policy, the Trustees would not
materially change a Fund's investment objective without
shareholder approval.
HOW PERFORMANCE IS SHOWN
PUTNAM NEW YORK TAX EXEMPT INCOME FUND
THE INCOME FUND'S YIELD, TAX-EQUIVALENT YIELD AND TOTAL RETURN
DATA MAY FROM TIME TO TIME BE INCLUDED IN ADVERTISEMENTS ABOUT
THE FUND. "Yield" for each class of shares is calculated by
dividing the annualized net investment income per share during a
recent 30-day period by the maximum public offering price per
share of such class on the last day of that period. For this
purpose, net investment income is calculated in accordance with
SEC regulations and may differ from the Income Fund's net
investment income as determined for financial reporting purposes.
SEC regulations require that net investment income be calculated
on a "yield-to-maturity" basis, which has the effect of
amortizing any premiums or discounts in the current market value
of fixed-income securities. The Income Fund's current dividend
rate is based on the Fund's net investment income as determined
for financial statement purposes, which may not reflect
amortization in the same manner. See "How objectives are pursued
- -- Investments in premium securities." The Fund's yield reflects
the deduction of the maximum initial sales charge in the case of
Class A shares, but does not reflect the deduction of any
contingent deferred sales charge in the case of Class B shares.
"Tax-equivalent yield" for each class of shares shows the effect
on performance of the tax-exempt status of distributions received
from the Income Fund. It reflects the approximate yield that a
taxable investment must earn for shareholders at stated income
levels to produce an after-tax yield equivalent to the Income
Fund's tax-exempt yield. "Total return" for the one-, five- and
ten-year periods for the Income Fund (or since the commencement
of the public offering of a class, if shorter) through the most
recent calendar quarter represents the average annual compounded
rate of return on an investment of $1,000 in the Income Fund
invested at the maximum public offering price (in the case of
Class A shares) or reflecting the deduction of any applicable
contingent deferred sales charge (in the case of Class B shares).
Total return may also be presented for other periods or based on
investment at reduced sales charge levels or net asset value.
Any quotation of yield, tax-equivalent yield or total return not
reflecting the maximum initial sales charge or a contingent
deferred sales charge would be reduced if such sales charges were
used. Quotations of yield, tax-equivalent yield or total return
for any period when an expense limitation was in effect will be
greater than if the limitation had not been in effect. The
Income Fund's performance may be compared to various indices.
See the Statement of Additional Information.
PUTNAM NEW YORK TAX EXEMPT MONEY MARKET FUND
THE MONEY MARKET FUND'S YIELD, EFFECTIVE YIELD AND TAX-EQUIVALENT
YIELD DATA MAY FROM TIME TO TIME BE INCLUDED IN ADVERTISEMENTS
ABOUT THE FUND. "Yield" represents an annualization of the
change in value of a shareholder account (excluding any capital
changes) for a specific seven-day period. "Effective yield"
compounds the Money Market Fund's yield for a year and is, for
that reason, greater than the Money Market Fund's yield. "Tax-
equivalent yield" shows the effect on performance of the tax-
exempt status of distributions received from the Money Market
Fund. It reflects the approximate yield that a taxable
investment must earn for shareholders at stated income levels to
produce an after-tax yield equivalent to the Money Market Fund's
tax-exempt yield or tax-exempt effective yield. Quotations of
yield, effective yield or tax-equivalent yield for any period
when an expense limitation was in effect will be greater than if
the limitation had not been in effect. The Money Market Fund's
performance may be compared to various indices. See the
Statement of Additional Information.
GENERAL
ALL DATA IS BASED ON EACH FUND'S PAST INVESTMENT RESULTS AND DOES
NOT PREDICT FUTURE PERFORMANCE. Investment performance, which
will vary, is based on many factors, including market conditions,
the composition of each Fund's portfolio, each Fund's operating
expenses, and, in the case of the Income Fund, which class of
shares you purchase. Investment performance also often reflects
the risks associated with each Fund's investment objective and
policies. These factors should be considered when comparing each
Fund's investment results to those of other mutual funds and
other investment vehicles.
HOW THE FUNDS ARE MANAGED
THE TRUSTEES OF EACH FUND ARE RESPONSIBLE FOR GENERALLY
OVERSEEING THE CONDUCT OF EACH FUND'S BUSINESS. Subject to such
policies as the Trustees may determine, Putnam Management
furnishes a continuing investment program for each Fund and makes
investment decisions on that Fund's behalf. Subject to the
control of the Trustees, Putnam Management also manages the
Funds' other affairs and business. David J. Eurkus, Senior Vice
President of Putnam Management and Vice President of the Income
Fund, has had primary responsibility for the day-to-day
management of the Income Fund's portfolio since 1985. Mr. Eurkus
has been employed by Putnam Management since August, 1983.
Lindsey M. Callen, Vice President of Putnam Management and Vice
President of the Money Market Fund, has had primary
responsibility for the day-to-day management of the Money Market
Fund's portfolio since March, 1993. Ms. Callen has been employed
by Putnam Management for the past five years.
Each Fund pays all expenses not assumed by Putnam Management,
including Trustees' fees, auditing, legal, custodial, investor
servicing and shareholder reporting expenses, and payments under
any Distribution Plan which, in the case of the Income Fund, are
in turn allocated to the relevant class of shares). Each Fund
also reimburses Putnam Management for the compensation and
related expenses of certain officers of the Funds and their
staffs who provide administrative services to the Funds. The
total reimbursement is determined annually by the Trustees.
Putnam Management places all orders for purchases and sales of
the Funds' securities. In selecting broker-dealers, Putnam
Management may consider research and brokerage services furnished
to it and its affiliates. Subject to seeking the most favorable
price and execution available, Putnam Management may consider
sales of shares of each Fund (and, if permitted by law, of the
other Putnam funds) as a factor in the selection of broker-
dealers.
ORGANIZATION AND HISTORY
Putnam New York Tax Exempt Income Fund and Putnam New York Tax
Exempt Money Market Fund are open-end investment companies
organized as Massachusetts business trusts by Agreements and
Declarations of Trust dated May 12, 1983 and September 2, 1987,
respectively. A copy of each Agreement and Declaration of Trust,
which is governed by Massachusetts law, is on file with the
Secretary of State of The Commonwealth of Massachusetts.
Each Fund has an unlimited number of authorized shares of
beneficial interest. Shares of each Fund may, without
shareholder approval, be divided into an unlimited number of
series of such shares. Under the Declarations of Trust, any such
series of shares may be further divided, without shareholder
approval, into two or more classes of shares having such
preferences and special or relative rights and privileges as the
Trustees determine. Neither Fund's shares are currently divided
into series. The Income Fund's shares are currently divided into
two classes, while the Money Market Fund's shares are not
currently divided into classes. Each share has one vote, with
fractional shares voting proportionally. Shares of each class of
the Income Fund will vote together as a single class except when
otherwise required by law or as determined by the Trustees.
Shares of each Fund are freely transferable, are entitled to
dividends as declared by the Trustees, and, if a Fund were
liquidated, would receive the net assets of that Fund. Either
Fund may suspend the sale of shares at any time and may refuse
any order to purchase shares. Although neither Fund is required
to hold annual meetings of its shareholders, shareholders holding
at least 10% of the outstanding shares entitled to vote have the
right to call a meeting to elect or remove Trustees, or to take
other actions as provided in the Declaration of Trust.
Although each Fund is offering only its own shares in this
prospectus, it is possible that a Fund might become liable for
any misstatement in the Prospectus about the other Fund. The
Trustees of each Fund have considered this factor in approving
the use of a single Prospectus.
If you own fewer shares than a minimum amount set by the Trustees
of a Fund (presently 20 shares in the case of the Income Fund and
shares worth $500 in the case of the Money Market Fund), that
Fund may choose to redeem your shares and pay you for them. You
will receive at least 30 days' written notice before a Fund
redeems your shares, and you may purchase additional shares at
any time to avoid a redemption. A Fund may also redeem shares if
you own shares above a maximum amount set by the Trustees. There
is presently no maximum, but the Trustees of either Fund may
establish one at any time, which could apply to both present and
future shareholders of that Fund.
THE FUND'S TRUSTEES: GEORGE PUTNAM,* CHAIRMAN. President of
the Putnam funds. Chairman and Director of Putnam Management and
Putnam Mutual Funds Corp. ("Putnam Mutual Funds"). Director,
Marsh & McLennan Companies, Inc.; WILLIAM F. POUNDS, VICE
CHAIRMAN. Professor of Management, Alfred P. Sloan School of
Management, M.I.T.; JAMESON ADKINS BAXTER, President, Baxter
Associates, Inc.; HANS H. ESTIN, Vice Chairman, North American
Management; JOHN A. HILL, Principal and Managing Director, First
Reserve Corporation; ELIZABETH T. KENNAN, President, Mount
Holyoke College; LAWRENCE J. LASSER,* Vice President of the
Putnam funds. President, Chief Executive Officer and Director of
Putnam Investments, Inc. and Putnam Management. Director, Marsh
& McLennan Companies, Inc.; ROBERT E. PATTERSON, Executive Vice
President, Cabot Partners Limited Partnership; DONALD S. PERKINS,
Director of various corporations, including AT&T, K mart
Corporation and Time Warner Inc.; GEORGE PUTNAM, III,* President,
New Generation Research, Inc.; A.J.C. SMITH,* Chairman, Chief
Executive Officer and Director, Marsh & McLennan Companies, Inc.;
and W. NICHOLAS THORNDIKE, Director of various corporations and
charitable organizations, including Providence Journal Co. Also,
Trustee and President, Massachusetts General Hospital and Trustee
of Eastern Utilities Associates. The Funds' Trustees are also
Trustees of the other Putnam funds. Those marked with an
asterisk (*) are "interested persons" of the Funds, Putnam
Management or Putnam Mutual Funds.
<PAGE>
ABOUT YOUR INVESTMENT
ALTERNATIVE SALES ARRANGEMENTS
THE INCOME FUND
The Income Fund offers investors two classes of shares which bear
sales charges in different forms and amounts and which bear
different levels of expenses:
CLASS A SHARES. An investor who purchases Class A shares pays a
sales charge at the time of purchase. As a result, Class A
shares are not subject to any charges when they are redeemed
(except for sales at net asset value in excess of $1 million
which are subject to a contingent deferred sales charge).
Certain purchases of Class A shares qualify for reduced sales
charges. Class A shares currently bear a 12b-1 fee at the annual
rate of 0.20% of the Income Fund's average net assets
attributable to Class A shares. See "How to buy shares -- The
Income Fund -- Class A shares."
CLASS B SHARES. Class B shares are sold without an initial sales
charge, but are subject to a contingent deferred sales charge of
up to 5% if redeemed within six years. Class B shares also bear
a higher 12b-1 fee than Class A shares, currently at the annual
rate of 0.85% of the Fund's average net assets attributable to
Class B shares. Class B shares will automatically convert into
Class A shares, based on relative net asset value, approximately
eight years after purchase. Class B shares provide an investor
the benefit of putting all of the investor's dollars to work from
the time the investment is made, but (until conversion) will have
a higher expense ratio and pay lower dividends than Class A
shares due to the higher 12b-1 fee. See "How to buy shares --
The Income Fund -- Class B shares."
WHICH ARRANGEMENT IS BETTER FOR YOU? The decision as to which
class of shares provides a more suitable investment for an
investor depends on a number of factors, including the amount and
intended length of the investment. Investors making investments
that qualify for reduced sales charges might consider Class A
shares. Investors who prefer not to pay an initial sales charge
might consider Class B shares. Orders for Class B shares for
$250,000 or more will be treated as orders for Class A shares or
declined. For more information about these sales arrangements,
consult your investment dealer or Putnam Investor Services.
Sales personnel may receive different compensation depending on
which class of shares they sell. Shares may only be exchanged
for shares of the same class of another Putnam fund. See "How to
exchange shares."
<PAGE>
THE MONEY MARKET FUND
The Money Market Fund offers its shares at a price of $1.00 per
share, without a sales charge, although the Money Market Fund
pays certain distribution expenses. See "How to buy shares --
The Money Market Fund."
HOW TO BUY SHARES
THE INCOME FUND
You can open an Income Fund account with as little as $500 and
make additional investments at any time with as little as $50.
You can buy Income Fund shares three ways - through most
investment dealers, through Putnam Mutual Funds (at 1-800-225-
1581), or through a systematic investment plan. If you do not
have a dealer, Putnam Mutual Funds can refer you to one.
BUYING SHARES THROUGH PUTNAM MUTUAL FUNDS. Complete an order
form and return it with a check payable to Putnam New York Tax
Exempt Income Fund to Putnam Mutual Funds, which will act as your
agent in purchasing shares through your designated investment
dealer.
BUYING SHARES THROUGH SYSTEMATIC INVESTING. You can make regular
investments of $25 or more per month through automatic deductions
from your bank checking account. Application forms are available
from your investment dealer or through Putnam Investor Services.
Shares are sold at the public offering price based on the net
asset value next determined after Putnam Investor Services
receives your order. In most cases, in order to receive that
day's public offering price, Putnam Investor Services must
receive your order before the close of regular trading on the New
York Stock Exchange. If you buy shares through your investment
dealer, the dealer must receive your order before the close of
regular trading on the New York Stock Exchange to receive that
day's public offering price.
CLASS A SHARES. The public offering price of Class A shares is
the net asset value plus a sales charge. The Fund receives the
net asset value. The sales charge varies depending on the size
of your purchase and is allocated between your investment dealer
and Putnam Mutual Funds. The current sales charges are:<PAGE>
<TABLE>
<CAPTION>
SALES CHARGE AMOUNT OF
AS A PERCENTAGE OF: SALES CHARGE
--------------------- REALLOWED
NET TO DEALERS
AMOUNT OF TRANSACTION AMOUNT OFFERING AS A PERCENTAGE
AT OFFERING PRICE INVESTED PRICE OF OFFERING PRICE*
- ---------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
Less than $ 25,000 4.99% 4.75% 4.50%
$ 25,000 but less than 100,000 4.71 4.50 4.25
100,000 but less than 250,000 3.90 3.75 3.50
250,000 but less than 500,000 3.09 3.00 2.75
500,000 but less than 1,000,000 2.04 2.00 1.85
- ----------------------------------------------------------------------------------------
/TABLE
<PAGE>
* At the discretion of Putnam Mutual Funds, however, the
entire sales charge may at times be reallowed to dealers.
The Staff of the Securities and Exchange Commission has
indicated that dealers who receive more than 90% of the
sales charge may be considered underwriters.
There is no initial sales charge on purchases of Class A shares
of $1 million or more. However, a contingent deferred sales
charge ("CDSC") of 1.00% or 0.50%, respectively, is imposed on
redemptions of such shares within the first or second year after
purchase, based on the lower of the shares' cost and current net
asset value. Any shares acquired by reinvestment of
distributions will be redeemed without a CDSC. In addition,
shares purchased by certain investors investing $1 million or
more that have made arrangements with Putnam Mutual Funds and
whose dealer of record waived the commission described in the
next paragraph are not subject to the CDSC. In determining
whether a CDSC is payable, the Fund will first redeem shares not
subject to any charge. Putnam Mutual Funds receives the entire
amount of any CDSC you pay. See the Statement of Additional
Information for more information about the CDSC.
Except as stated below, Putnam Mutual Funds pays investment
dealers of record commissions on sales of Class A shares of $1
million or more based on an investor's cumulative purchases
during consecutive one-year periods beginning with the date of
the initial purchase at net asset value. Such commissions are
paid at the rate of 1.00% of the amount under $3 million, 0.50%
of the next $47 million and 0.25% thereafter. On sales at net
asset value to a participant-directed qualified retirement plan
initially investing less than $20 million in Putnam funds and
other investments managed by Putnam Management or its affiliates
(including a plan sponsored by an employer with more than 750
employees), Putnam Mutual Funds pays commissions on cumulative
purchases during the life of the account at the rate of 1.00% of
the amount under $3 million and 0.50% thereafter. On sales at
net asset value to all other participant-directed qualified
retirement plans, Putnam Mutual Funds pays commissions on the
initial investment and on subsequent net quarterly sales at the
rate of 0.15%.
YOU MAY BE ELIGIBLE TO BUY CLASS A INCOME FUND SHARES AT REDUCED
SALES CHARGES. Consult your investment dealer or Putnam Mutual
Funds for details about Putnam's Combined Purchase Privilege,
Cumulative Quantity Discount, Statement of Intention, Group Sales
Plan, Employee Benefit Plans and other plans. Descriptions are
also included in the order form and in the Statement of
Additional Information. Shares may be sold at net asset value to
certain categories of investors, and the CDSC may be waived under
certain circumstances. See "How to buy shares -- General" below.
CLASS B SHARES. Class B shares are sold without an initial sales
charge, although a CDSC will be imposed if you redeem shares
within six years of purchase. The following types of shares may
be redeemed without charge at any time: (i) shares acquired by
reinvestment of distributions and (ii) shares otherwise exempt
from the CDSC, as described below. Subject to the foregoing
exclusions, the amount of the charge is determined as a
percentage of the lesser of the current market value or the cost
of the share being redeemed. Therefore, when a shares is
redeemed, any increase in value above the initial purchase price
is not subject to any CDSC. The amount of the CDSC will depend
on the number of years since you invested and the dollar amount
being redeemed, according to the following table:
CONTINGENT DEFERRED
SALES CHARGE AS A
PERCENTAGE OF
YEARS SINCE PURCHASE DOLLAR AMOUNT
PAYMENT MADE SUBJECT TO CHARGE
- ------------------- -------------------
0-1. . . . . . . . . . . . . . . . . .5.0%
1-2. . . . . . . . . . . . . . . . . .4.0%
2-3. . . . . . . . . . . . . . . . . .3.0%
3-4. . . . . . . . . . . . . . . . . .3.0%
4-5. . . . . . . . . . . . . . . . . .2.0%
5-6. . . . . . . . . . . . . . . . . .1.0%
6 and thereafter. . . . . . . . . . . . . . .NONE
In determining whether a CDSC is payable on any redemption, the
Fund will first redeem shares not subject to any charge, and then
shares held longest during the six-year period. For information
on how sales charges are calculated if you exchange your shares,
see "How to exchange shares." Putnam Mutual Funds receives the
entire amount of any CDSC you pay.
CONVERSION OF CLASS B SHARES. Class B shares will automatically
convert into Class A shares at the end of the month eight years
after the purchase date, except as noted below. Class B shares
acquired by exchange from Class B shares of another Putnam fund
will convert into Class A shares based on the time of the initial
purchase. Class B shares acquired through reinvestment of
distributions will convert into Class A shares based on the date
of the initial purchase to which such shares relate. For this
purpose, Class B shares acquired through reinvestment of
distributions will be attributed to particular purchases of Class
B shares in accordance with such procedures as the Trustees may
determine from time to time. The conversion of Class B shares to
Class A shares is subject to the continuing availability of a
ruling from the Internal Revenue Service or an opinion of counsel
that such conversions will not constitute taxable events for
Federal tax purposes. There can be no assurance that such ruling
or opinion will be available, and the conversion of Class B
shares to Class A shares will not occur if such ruling or opinion
is not available. In such event, Class B shares would continue
to be subject to higher expenses than Class A shares for an
indefinite period.
GENERAL
The Income Fund may sell Class A and Class B shares at net asset
value without an initial sales charge or a CDSC to the Fund's
current and retired Trustees (and their families), current and
retired employees (and their families) of Putnam Management and
affiliates, registered representatives and other employees (and
their families) of broker-dealers having sales agreements with
Putnam Mutual Funds, employees (and their families) of financial
institutions having sales agreements with Putnam Mutual Funds (or
otherwise having an arrangement with a broker-dealer or financial
institution with respect to sales of Fund shares), financial
institution trust departments investing an aggregate of $1
million or more in Putnam funds, clients of certain
administrators of tax-qualified plans, employee benefit plans of
companies with more than 750 employees, tax-qualified plans when
proceeds from repayments of loans to participants are invested
(or reinvested) in Putnam funds, "wrap accounts" for the benefit
of clients of broker-dealers, financial institutions or financial
planners adhering to certain standards established by Putnam
Mutual Funds, and investors meeting certain requirements who sold
shares of certain Putnam closed-end funds pursuant to a tender
offer by the closed-end fund. In addition, the Income Fund may
sell shares at net asset value without an initial sales charge or
a CDSC in connection with the acquisition by the Income Fund of
assets of an investment company or personal holding company, and
the CDSC will be waived on redemptions of shares arising out of
death or disability or in connection with certain withdrawals
from IRA or other retirement plans. Up to 12% of the value of
Class B shares subject to a Systematic Withdrawal Plan may also
be redeemed each year without a CDSC. See the Statement of
Additional Information.
Shareholders of other Putnam funds may be entitled to exchange
their shares for, or reinvest distributions from their funds in,
shares of the Income Fund at net asset value.
If you are considering redeeming or exchanging shares or
transferring shares to another person shortly after purchase, you
should pay for those shares with a certified check to avoid any
delay in redemption, exchange or transfer. Otherwise the Income
Fund may delay payment until the purchase price of those shares
has been collected or, if you redeem by telephone, until 15
calendar days after the purchase date.
<PAGE>
To eliminate the need for safekeeping, the Income Fund will not
issue certificates for your shares unless you request them.
Putnam Mutual Funds may, at its expense, provide additional
promotional incentives or payments to dealers that sell shares of
the Putnam funds. In some instances, these incentives or
payments may be offered only to certain dealers who have sold or
may sell significant amounts of shares. Certain dealers may not
sell all classes of shares.
THE MONEY MARKET FUND
The Money Market Fund continuously offers its shares at a price
of $1.00 per share. You can open an account for $1,000 or more
and make additional investments at any time for as little as
$100. You can buy Money Market Fund shares three ways - by mail,
by wire, or through most investment dealers. There are no sales
charges on the sales of Money Market Fund shares, although the
Money Market Fund pays certain distribution expenses described
below.
Because the Money Market Fund seeks to be fully invested at all
times, investments must be in Same Day Funds to be accepted.
Same Day Funds are monies credited to the account of the Money
Market Fund's designated bank by the Federal Reserve Bank of
Boston. When payment in Same Day Funds is available to the Money
Market Fund prior to the close of regular trading on the New York
Stock Exchange, the Money Market Fund will accept the order to
purchase shares that day.
If you are considering redeeming shares or transferring shares to
another person shortly after purchase, you should pay for those
shares with wired Same Day Funds or a certified check to avoid
any delay in redemption or transfer. Otherwise, the Money Market
Fund may delay payment for shares until the purchase price of
those shares has been collected or, if you redeem by check,
telephone or Telex, until 15 calendar days after the purchase
date.
After you make your initial investment in the Money Market Fund,
Putnam Investor Services will establish an Investing Account for
you on the Money Market Fund's records. This account is a
complete record of all transactions between you and the Money
Market Fund, which at all times shows the balance of shares you
own. The Money Market Fund will not issue share certificates.
BUYING SHARES BY MAIL. Complete the order form and send it to
Putnam Investor Services with your check, Federal Reserve Draft
or other negotiable bank draft drawn on a U.S. bank and payable
in U.S. dollars to the order of Putnam New York Tax Exempt Money
Market Fund. If you pay by check or draft, the Money Market
Fund's designated bank will make Same Day Funds available to the
Money Market Fund, and the Money Market Fund will accept the
order, on the first business day after receipt of your check or
draft. If you pay by Federal Reserve Draft, the Money Market
Fund will accept the order the day it is received provided it is
received before the close of regular trading on the New York
Stock Exchange.
BUYING SHARES BY WIRE. You may invest in the Money Market Fund
by bank wire transfer of Same Day Funds to the Money Market
Fund's designated bank. For wiring instructions, see the order
form.
Any commercial bank can transfer Same Day Funds by wire. Wired
funds received by the Money Market Fund's designated bank by 3:00
p.m. Boston time are normally accepted for investment on the day
received. To be sure that a bank wire order is accepted on the
same day it is sent, your bank should wire funds as early in the
day as possible. Your bank may charge for sending Same Day Funds
on your behalf. The Money Market Fund's designated bank
presently does not charge you for receipt of wired Same Day
Funds, but reserves the right to charge for this service.
BUYING SHARES THROUGH INVESTMENT DEALERS. You may, if you wish,
purchase shares of the Money Market Fund through investment
dealers, which may charge a fee for their services. Most
investment dealers have a sales agreement with Putnam Mutual
Funds and will be glad to accept your order. If you do
not have a dealer, Putnam Mutual Funds can refer you to one.
Investment dealers must follow the instructions in the order
form.
DISTRIBUTION PLANS
THE INCOME FUND'S CLASS A DISTRIBUTION PLAN. The purpose of the
Class A Plan is to permit the Income Fund to compensate Putnam
Mutual Funds for services provided and expenses incurred by it in
promoting the sale of Class A shares of the Fund, reducing
redemptions, or maintaining or improving services provided to
shareholders by Putnam Mutual Funds or dealers. The Class A Plan
provides for payments by the Income Fund to Putnam Mutual Funds
at the annual rate of up to 0.35% of the Income Fund's average
net assets attributable to Class A shares, subject to the
authority of the Income Fund's Trustees to reduce the amount of
payments or to suspend the Class A Plan for such periods as they
may determine. Subject to these limitations, the amount of such
payments and the specific purposes for which they are made shall
be determined by the Trustees of the Income Fund. At present,
the Income Fund's Trustees have approved payments under the Class
A Plan at the annual rate of 0.20% of the Fund's average net
assets attributable to Class A shares for the purpose of
compensating Putnam Mutual Funds for services provided and
expenses incurred by it as principal underwriter of the Income
Fund's Class A shares, including payments made by it to dealers
under the Service Agreements referred to below. Should the
Income Fund's Trustees decide in the future to approve payments
in excess of this amount, shareholders will be notified and this
Prospectus will be revised.
In order to compensate investment dealers (including, for this
purpose, certain financial institutions) for services provided in
connection with sales of Class A shares and the maintenance of
shareholder accounts, Putnam Mutual Funds makes quarterly
payments to qualifying dealers based on the average net asset
value of Class A shares of the Income Fund which are attributable
to shareholders for whom the dealers are designated as the dealer
of record. This calculation excludes until one year after
purchase shares purchased at net asset value after March 31, 1994
by shareholders investing $1 million or more and by participant-
directed qualified retirement plans sponsored by employers with
more than 750 employees ("NAV Shares"), except for shares owned
by certain investors investing $1 million or more that have made
arrangements with Putnam Mutual Funds and whose dealer of record
waived the sales commission. Except as stated below, Putnam
Mutual Funds makes such payments at the annual rate of 0.15% of
such average net asset value for Class A shares outstanding as of
December 31, 1992 and 0.20% of the average net asset value of
shares acquired after that date (including shares acquired
through reinvestment of distributions). For participant-directed
qualified retirement plans initially investing less than $20
million in Putnam funds and other investments managed by Putnam
Management or its affiliates, Putnam Mutual Funds' payments to
qualifying dealers on NAV Shares are 100% of the rate stated
above if average plan assets in Putnam funds (excluding money
market funds) during the quarter are less than $20 million, 60%
of the stated rate if average plan assets are at least $20
million but less than $30 million, and 40% of the stated rate if
average plan assets are $30 million or more. For all other
participant-directed qualified retirement plans purchasing NAV
Shares, Putnam Mutual Funds makes quarterly payments to
qualifying dealers at the annual rate of 0.10% of the average net
asset value of such shares.
THE INCOME FUND'S CLASS B DISTRIBUTION PLAN. The Class B Plan
provides for payments by the Income Fund to Putnam Mutual Funds
at the annual rate of up to 1.00% of the Income Fund's average
net assets attributable to Class B shares, subject to the
authority of the Trustees to reduce the amount of payments or to
suspend the Class B Plan for such periods as they may determine.
The Trustees currently limit payments under the Class B Plan to
0.85% of such assets. Should the Trustees decide in the future
to approve payments in excess of this amount, shareholders will
be notified and this Prospectus will be revised. Putnam Mutual
Funds also receives the proceeds of any CDSC imposed on
redemptions of shares.
Although Class B shares are sold without an initial sales charge,
Putnam Mutual Funds pays a sales commission equal to 4.00% of the
amount invested (including a prepaid service fee of 0.20% of the
amount invested) to dealers who sell Class B shares. These
commissions are not paid on exchanges from other Putnam funds and
sales to investors exempt from the CDSC. In addition, in order
to further compensate dealers (including, for this purpose,
certain financial institutions) for services provided in
connection with sales of Class B shares and the maintenance of
shareholder accounts, Putnam Mutual Funds makes quarterly
payments to qualifying dealers based on the average net asset
value of Class B shares which are attributable to shareholders
for whom the dealers are designated as the dealer of record,
except for the first year's service fees, which are prepaid as
described above. Putnam Mutual Funds makes such payments at an
annual rate of 0.20% of such average net asset value of such
shares.
GENERAL. Putnam Mutual Funds may suspend or modify the payments
made to dealers described above, and such payments are subject to
the continuation of the relevant Plan described above, the terms
of Service Agreements between dealers and Putnam Mutual Funds,
and any applicable limits imposed by the National Association of
Securities Dealers, Inc.
THE MONEY MARKET FUND'S DISTRIBUTION PLAN. The purpose of the
Plan is to permit the Money Market Fund to compensate Putnam
Mutual Funds for services provided and expenses incurred by it in
promoting the sale of shares of the Money Market Fund, reducing
redemptions, or maintaining or improving services provided to
shareholders by Putnam Mutual Funds or dealers. The Plan
provides for payments by the Money Market Fund to Putnam Mutual
Funds at the annual rate of up to 0.35% of the Money Market
Fund's average net assets. At present, the Money Market Fund's
Trustees have not authorized any payments under the plan for the
period beginning January 1, 1994. Should the Money Market Fund's
Trustees decide in the future to approve payments, shareholders
will be notified and this Prospectus will be revised.
As an inducement to the sale of shares of the Money Market Fund,
Putnam Mutual Fund may from time to time pay dealers not to
exceed 0.15% on certain sales of Money Market Fund shares.
HOW TO SELL SHARES
THE INCOME FUND
You can sell your shares to the Income Fund any day the New York
Stock Exchange is open, either directly to the Income Fund or
through your investment dealer. The Income Fund will only
repurchase shares for which it has received payment.
SELLING SHARES DIRECTLY TO THE INCOME FUND. Send a signed letter
of instruction or stock power form to Putnam Investor Services,
along with any certificates that represent shares you want to
sell. The price you will receive is the next net asset value
calculated after the Income Fund receives your request in proper
form less any applicable CDSC. In order to receive that day's
net asset value, Putnam Investor Services must receive your
request before the close of regular trading on the New York Stock
Exchange. If you sell shares having a net asset value of
$100,000 or more, the signatures of registered owners or their
legal representatives must be guaranteed by a bank, broker-dealer
or certain other financial institutions. See the Statement of
Additional Information for more information about where to obtain
a signature guarantee. Stock power forms are available from your
investment dealer, Putnam Investor Services and many commercial
banks. If you want your redemption proceeds sent to an address
other than your address as it appears on Putnam's records, a
signature guarantee is required. Putnam Investor Services
usually requires additional documentation for the sale of shares
by a corporation, partnership, agent or fiduciary, or a surviving
joint owner. Contact Putnam Investor Services for details.
THE INCOME FUND GENERALLY SENDS YOU PAYMENT FOR YOUR SHARES THE
BUSINESS DAY AFTER YOUR REQUEST IS RECEIVED. Under unusual
circumstances, the Income Fund may suspend repurchases, or
postpone payment for more than seven days, as permitted by
federal securities law.
You may use Putnam's Telephone Redemption Privilege to redeem
shares valued up to $100,000 from your account unless you have
notified Putnam Investor Services of an address change within the
preceding 15 days. Unless an investor indicates otherwise on the
Account Application, Putnam Investor Services will be authorized
to act upon redemption and transfer instructions received by
telephone from a shareholder, or any person claiming to act as
his or her representative, who can provide Putnam Investor
Services with his or her account registration and address as it
appears on Putnam Investor Services' records. Putnam Investor
Services will employ these and other reasonable procedures to
confirm that instructions communicated by telephone are genuine;
if it fails to employ reasonable procedures, Putnam Investor
Services may be liable for any losses due to unauthorized or
fraudulent instructions. For information, consult Putnam
Investor Services. During periods of unusual market changes and
shareholder activity, you may experience delays in contacting
Putnam Investor Services by telephone in which case you may wish
to submit a written redemption request, as described above, or
contact your investment dealer, as described below. The
Telephone Redemption Privilege is not available if you were
issued certificates for your shares which remain outstanding.
The Telephone Redemption Privilege may be modified or terminated
without notice.
SELLING SHARES THROUGH YOUR INVESTMENT DEALER. Your dealer must
receive your request before the close of regular trading on the
New York Stock Exchange and transmit it to Putnam Mutual Funds
before 5 p.m. Boston time to receive that day's net asset value.
Your dealer will be responsible for furnishing all necessary
documentation to Putnam Investor Services, and may charge for its
services.
THE MONEY MARKET FUND
You can sell your shares to the Money Market Fund any day the New
York Stock Exchange is open, by check, by telephone or Telex, by
mail or through your investment dealer. The Money Market Fund
must receive your properly completed application before you may
sell shares; certain methods require additional documentation
(see below). To enable shareholders to earn daily dividends as
long as possible, the Money Market Fund has arranged the
following methods of selling shares:
SELLING SHARES BY CHECK. If you would like to use the Money
Market Fund's CheckWriting Service, please mark the proper box on
the order form and complete the signature card and, if
applicable, the resolution. When Putnam Investor Services
receives your properly completed order form, card and resolution,
the Fund will provide you with checks drawn on the Fund's
designated bank. These checks may be made payable to the order
of any person in the amount of $500 or more. You will continue
to earn dividends until the check clears. When a check is
presented to the Fund's designated bank for payment, a sufficient
number of full and fractional shares in your account will be
redeemed to cover the amount of the check.
Shareholders using Money Market Fund checks are subject to the
Fund's designated bank's rules governing checking accounts.
There is currently no charge to the shareholder for the use of
checks. You should make sure that there are sufficient shares in
your account to cover the amount of the check drawn. If there is
an insufficient number of shares in the account, the check will
be returned marked "insufficient funds" and no shares will be
redeemed. Because dividends declared on shares held in your
account or prior withdrawals may cause the value of your account
to change, it is impossible to determine in advance your
account's total value. Accordingly, you should not write a check
for the entire value of your account or close your account by
writing a check. Redemptions by check will be confirmed at least
monthly.
SELLING SHARES BY TELEPHONE OR TELEX. If you would like to sell
Money Market Fund shares by telephone or Telex with proceeds
directed to your bank account, please mark the proper box on the
order form. You may call toll-free 1-800-225-1581 or by Telex
94-0153. On the following business day, the amounts withdrawn
from your account will either be mailed by check or wired in Same
Day Funds to the bank account designated on your application.
(To wire proceeds, the amount must be $1,000 or more and the
designated bank must be a commercial bank within the United
States.) You may change a designated bank account by sending a
written request to Putnam Investor Services with your signature
guaranteed by a bank, broker/dealer or certain other financial
institutions. See the Statement of Additional Information for
more information about how to obtain a signature guarantee.
You may also use Putnam's Telephone Redemption Privilege to
redeem shares valued up to $100,000 from your account unless you
have notified Putnam Investor Services of an address change
within the preceding 15 days. Unless an investor indicates
otherwise on the Account Application, Putnam Investor Services
will be authorized to act upon redemption and transfer
instructions received by telephone from a shareholder, or any
person claiming to act as his or her representative, who can
provide Putnam Investor Services with his or her account
registration and address as it appears on Putnam Investor
Services' records. Putnam Investor Services will employ these
and other reasonable procedures to confirm that instructions
communicated by telephone are genuine; if it fails to employ
reasonable procedures, Putnam Investor Services may be liable for
any losses due to unauthorized or fraudulent instructions. For
information, consult Putnam Investor Services. During periods of
unusual market changes and shareholder activity, you may
experience delays in contacting Putnam Investor Services by
telephone, in which case you may wish to submit a written
redemption request, as described below, or contact your
investment dealer. The Telephone Redemption Privilege may be
modified or terminated without notice.
SELLING SHARES BY MAIL. You may also sell shares of the Money
Market Fund by sending a written withdrawal request to: Putnam
Investor Services, Mailing address: P.O. Box 41203, Providence,
RI 02940-1203. If you sell shares having a net asset value of
$100,000 or more, the signatures of registered owners or their
legal representatives must be guaranteed by a bank, broker-
dealer or certain other financial institutions. See the
Statement of Additional Information for more information about
where to obtain a signature guarantee.
Putnam Investor Services may require additional documentation
from shareholders which are corporations, partnerships, agents,
trusts, fiduciaries or surviving joint owners. Corporations,
partnerships, agents, trusts and fiduciary accounts must submit a
completed resolution in proper form before selling shares by
telephone or check. Resolution forms are available from Putnam
Investor Services. If you are currently a shareholder and did
not request the CheckWriting Service or telephone/Telex
redemption privilege on your initial order form, you must first
complete and return an authorization form, available from Putnam
Investor Services. A shareholder may revoke authorization for
CheckWriting Service or telephone/Telex redemption by written
notice at any time, effective when Putnam Investor Services
receives such notice.
The Money Market Fund reserves the right to terminate or modify
the terms of the CheckWriting Service or telephone/Telex
redemption privilege, or to charge shareholders for the use of
these services at any time.
THE MONEY MARKET FUND GENERALLY SENDS YOU PAYMENT FOR YOUR
SHARES THE BUSINESS DAY AFTER YOUR REQUEST IS RECEIVED. Under
unusual circumstances, the Fund may suspend repurchases, or
postpone payment for more than seven days, as permitted by
federal securities law.
HOW TO EXCHANGE SHARES
Shareholders of the Money Market Fund who received their shares
in exchange for shares of another Putnam fund with a sales charge
and shareholders of the Income Fund can exchange their shares for
shares of other Putnam funds at net asset value beginning 15 days
after purchase. Other shareholders of the Money Market Fund may
need to pay a sales charge which varies depending on the fund to
which they exchange and the amount exchanged. Shareholders of
the Money Market Fund exchanging into funds with more than one
class of shares may exchange their shares only for Class A
shares. Shareholders of the Income Fund may exchange their
shares only for shares of the same class. If the other Putnam
fund offers only one class of shares, only Class A shares may be
exchanged for such class. If you exchange shares subject to a
CDSC, the transaction will not be subject to the CDSC. However,
when you redeem the shares acquired through the exchange, the
redemption may be subject to the CDSC, depending on when you
originally purchased the shares and using the schedule of any
fund into or from which you have exchanged your shares that would
result in your paying the highest CDSC applicable to your class
of shares. For purposes of computing the CDSC, the length of
time you have owned your shares will be measured from the date of
original purchase and will not be affected by the exchange.
To exchange your shares, simply complete an Exchange
Authorization Form and send it to Putnam Investor Services.
Exchange Authorization Forms are available by calling or writing
Putnam Investor Services. A Telephone Exchange Privilege is
currently available for amounts up to $500,000. Putnam Investor
Services' procedures for telephonic transactions are described
above under "How to sell shares". The Telephone Exchange
Privilege is not available if you were issued certificates of the
Income Fund for shares which remain outstanding. For federal
income tax purposes, an exchange is treated as a sale of shares
and may result in a capital gain or loss. Ask your investment
dealer or Putnam Investor Services for prospectuses of other
Putnam funds. Shares of certain Putnam funds are not available
to residents of all states.
The exchange privilege is not intended as a vehicle for short-
term trading. Excessive exchange activity may interfere with
portfolio management and have an adverse effect on all
shareholders. In order to limit excessive exchange activity and
in other circumstances where the Trustees or Putnam Management
believes doing so would be in the best interests of a Fund, each
Fund reserves the right to revise or terminate the exchange
privilege, limit the amount or number of exchanges or reject any
exchange. Shareholders would be notified of any such action to
the extent required by law. Consult Putnam Investor Services
before requesting an exchange. See the Statement of Additional
Information to find out more about the exchange privilege.
HOW EACH FUND VALUES ITS SHARES
THE MONEY MARKET FUND CALCULATES THE NET ASSET VALUE OF A SHARE
AND THE INCOME FUND CALCULATES THE NET ASSET VALUE OF A SHARE OF
EACH CLASS BY DIVIDING THE TOTAL VALUE OF ITS ASSETS, LESS
LIABILITIES, BY THE NUMBER OF ITS SHARES OUTSTANDING. SHARES ARE
VALUED AS OF THE CLOSE OF REGULAR TRADING ON THE NEW YORK STOCK
EXCHANGE EACH DAY THE EXCHANGE IS OPEN.
THE INCOME FUND. Tax-exempt securities (including New York Tax
Exempt Securities) are stated on the basis of valuations provided
by a pricing service approved by the Trustees, which uses
information with respect to transactions in bonds, quotations
from bond dealers, market transactions in comparable securities
and various relationships between securities in determining
value. The Income Fund believes that reliable market quotations
are generally not readily available for purposes of valuing its
portfolio securities. As a result, it is likely that most of the
valuations provided by such pricing service will be based upon
fair value determined on the basis of the factors listed above.
Non-tax-exempt securities for which market quotations are readily
available are stated at market value. Short-term investments
that will mature in 60 days or less are stated at amortized cost,
which approximates market value. All other securities and assets
are valued at their fair value following procedures approved by
the Trustees.
THE MONEY MARKET FUND. The Money Market Fund values its
portfolio investments at amortized cost according to Securities
and Exchange Commission Rule 2a-7. The amortized cost of an
instrument is determined by valuing it at cost originally and
thereafter amortizing any discount or premium from its face value
at a constant rate until maturity.
HOW DISTRIBUTIONS ARE MADE; TAX INFORMATION
THE INCOME FUND. The Income Fund declares all of its net
interest income as a distribution on each day it is open for
business. Net interest income consists of interest accrued on
portfolio investments of the Income Fund, less accrued expenses,
computed in each case since the most recent determination of net
asset value. Normally, the Income Fund pays distributions of net
interest income on the last business day of each month. The
Income Fund will distribute at least annually all net realized
capital gains, if any, after applying any available capital loss
carryovers. Distributions paid by the Income Fund with respect
to Class A shares will generally be greater than those paid with
respect to Class B shares because expenses attributable to Class
B shares will generally be higher. You begin earning
distributions on the business day that Putnam Mutual Funds
receives payment for your shares.
THE MONEY MARKET FUND. The Money Market Fund determines its net
income once each day the New York Stock Exchange is open, as of
the close of the Exchange. Each determination of the Money
Market Fund's net income includes (i) all accrued interest on
portfolio investments of the Money Market Fund, (ii) plus or
minus any realized and unrealized gains and losses on the Money
Market Fund's investments, (iii) less all accrued expenses of the
Money Market Fund. (The Money Market Fund normally will not have
unrealized losses so long as it values its investments by the
amortized cost method.)
All of the net income of the Money Market Fund is declared each
day that the Money Market Fund is open for business as a dividend
to shareholders of record at the time of each declaration.
Shareholders begin earning dividends on the day after the Money
Market Fund accepts their orders. Each month's dividends will be
paid on the tenth day of the next month (or, if that day is not a
business day, on the next business day). Since the net income of
the Money Market Fund is declared as a dividend each time it is
determined, the net asset value per share of the Money Market
Fund remains at $1.00 immediately after each determination and
dividend declaration.
YOU CAN CHOOSE FROM A NUMBER OF DISTRIBUTION OPTIONS: (1)
reinvest all distributions in additional Fund shares without a
sales charge; (2) (INCOME FUND ONLY) receive distributions from
net interest income in cash while reinvesting capital gains
distributions in additional shares of the Fund without a sales
charge; or (3) receive all distributions in cash. You can change
your distribution option by notifying Putnam Investor Services in
writing. If you do not select an option when you open your
account, all distributions will be reinvested. All distributions
of the Income Fund not paid in cash will be reinvested in shares
of the class on which the distribution is paid. You will receive
a statement confirming reinvestment of distributions in
additional Fund shares (or in shares of other Putnam funds for
Dividends Plus accounts) promptly following the quarter in which
the reinvestment occurs.
If a check representing a Fund distribution is not cashed within
a specified period, Putnam Investor Services will notify you that
you have the option of requesting another check or reinvesting
the distribution in that Fund or in another Putnam fund. If
Putnam Investor Services does not receive your election, the
distribution will be reinvested in the Fund. Similarly, if
correspondence sent by the Fund or Putnam Investor Services is
returned as "undeliverable," Fund distributions will
automatically be reinvested in the Fund or in another Putnam
fund.
Each Fund intends to qualify as a "regulated investment company"
for federal income tax purposes and to meet all other
requirements that are necessary for it to be relieved of federal
taxes on income and gains it distributes to shareholders. Each
Fund will distribute substantially all of its ordinary income and
capital gain net income on a current basis.
Distributions designated by a Fund as "exempt-interest dividends"
are not generally subject to federal income tax. However, an
investment in either Fund may result in liability for federal
alternative minimum tax, both for individual and corporate
investors. See New York Tax Exempt Securities -- Alternative
minimum tax. To the extent that exempt-interest dividends are
derived from interest on New York Tax Exempt Securities, such
distributions will also be exempt from New York State and New
York City personal income taxes. However, an investment in the
Fund may result in liability for state and local taxes for
individual shareholders subject to taxation by states other than
New York State or cities outside of New York State because the
exemption from New York State and New York City personal income
taxes does not prevent such other jurisdictions from taxing
individual shareholders on dividends received from the Fund. In
addition, distributions derived from interest on tax exempt
securities other than New York Tax Exempt Securities will be
treated as taxable ordinary income for purposes of the New York
State and New York City personal income taxes. Exempt-interest
dividends, including those derived from New York Tax Exempt
Securities, are included in a corporation's net investment income
for purposes of calculating such corporation's New York State
corporate franchise tax and New York City general corporation tax
and will be subject to such taxes to the extent that a
corporation's net investment income is allocated to New York
State and/or New York City.
All or a portion of interest on indebtedness incurred or
continued to purchase or carry Fund shares generally will not be
deductible for federal or New York State and New York City
personal income tax purposes.
If you receive Social Security or railroad retirement benefits,
you should consult your tax adviser to determine what effect, if
any, an investment in either Fund may have on the taxation of
your benefits.
For federal income tax purposes, all Fund distributions other
than exempt-interest dividends will be taxable to you as ordinary
income, except that any distributions of net long-term capital
gains will be taxable to you as such, regardless of how long you
have held your shares. For New York State and City personal
income tax purposes, distributions of net long-term gains will be
taxable at the same rates as ordinary income. Distributions will
be taxable as described above whether received in cash or in
shares through the reinvestment of distributions.
Early in each year each Fund will notify you of the amount and
tax status of distributions paid to you by that Fund for the
preceding year.
Gain or loss realized upon the taxable disposition of Fund shares
is generally treated as long-term capital gain or loss if the
shares have been held for more than twelve months, and otherwise
as short-term capital gain or loss. However, if a shareholder
receives one or more exempt-interest dividends with respect to a
share that is held for six months or less, any loss on the sale
or exchange of the share will be disallowed to the extent of such
exempt-interest dividend(s).
The foregoing is a summary of certain federal, New York State and
New York City income tax consequences of investing in a Fund.
You should consult your tax adviser to determine the precise
effect of an investment in a Fund on your particular tax
situation (including possible liability for alternative minimum
tax and state and local taxes).
ABOUT PUTNAM INVESTMENTS, INC.
PUTNAM MANAGEMENT HAS BEEN MANAGING MUTUAL FUNDS SINCE 1937.
Putnam Mutual Funds is the principal underwriter of the Funds and
of other Putnam funds. Putnam Fiduciary Trust Company is the
Fund's custodian. Putnam Investor Services, a division of Putnam
Fiduciary Trust Company, is the Fund's investor servicing and
transfer agent.
Putnam Management, Putnam Mutual Funds, and Putnam Fiduciary
Trust Company are subsidiaries of Putnam Investments, Inc., which
is wholly-owned by Marsh & McLennan Companies, Inc., a publicly
owned holding company whose principal businesses are
international insurance and reinsurance brokerage, employee
benefit consulting and investment management.
PUTNAM NEW YORK TAX EXEMPT INCOME FUND
PUTNAM NEW YORK TAX EXEMPT MONEY MARKET FUND
One Post Office Square
Boston, MA 02109
FUND INFORMATION:
INVESTMENT MANAGER
Putnam Investment Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
INVESTOR SERVICING AGENT
Putnam Investor Services
Mailing address:
P.O. Box 41203
Providence, RI 02940-1203
CUSTODIAN
Putnam Fiduciary Trust Company
One Post Office Square
Boston, MA 02109
LEGAL COUNSEL
Ropes & Gray
One International Place
Boston, MA 02110
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand
One Post Office Square
Boston, MA 02109
PUTNAMINVESTMENTS
One Post Office Square
Boston, Massachusetts 02109
Toll-free 1-800-225-1581<PAGE>
PUTNAM NEW YORK TAX EXEMPT INCOME
TRUST
FORM N-1A
PART B
STATEMENT OF ADDITIONAL INFORMATION
JUNE 1, 1994
This Statement of Additional Information is not a Prospectus
and is only authorized for distribution when accompanied or
preceded by the Prospectus of the Trust dated June 1,
1994, as revised from time to time. This Statement contains
information which may be useful to investors but which is not
included in the Prospectus of Putnam New York Tax Exempt Income
Trust (the "Trust"), including its two portfolio series (the
"Funds"): Putnam New York Tax Exempt Income Fund (the "Income
Fund") and Putnam New York Intermediate Tax Exempt Fund (the
"Intermediate Fund"). If the Trust have more than one form
of current Prospectus, each reference to the Prospectus in this
Statement shall include all the Trust's Prospectuses,
unless otherwise noted. The Statement should be read together
with the applicable Prospectus. Investors may obtain a free copy
of the applicable Prospectus from Putnam Investor Services,
Mailing address: P.O. Box 41203, Providence, RI 02940-1203.
Part I of this Statement contains specific information about
the Trust . Part II includes information about the
Trust and the other Putnam funds.
TABLE OF CONTENTS
PART I
PAGE
NEW YORK TAX EXEMPT SECURITIES . . . . . . . . . . . . . . . . .I-3
NEW YORK TAX-EXEMPT SECURITY RATINGS. . . . . . . . . . I-6
INVESTMENT RESTRICTIONS OF THE FUNDS. . . . . . . . . . . . . I-8
FUND CHARGES AND EXPENSES. . . . . . . . . . . . . . . . . . . I-12
INVESTMENT PERFORMANCE OF THE FUNDS . . . . . . . . . . . . . I-17
TAXES. . . . . . . . . . . . . . . . . . . . . . . . I -25
ADDITIONAL OFFICERS OF THE TRUST. . . . . . . . . . I -27
INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS. . . . . . . I-28
<PAGE>
PART II
MISCELLANEOUS INVESTMENT PRACTICES. . . . . . . . . . . . . . II-1
TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . II-23
MANAGEMENT OF THE FUND. . . . . . . . . . . . . . . . . . . II-28
DETERMINATION OF NET ASSET VALUE. . . . . . . . . . . . . . II-37
HOW TO BUY SHARES . . . . . . . . . . . . . . . . . . . . . II-39
DISTRIBUTION PLAN . . . . . . . . . . . . . . . . . . . . . II-50
INVESTOR SERVICES . . . . . . . . . . . . . . . . . . . . . II-51
SIGNATURE GUARANTEES. . . . . . . . . . . . . . . . . . . . II-57
SUSPENSION OF REDEMPTIONS . . . . . . . . . . . . . . . . . II-57
SHAREHOLDER LIABILITY . . . . . . . . . . . . . . . . . . . II-58
STANDARD PERFORMANCE MEASURES . . . . . . . . . . . . . . . II-58
COMPARISON OF PORTFOLIO PERFORMANCE . . . . . . . . . . . . II-59
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . II-64
<PAGE>
PUTNAM NEW YORK TAX EXEMPT INCOME TRUST
STATEMENT OF ADDITIONAL INFORMATION
PART I
NEW YORK TAX EXEMPT SECURITIES
GENERAL DESCRIPTION. As used in the Prospectus and in this
Statement, the term "New York Tax Exempt Securities" includes
to debt obligations issued by the State of New York and its
political subdivisions (for example, counties, cities, towns,
villages, districts and authorities) the interest from which is,
in the opinion of bond counsel, exempt from both federal income
tax and New York State and City personal income taxes. Such
obligations are issued to obtain funds for various public
purposes, including the construction of a wide range of public
facilities, such as airports, bridges, highways, housing,
hospitals, mass transportation, schools, streets and water and
sewer works. Other public purposes for which New York Tax Exempt
Securities may be issued include the refunding of outstanding
obligations or obtaining funds for general operating expenses.
Short-term New York Tax Exempt Securities are generally issued by
state and local governments and public authorities as interim
financing in anticipation of tax collections, revenue receipts,
or bond sales to finance such public purposes. In addition,
certain types of "private activity" bonds may be issued by public
authorities to finance such projects as privately operated
housing facilities, and certain local facilities for water
supply, gas, electricity or sewage or solid waste disposal,
student loans, or the obtaining of funds to lend to public or
private institutions for the construction of facilities such as
educational, hospital and housing facilities. Such obligations
are included within the term New York Tax Exempt Securities if
the interest paid thereon is, in the opinion of bond counsel,
exempt from federal income tax (such interest may, however, be
subject to federal alternative minimum tax) and New York State
and City personal income tax. Other types of private activity
bonds, the proceeds of which are used for the construction,
repair or improvement of, or to obtain equipment for, privately
operated industrial or commercial facilities, may constitute New
York Tax Exempt Securities, although the current federal tax laws
place substantial limitations on the size of such issues. New
York Tax Exempt Securities also include short-term discount notes
(tax-exempt commercial paper), which are promissory notes issued
by municipalities to enhance their cash flows.
STAND-BY COMMITMENTS. When a Fund purchases New York Tax
Exempt Securities, it has the authority to acquire stand-by
commitments from banks and broker-dealers with respect to those
New York Tax Exempt Securities. A stand-by commitment may be
considered a security independent of the New York Tax Exempt
Security to which it relates. The amount payable by a bank or
dealer during the time a stand-by commitment is exercisable,
absent unusual circumstances, would be substantially the same as
the market value of the underlying New York Tax Exempt Security
to a third party at any time. Each Fund expects that
stand-by commitments generally will be available without the
payment of direct or indirect consideration. Neither Fund
expects to assign any value to stand-by commitments.
YIELDS. The yields on New York Tax Exempt Securities
depend on a variety of factors, including general money market
conditions, effective marginal tax rates, the financial condition
of the issuer, general conditions of the Tax Exempt
Security market, the size of a particular offering, the maturity
of the obligation and the rating of the issue. The ratings of
Moody's , Standard & Poor's and Fitch
represent their opinions as to the quality of the New York Tax
Exempt Securities which they undertake to rate. It should be
emphasized, however, that ratings are general and are not
absolute standards of quality. Consequently, New York Tax Exempt
Securities with the same maturity and interest rate with
different ratings may have the same yield. Yield disparities may
occur for reasons not directly related to the investment quality
of particular issues or the general movement of interest rates,
due to such factors as changes in the overall demand or
supply of various types of New York Tax Exempt Securities or
changes in the investment objectives of investors. Subsequent to
purchase by a Fund, an issue of Tax Exempt Securities or
other investments may cease to be rated or its rating may be
reduced below the minimum rating required for purchase by
such Fund. Neither event will require the elimination of an
investment from the Fund's portfolio, but Putnam Management will
consider such an event in its determination of whether
the Fund should continue to hold an investment in its
portfolio.
"MORAL OBLIGATION" BONDS. Neither Fund currently intends
to invest in so-called "moral obligation" bonds, where repayment
is backed by a moral commitment of an entity other than the
issuer, unless the credit of the issuer itself, without regard to
the "moral obligation," meets the investment criteria established
for investments by such Fund.
ADDITIONAL RISKS. Securities in which the Funds may
invest, including New York Tax Exempt Securities, are subject to
the provisions of bankruptcy, insolvency and other laws affecting
the rights and remedies of creditors, such as the federal
Bankruptcy Code, and laws, if any, which may be enacted by
Congress or the state legislatures extending the time
for payment of principal or interest, or both, or imposing other
constraints upon enforcement of such obligations. There is also
the possibility that as a result of litigation or other
conditions the power or ability of issuers to meet their
obligations for the payment of interest and principal on their
New York Tax Exempt Securities may be materially affected.
From time to time, proposals have been introduced before
Congress for the purpose of restricting or eliminating the
federal income tax exemption for interest on debt obligations
issued by states and their political subdivisions. Federal tax
legislation limits the types and amounts of tax-exempt
bonds issuable for certain purposes, especially industrial
development bonds and other types of so-called "private activity
bonds." Such limits may affect the future supply and yields of
these types of New York Tax Exempt Securities. Further proposals
limiting the issuance of tax-exempt bonds may well be introduced
in the future. If it appeared that the availability of New York
Tax Exempt Securities for investment by a Fund and the value of
that Fund's portfolio could be materially affected by
such changes in law, the Trustees would reevaluate its
investment objectives and policies and consider changes
in the structure of the Fund or its dissolution.
<PAGE>
NEW YORK TAX-EXEMPT SECURITY RATINGS
The ratings services' descriptions of the tax-exempt securities
in which the Funds will invest are:
MOODY'S INVESTORS SERVICE, INC.
Aaa -- Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and
are generally referred to as "gilt-edge." Interest payments are
protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such
issues.
Aa -- Bonds which are rated Aa are judged to be of high quality
by all standards. Together with the Aaa group they comprise what
are generally known as high grade bonds. They are rated lower
than the best bonds because margins of protection may not be as
large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger
than in Aaa securities.
A -- Bonds which are rated A possess many favorable
investment attributes and are to be considered as upper medium
grade obligations. Factors giving security to principal and
interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the
future.
Baa -- Bonds which are rated Baa are considered as
medium grade obligations, i.e., they are neither highly protected
nor poorly secured. Interest payments and principal security
appear adequate for the present but certain protective elements
may be lacking or may be characteristically unreliable over any
great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as
well.
Ba -- Bonds which are rated Ba are judged to have
speculative elements; their future cannot be considered as well
assured. Often the protection of interest and principal payments
may be very moderate and thereby not well safeguarded during both
good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
<PAGE>
STANDARD & POOR'S CORPORATION
AAA -- Debt rated AAA has the highest rating assigned by
Standard & Poor's. Capacity to pay interest and repay principal
is extremely strong.
AA -- Debt rated AA has a very strong capacity to pay interest
and repay principal and differs from the higher rated issues only
in small degree.
A -- Debt rated A has a strong capacity to pay interest
and repay principal although it is somewhat more susceptible to
the adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories.
BBB -- Debt rated BBB is regarded as having an adequate
capacity to pay interest and repay principal. Whereas it
normally exhibits adequate protection parameters, adverse
economic conditions or changing circumstances are more likely to
lead to a weakened capacity to pay interest and repay principal
for debt in this category than in higher rated categories.
BB -- Debt rated BB is regarded, on balance, as
predominantly speculative with respect to the issuer's capacity
to pay interest and repay principal in accordance with the terms
of the obligation. While such debt will likely have some quality
and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
FITCH INVESTORS SERVICE, INC.:
AAA - Bonds considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability
to pay interest and repay principal, which is unlikely to be
affected by reasonably foreseeable events.
AA - Bonds considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay
principal is very strong, although not quite as strong as bonds
rated AAA.
A - Bonds considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay
principal is considered to be strong, but may be more vulnerable
to adverse changes in economic conditions and circumstances than
bonds with higher ratings.
BBB - Bonds considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay
interest and repay principal is considered to be adequate.
Adverse changes in economic conditions and circumstances,
however, are more likely to have adverse impact on these bonds,
and therefore impair timely payment. The likelihood that the
ratings of these bonds will fall below investment grade is higher
than for bonds with higher ratings.
BB-B-CCC -- Bonds rated BB, B and CCC are regarded, on balance,
as predominantly speculative with respect to the issuer's
capacity to pay interest and repay principal in accordance with
the terms of the obligation. While such bonds will likely have
some quality and protective characteristics, these are outweighed
by large uncertainties or major risk exposures to adverse
conditions.
INVESTMENT RESTRICTIONS OF THE FUNDS
THE INCOME FUND
AS FUNDAMENTAL INVESTMENT RESTRICTIONS , WHICH MAY
NOT BE CHANGED WITHOUT A VOTE OF A MAJORITY OF ITS
OUTSTANDING VOTING SECURITIES , THE INCOME FUND
MAY NOT AND WILL NOT :
(1) Borrow money in excess of 10% of the value (taken at
the lower of cost or current value) of its total assets (not
including the amount borrowed) at the time the borrowing is made,
and then only from banks as a temporary measure to facilitate the
meeting of redemption requests (not for leverage) which might
otherwise require the untimely disposition of portfolio
investments or for extraordinary or emergency purposes. Such
borrowings will be repaid before any additional investments are
purchased.
(2) Pledge, hypothecate, mortgage, or otherwise
encumber its assets in excess of 10% of its total assets (taken
at the lower of cost or current value) in connection with
borrowings permitted by restriction 1 above (relating to
permitted bank borrowings).
(3) Purchase securities on margin, except such
short-term credits as may be necessary for the clearance of
purchases and sales of securities, but it may make margin
payments in connection with financial futures contracts or
related options.
(4) Make short sales of securities or maintain a
short position for the account of the Fund unless at all times
when a short position is open it owns an equal amount of such
securities or owns securities which, without payment of any
further consideration, are convertible into or exchangeable for
securities of the same issue as, and equal in amount to, the
securities sold short.
(5) Underwrite securities issued by other
persons except to the extent that, in connection with the
disposition of its portfolio investments, it may be deemed to be
an underwriter under certain federal securities laws.
(6) Purchase or sell real estate, although it
may purchase securities which are secured by or represent
interests in real estate.
(7) Purchase or sell commodities or commodity
contracts except financial futures contracts and related options.
(8) Make loans, except by purchase of debt
obligations in which the Fund may invest consistent with its
investment policies, and through repurchase agreements.
(9) Invest in securities of any issuer if, to
the knowledge of the Fund, officers and Trustees of the Fund and
officers and directors of Putnam Management who beneficially own
more than 0.5% of the securities of that issuer together own more
than 5%.
(10) Invest in securities of any issuer if,
immediately after such investment, more than 5% of the total
assets of the Fund taken at current value would be invested in
the securities of such issuer; provided that this limitation does
not apply to obligations issued or guaranteed as to interest and
principal by the U.S. government, its agencies or
instrumentalities or to New York Tax Exempt Securities.
(11) Purchase securities which are restricted as
to resale, if, as a result, such investments would exceed 15% of
the value of the Fund's net assets, excluding restricted
securities that have been determined by the Trustees of the Fund
(or the person designated by them to make such determinations) to
be readily marketable.
(12) Purchase securities (other than securities
of the U.S. government, its agencies or instrumentalities or New
York Tax Exempt Securities, except obligations backed only by the
assets and revenues of nongovernmental issuers) if, as a result
of such purchase, more than 25% of the Fund's total assets would
be invested in any one industry.
(13) Acquire more than 10% of the voting
securities of any issuer.
(14) Issue any class of securities which is
senior to the Fund's shares of beneficial interest.
IT IS CONTRARY TO THE PRESENT POLICY OF THE INCOME
FUND, WHICH POLICY MAY BE CHANGED WITHOUT SHAREHOLDER APPROVAL,
TO:
(1) Invest in securities of registered open-end investment
companies, except as they may be acquired as part of a merger or
consolidation or acquisition of assets or by purchases in the
open market involving only customary brokers' commissions.
(2) Engage in puts, calls, straddles, spreads or any
combination thereof, except that the Fund may buy and sell call
and put options (and any combination thereof) on securities, on
financial futures contracts and on securities indices; in
connection with the purchase of fixed-income securities, however,
the Fund may acquire attached warrants or other rights to
subscribe for securities of companies issuing such fixed-income
securities or securities of parents or subsidiaries of such
companies. (The Fund's investment policies do not currently
permit it to exercise warrants or rights with respect to equity
securities.)
(3) Invest in securities of any issuer if the party
responsible for payment, together with any predecessor, has been
in operation for less than three years, and, as a result of the
investment, the aggregate of such investments would exceed 5% of
the value of the Fund's net assets; provided, however, that this
restriction shall not apply to any obligation of the United
States or its agencies or for the payment of which is pledged the
faith, credit and taxing power of any person authorized to issue
New York Tax Exempt Securities.
(4) Buy or sell oil, gas or other mineral leases, rights
or royalty contracts.
(5) Invest in (a) securities which at the time of such
investment are not readily marketable, (b) securities restricted
as to resale (excluding securities determined by the Trustees of
the Fund (or the person designated by the Trustees of the
Trust to make such determinations) to be readily marketable),
and (c) repurchase agreements maturing in more than seven days,
if, as a result, more than 15% of the Fund's net assets (taken at
current value) would be invested in securities described in (a),
(b) and (c) above.
THE INTERMEDIATE FUND
AS FUNDAMENTAL INVESTMENT RESTRICTIONS, WHICH MAY NOT BE
CHANGED WITHOUT A VOTE OF A MAJORITY OF ITS OUTSTANDING VOTING
SECURITIES, THE INTERMEDIATE FUND MAY NOT AND WILL NOT:
(1) Borrow money in excess of 10% of the value (taken at
the lower of cost or current value) of its total assets (not
including the amount borrowed) at the time the borrowing is made,
and then only from banks as a temporary measure to facilitate the
meeting of redemption requests (not for leverage) which might
otherwise require the untimely disposition of portfolio
investments or for extraordinary or emergency purposes. Such
borrowings will be repaid before any additional investments are
purchased.
(2) Underwrite securities issued by other persons except
to the extent that, in connection with the disposition of its
portfolio investments, it may be deemed to be an underwriter
under certain federal securities laws.
(3) Purchase or sell real estate, although it may purchase
securities of issuers which deal in real estate, securities which
are secured by interests in real estate, and securities which
represent interests in real estate, and it may acquire and
dispose of real estate or interests in real estate acquired
through the exercise of its rights as a holder of debt
obligations secured by real estate or interests therein.
(4) Purchase or sell commodities or commodity contracts,
except that the Fund may purchase and sell financial futures
contracts and options.
(5) Make loans, except by purchase of debt obligations in
which the Fund may invest consistent with its investment
policies, by entering into repurchase agreements with respect to
not more than 25% of its total assets (taken at current value) or
through the lending of its portfolio securities with respect to
not more than 25% of its total assets (taken at current value).
(6) With respect to 50% of its total assets, invest in
securities of any issuer if, immediately after such investment,
more than 5% of the total assets of the Fund (taken at current
value) would be invested in the securities of such issuer;
provided that this limitation does not apply to obligations
issued or guaranteed as to interest or principal by the U.S.
government or its agencies or instrumentalities or by the State
of New York or its political subdivisions.
(7) With respect to 75% of its total assets, acquire more
than 10% of the voting securities of any issuer.
(8) Purchase securities (other than securities of the U.S.
government, its agencies or instrumentalities or New York Tax
Exempt Securities, except obligations backed only by the assets
and revenues of nongovernmental issuers) if, as a result of such
purchase, more than 25% of the Fund's total assets would be
invested in any one industry.
(9) Issue any class of securities which is senior to the
Fund's shares of beneficial interest.
IT IS CONTRARY TO THE INTERMEDIATE FUND'S PRESENT POLICY,
WHICH MAY BE CHANGED WITHOUT SHAREHOLDER APPROVAL, TO:
(1) Invest in (a) securities which at the time of such
investment are not readily marketable, (b) securities restricted
as to resale (excluding securities determined by the Trustees of
the Trust (or the person designated by the Trustees of the Trust
to make such determinations) to be readily marketable), and (c)
repurchase agreements maturing in more than seven days, if, as a
result, more than 15% of the Fund's net assets (taken at current
value) would be invested in securities described in (a), (b) and
(c) above.
(2) Invest in securities of any issuer if the party
responsible for payment, together with any predecessor, has been
in operation for less than three years, and, as a result of the
investment, the aggregate of such investments would exceed 5% of
the value of the Fund's net assets; provided, however, that this
restriction shall not apply to any obligation of the United
States or its agencies or for the payment of which is pledged the
faith, credit and taxing power of any person authorized to issue
New York Tax Exempt Securities.
(3) Purchase securities which are restricted as to resale,
if, as a result, such investments would exceed 15% of the value
of the Fund's net assets, excluding restricted securities that
have been determined by the Trustees of the Fund (or the person
designated by them to make such determinations) to be readily
marketable.
-----------------------
GENERAL
Although certain of each Fund's fundamental investment
restrictions permit a Fund to borrow money to a limited extent,
the Funds do not currently intend to do so and the Income
Fund did not do so last year.
All percentage limitations on investments will apply at
the time of the making of an investment and shall not be
considered violated unless an excess or deficiency occurs or
exists immediately after and as a result of such investment.
The Investment Company Act of 1940 provides that a "vote
of a majority of the outstanding voting securities" of the Funds
means the affirmative vote of the lesser of (1) more than 50% of
the outstanding shares of a Fund, or (2) 67% or more of the
shares present at a meeting if more than 50% of the outstanding
shares are represented at the meeting in person or by proxy.
FUND CHARGES AND EXPENSES
THE INCOME FUND
MANAGEMENT FEES
Under a Management Contract dated July 11, 1991, the
Income Fund pays a quarterly fee to Putnam Management based on
the average net assets of the Income Fund, as determined at the
close of each business day during the quarter, at an annual rate
of 0.60% of the first $500 million of average net assets, 0.50%
of the next $500 million, 0.45% of the next $500 million and
0.40% of any amount over $1.5 billion. For its 1991, 1992 and
1993 fiscal years, pursuant to the Management Contract (and a
management contract in effect prior to July 11, 1991 under which
the management fee payable to Putnam Management was paid at the
rate of 0.60% of the first $100 million of average net assets,
0.50% of the next $100 million, 0.40% of the next $300 million,
0.35% of the next $2.0 billion , and 0.325% of any amount
over $2.5 billion), the Income Fund incurred fees of $6,662,019,
$8,946,558 and $10,741,863, respectively.
BROKERAGE COMMISSIONS
Most purchases and sales of portfolio investments are with
underwriters of or dealers in New York Tax Exempt Securities and
other tax-exempt securities, acting as principal. Accordingly,
the Income Fund will not ordinarily pay significant brokerage
commissions. During fiscal 1991, the Income Fund incurred no
brokerage commissions on agency transactions. During fiscal 1992
and 1993, the Income Fund incurred $67,325 and $589,005 in
brokerage commissions on agency transactions. In fiscal 1991,
1992 and 1993, the Income Fund incurred underwriting commissions
aggregating $3,163,949, $2,068,111 and $3,193,325, respectively,
on underwritten transactions. In fiscal 1993, Putnam Management,
on behalf of the Income Fund, placed agency and underwritten
transactions having an approximate aggregate dollar value of
$65,563,305 (13.36% of the Income Fund's agency and underwritten
transactions, on which approximately $505,438 of commissions were
paid) with brokers and dealers to recognize research, statistical
and quotation services Putnam Management considered to be
particularly useful to it and its affiliates. However, many
of such transactions were placed with such brokers and dealers
without regard to the furnishing of such services.
ADMINISTRATIVE EXPENSE REIMBURSEMENT
The Income Fund reimbursed Putnam Management $38,655 for
administrative services in fiscal 1993, including $34,396 for the
compensation of certain officers of the Income Fund and their
staff and contributions to Putnam Investments, Inc.
Profit Sharing Retirement Plan for their benefit.
TRUSTEE FEES
Each Trustee of the Income Fund receives an annual fee of
$3,080 and an additional fee for each Trustees' meeting attended.
Trustees who are not interested persons of Putnam Management and
who serve on committees of the Trustees receive additional fees
for attendance at certain committee meetings. The Income Fund
incurred Trustees' fees aggregating $47,740 in fiscal 1993.
OWNERSHIP OF INCOME FUND SHARES
At December 31, 1993, the officers and Trustees of the
Income Fund as a group owned less than 1% of the outstanding
shares of either class of the Income Fund, and to the knowledge
of the Income Fund no person owned of record or beneficially 5%
or more of the shares of either class of the Income Fund, except
that Merrill Lynch, Pierce, Fenner & Smith, Inc., 4000 Deer Lake
Drive E., Jacksonville, FL 32246-6484, owned of record 12.6% of
the shares of the Class A shares of the Income
Fund and owned of record 6.8% of the shares
of the Class B shares of the Income Fund .
CLASS A SALES CHARGES, CONTINGENT DEFERRED SALES CHARGES AND
12B-1 FEES
During fiscal 1991, 1992 and 1993, Putnam Mutual Funds
received $10,093,261, $12,369,841 and $11,303,898, respectively,
in sales charges on sales of Class A shares of the Income Fund,
of which it retained $625,524, $800,342 and $634,632,
respectively, after allowance of dealer concessions. During
fiscal 1991, Putnam Mutual Funds did not receive any contingent
deferred sales charges following redemptions of Class A
shares. During fiscal 1992 and 1993, Putnam Mutual Funds
received $3,853 and $4,188, respectively, in contingent deferred
sales charges following redemptions of Class A shares of
the Income Fund. During fiscal 1993, the Fund incurred
$4,027,835 in 12b-1 fees to Putnam Mutual Funds pursuant to the
Fund's Class A Distribution Plan.
CLASS B CONTINGENT DEFERRED SALES CHARGES AND 12B-1 FEES
During fiscal 1993, Putnam Mutual Funds received $152,891
in contingent deferred sales charges upon redemptions of Class B
shares of the Fund. During fiscal 1993, the Fund incurred
$601,037 in 12b-1 fees to Putnam Mutual Funds pursuant to the
Fund's Class B Distribution Plan.
INVESTOR SERVICING AND CUSTODY FEES AND EXPENSES
During the 1993 fiscal year, the Income Fund incurred
$1,680,720 in fees and out-of-pocket expenses for investor
servicing and custody services provided by Putnam Fiduciary Trust
Company.
THE INTERMEDIATE FUND
MANAGEMENT FEES
Under a Management Contract dated April , 1994, the
Intermediate Fund pays a quarterly fee to Putnam Management
based on the average net assets of the Fund, as determined at the
close of each business day during the quarter, at an annual rate
of (to be filed by amendment).
EXPENSE LIMITATION. In order to limit the
Intermediate Fund's expenses during its start-up period, Putnam
Management has agreed to reduce its compensation (and, to the
extent necessary, absorb other expenses of the Fund) until the
net assets of the Fund exceed $100,000,000, to the extent that
expenses of the Fund (exclusive of brokerage, interest, taxes,
deferred organizational and extraordinary expenses, and payments
under the Fund's Distribution Plans) exceed an annual rate of
0.80% of the Fund's average net assets. For the purpose of
determining any such reduction in Putnam Management's
compensation, expenses of the Fund shall not reflect the
application of commissions or cash management credits that may
reduce designated Fund expenses. With Trustee approval, this
expense limitation may be terminated earlier, in which event
shareholders would be notified and this Statement of Additional
Information would be revised.
TRUSTEE FEES
Each Trustee of the Intermediate Fund receives an
annual fee of $100 and an additional fee for each
Trustees' meeting attended. Trustees who are not interested
persons of Putnam Management and who serve on committees of the
Trustees receive additional fees for attendance at certain
committee meetings.
BROKERAGE
The Intermediate Fund shall not effect any brokerage
transactions in its portfolio securities with any broker-dealer
affiliated directly or indirectly with its investment adviser or
manager, unless the transactions, including the frequency
thereof, the receipt of commissions payable in connection
therewith, and the selection of the affiliated broker-dealer
effecting the transactions, are not unfair or unreasonable to the
shareholders of the Fund .
OWNERSHIP OF FUND SHARES
At , 1994, Putnam Investments, Inc. owned
of record and beneficially all of the shares of the
Intermediate Fund. Putnam Investments, Inc. and its parent
corporation, Marsh & McLennan Companies, Inc., are incorporated
in Delaware. The address of Putnam Investments, Inc. is One Post
Office Square, Boston, MA 02109.
INVESTMENT PERFORMANCE OF THE FUNDS
Standard Performance Measures
The Income Fund's tax-exempt yield for the thirty-
day period ended November 30, 1993 for Class A shares was 4.73%.
A Class A shareholder in a 46.88% combined federal/New York
State/New York City tax bracket would have to earn 8.90% from a
taxable investment to produce an after-tax yield equal to the
tax-exempt yield of 4.73%. The Income Fund's average
annual total return (compounded annually) for Class A shares for
the one-, five- and ten-year periods ended November 30, 1993 was
6.67%, 8.92%, and 10.57%, respectively. The Income
Fund's tax-exempt yield for the thirty-day period ended
November 30, 1993 for Class B shares was 4.29%. A Class B
shareholder in a 46.88% combined federal/New York State/New York
City tax bracket would have to earn 8.08% from a taxable
investment to produce an after-tax yield equal to the tax-exempt
yield of 4.29%. The cumulative total return for Class B shares
since inception through the period ended November 30, 1993 was
4.25%. See "Standard Performance Measures" in Part II of this
Statement for information on how the Income Fund's tax-exempt
yield, total return and tax-equivalent yield are calculated.
No shares of the Intermediate Fund were outstanding
during these periods.
PERFORMANCE RATINGS
For the 1993 fiscal year, the Class A shares of the Income
Fund were ranked 29 of 53 New York State municipal bond funds by
Lipper Analytical Services, Inc. and 105 of 464 municipal single
state funds by CDA/Wiesenberger's Management Results. As of the
end of the fiscal year, Class A shares were given a 2-star rating
(out of 5 stars) by Morningstar, Inc. For the 1993 fiscal year,
the Class B shares of the Income Fund were not ranked or rated.
See "Comparison of Portfolio Performance" in Part II of this
Statement for information about how these rankings are
determined. Past performance is no guarantee of future results.
No shares of the Intermediate Fund were outstanding
during these periods.
OTHER PERFORMANCE INFORMATION
The tables below show total return (capital changes plus
reinvestment of all distributions) on a hypothetical investment
in one share of each Fund during the life of that Fund. This was
a period of fluctuating tax-exempt bond prices. The tables do
not project the future performance of the Funds.
No shares of the Intermediate Fund were outstanding
during these periods.
<PAGE>
<TABLE>
<CAPTION>
PUTNAM NEW YORK TAX EXEMPT INCOME FUND
CLASS A SHARES
CUMULATIVE
MAXIMUM NET ASSET DISTRIBUTIONS NET ASSET VALUE
OFFERING VALUE ------------------- AT YEAR-
END
FISCAL PRICE AT ----------------- FROM FROM WITH
ALL
YEAR BEGINNING BEGINNING END OF INVESTMENT CAPITAL
DISTRIBUTIONS
ENDED OF YEAR OF YEAR YEAR INCOME GAINS
REINVESTED
------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
11/30/83(1) $7.51 $7.15 $7.11 $0.138 --- $7.25
11/30/84 7 .46 7.11 7.10 0.650 $0.005 7.93
9/30/85 7.45 7.10 7.57 0 .553 --- 9.10
9/30/86 7.95 7.57 8.56 0 .656 --- 11 .14
9/30/87 8.99 8.56 7.76 0 .608 0.070 10 .94
11/30/87 8 .15 7.76 7.99 0.103 --- 11 .42
11/30/88 8 .39 7.99 8.33 0.600 0.062 12.90
11/30/89 8 .75 8.33 8.61 0.591 --- 14 .29
11/30/90 9 .04 8.61 8.34 0.568 0.057 14.91
11/30/91 8 .76 8.34 8.75 0.591 --- 16 .77
11/30/92 9 .19 8.75 8.98 0.580 0.083 18.55
11/30/93 9 .43 8.98 9.38 0.527 0.121 20.78
------- --------
Total distributions $6.165 $0.398
(1) Investment operations began September 2, 1983.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE CHANGES DURING LIFE OF FUND (CLASS A SHARES)
PUTNAM NEW YORK TAX EXEMPT INCOME FUND
--------------------------------------
MAXIMUM OFFERING NET ASSET VALUE LEHMAN
PRICE TO NET TO NET BROTHERS MUNICIPAL CONSUMER
ASSET VALUE ASSET VALUE BOND INDEX PRICE INDEX
FISCAL ---------------- -------------- ------------- ------------
YEAR CUMULA- CUMULA- CUMULA- CUMULA-
ENDED ANNUAL TIVE ANNUAL TIVE ANNUAL TIVE ANNUAL TIVE
---------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C>
11/30/83(1) --- -3.4% --- +1.4% --- +2 .1% --- +1.0%
11/30/84 +4 .3% +5.8 +9 .5% +11.0 +8 .7% +10.9 +4 .1% +5.1
9/30/85 +9.3 +21.4 +14.7 +27.4 +13.1 +25.5 +2.9 +8 .1
9/30/86 +16 .6 +48.5 +22 .4 +55.9 +24 .7 +56.4 +1.8 +10.0
9/30/87 -6.5 +45.9 -1.8 +53.2 +0.5 +57.2 +4.4 +14.8
11/30/87 -0 .7 +52.2 +4.3 +59.8 +3.0 +61.9 +0.4 +15.2
11/30/88 +7 .6 +72.0 +13 .0 +80.5 +10 .6 +79.1 +4.3 +20.1
11/30/89 +5 .5 +90.5 +10 .8 +100.0 +11 .0 +98.8 +4.7 +25.7
11/30/90 -0 .6 +98.8 +4.4 +108.7 +7.7 +114.1 +6.3 +33.5
11/30/91 +7 .1 +123.6 +12 .4 +134.7 +10 .3 +136.1 +3 .0 +37.5
11/30/92 +5 .3 +147.3 +10 .6 +159.6 +10 .0 +159.8 +3 .1 +41.7
11/30/93 +6 .7 +177.0 +12 .0 +190.8 +11 .1 +188.6 +2 .7 +45.5
(1) Investment operations began September 2, 1983.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PUTNAM NEW YORK TAX EXEMPT INCOME FUND
CLASS B SHARES
CUMULATIVE
NET ASSET DISTRIBUTIONS NET ASSET VALUE
VALUE ------------------- AT YEAR-END
FISCAL ----------------- FROM FROM WITH ALL
YEAR BEGINNING END OF INVESTMENT CAPITAL DISTRIBUTIONS
ENDED OF YEAR YEAR INCOME GAINS REINVESTED
----------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
11/30/93(1) $8.95 $9.37 $ 0.399 $ --- $ 9.78
------- -------
Total distributions $ 0.399 $ ---
(1) Class B shares were offered beginning January 4, 1993.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE CHANGES SINCE COMMENCEMENT OF THE PUBLIC OFFERING OF CLASS B SHARES
PUTNAM NEW YORK TAX EXEMPT
INCOME FUND
-------------------------- LEHMAN
NET ASSET VALUE BROTHERS
TO NET MUNICIPAL CONSUMER
FISCAL ASSET VALUE BOND INDEX PRICE INDEX
YEAR CUMULA- CUMULA- CUMULA-
ENDED ANNUAL TIVE ANNUAL TIVE ANNUAL TIVE
-------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
11/30/93 (1) --- +9.3% --- +10.0% --- +2.8%
(1) Class B shares were offered beginning January 4, 1993.
</TABLE>
<PAGE>
The tables are not adjusted for any taxes payable on
reinvested distributions. The total values for the Funds as of
the end of each period reflect reinvestment of all distributions
and all changes in net asset value.
The Lehman Brothers Municipal Bond Index is an unmanaged
list of approximately 20,000 investment-grade, fixed-rate, tax-
exempt bonds. The average quality of bonds held in the index may
differ from the average quality of those bonds in which the Fund
invests. The index does not include bonds in certain of the
lower-rating classifications in which the Fund may invest. The
performance figures for the index reflect changes of market
prices and reinvestment of all interest payments. Because the
Income Fund is a managed portfolio investing primarily in New
York Tax Exempt Securities, the tax-exempt securities it owns
will not match those in the index.
The Consumer Price Index, prepared by the U.S. Bureau of
Labor Statistics, is a commonly used measure of the rate of
inflation. The index shows the average change in the cost of
selected consumer goods and services and does not represent a
return on an investment vehicle.
<PAGE>
<TABLE>
<CAPTION>
EQUIVALENT YIELDS: TAX-EXEMPT VERSUS TAXABLE SECURITIES
The tables below show the effect of the tax status of New York Tax Exempt Securities on the effective
yield received by their individual holders, in the case of table 1, under the federal income tax and New York State
personal income tax laws currently in effect for 1994 and, in the case of table 2, under the federal, New York State and
New York City personal income tax laws currently in effect for 1994. The tables give the approximate yield a taxable
security must earn at various income levels to produce after-tax yields equivalent to those of New York Tax Exempt
Securities yielding from 3.0% to 8.0%.
-----------------------------------------------------------------------------------------------------------------------
- -
TAXABLE INCOME* 1994 COMBINED NEW YORK TAX-EXEMPT YIELD OF
------------------------ NEW YORK STATE -------------------------------------------
AND FEDERAL
SINGLE JOINT TAX RATE ** 3.0% 4.0% 5.0% 6.0% 7.0% 8.0%
-----------------------------------------------------------------------------------------------------------------------
- -
EQUIVALENT TAXABLE YIELD IF DOUBLE TAX-EXEMPT
<C> <C> <C> <C> <C> <C> <C> <C> <C>
0 - $6,500 0 - 13,000 18.87% 3.70% 4.93% 6.16% 7.40% 8.63% 9.86%
6,501 - 9,500 13,001 - 19,000 19.72% 3.74% 4.98% 6.23% 7.47% 8.72% 9.96%
9,501 - 12,500 19,001 - 25,000 20.57% 3.78% 5.04% 6.29% 7.55% 8.81% 10.07%
12,501 - 22,750 25,001 - 38,000 21.45% 3.82% 5.09% 6.37% 7.64% 8.91% 10.19%
22,751 - 55,100 38,001 - 91,850 33.47% 4.51% 6.01% 7.52% 9.02% 10.52% 12.02%
55,101 - 115,000*** 91,851 - 140,000*** 36.24% 4.71% 6.27% 7.84% 9.41% 10 .98% 12.55%
115,001 - 250,000*** 140,001 - 250,000*** 40.86% 5.07% 6.76% 8.45% 10.15% 11 .84% 13.53%
over - 250,000*** over - 250,000*** 44.19% 5.38% 7.17% 8.96% 10.75% 12 .54%
14.33%
/TABLE
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
- -
TAXABLE INCOME* 1994 COMBINED NEW YORK TAX-EXEMPT YIELD OF
------------------------ NEW YORK STATE , ------------------------------------
CITY AND FEDERAL
SINGLE JOINT TAX RATE ** 3.0% 4.0% 5.0% 6.0% 7.0% 8.0%
-----------------------------------------------------------------------------------------------------------------------
- -
EQUIVALENT TAXABLE YIELD IF TRIPLE TAX-EXEMPT
<C> <C> <C> <C> <C> <C> <C> <C> <C>
0 - $6,500 0 - 13,000 21 .05% 3.80% 5.07% 6.33% 7.60%
8.87% 10.13%
6,501 - 8,000 13,001 - 14,400 21.90% 3.84% 5.12% 6.40% 7.68% 8.96% 10 .24%
8,001 - 8,400 22.48% 3.87% 5.16% 6.45% 7.74% 9 .03% 10.32%
8,401 - 9,500 14,401 - 19,000 22.97% 3.89% 5.19% 6.49% 7.79% 9.09% 10 .39%
9,501 - 12,500 19,001 - 25,000 23.82% 3.94% 5.25% 6.56% 7.88% 9.19% 10 .50%
12,501 - 15,000 25,001 - 27,000 24.71% 3.98% 5.31% 6.64% 7.97% 9.30% 10 .63%
15,001 - 22,750 27,001 - 38,000 25.19% 4.01% 5.35% 6.68% 8.02% 9.36% 10 .69%
22,751 - 25,000 38,001 - 45,000 36.63% 4.73% 6.31% 7.89% 9.47% 11.05% 12 .62%
25,001 - 55,100 45,001 - 91,850 36.64% 4.73% 6.31% 7.89% 9.47% 11.05% 12 .63%
55,101 - 60,000 91,851 - 108,000 39.28% 4.94% 6.59% 8.23% 9.88% 11.53% 13 .17%
60,001 - 115,000*** 108,001 - 140,000*** 39.32% 4.94% 6.59% 8.24% 9.89% 11 .54% 13.18%
115,001 - 250,000*** 140,001 - 250,000*** 43.71% 5.33% 7.11% 8.88% 10.66% 12 .44% 14.21%
over 250,000*** over - 250,000*** 46.88% 5.65% 7.53% 9.41% 11.29% 13.18% 15.06%
/TABLE
<PAGE>
* This amount represents taxable income as defined in the
Internal Revenue Code of 1986, as amended (the "Code"). It
is assumed that the definition of taxable income in the Code
is the same as under the New York State or City Personal
Income Tax law; however, New York State or City taxable
income may differ due to differences in exemptions, itemized
deductions, and other items.
** For federal tax purposes, these combined rates reflect the
marginal rates on taxable income currently in effect for
1994. These rates include the effect of deducting state
and, for the second table, city taxes on your Federal
return. For New York purposes, these combined rates reflect
the expected New York State and New York City income tax and
surcharge rates for 1994.
*** The amount of taxable income in this bracket may be
affected by the phase-out of personal exemptions and the
limitation on itemized deductions, based upon adjusted
gross
income, under the Code. A supplemental New York State tax
also applies to filers with adjusted gross income between
$100,000 and $150,000, which phases out the benefit of the
lower marginal brackets. This adjustment is not reflected
in the tables above.
Of course, there is no assurance that either Fund will achieve
any specific tax-exempt yield. While it is expected that the
Funds will invest principally in obligations which pay interest
exempt from federal income tax and New York State and City
personal income taxes, other income received by the Funds may be
taxable. The tables do not take into account any state or local
taxes payable on Fund distributions except for New York State and
City personal income taxes.
ADDITIONAL OFFICERS OF THE TRUST
In addition to the persons listed as officers of the
Trust in Part II of this Statement, the following persons are
also officers of the Trust . Officers of Putnam
Management hold the same offices in Putnam Management's parent
company, Putnam Investments, Inc.
GARY N. COBURN, Vice President. Senior Managing Director
of Putnam Management. Director, Putnam Investments, Inc. Vice
President of certain of the Putnam funds.
JAMES E. ERICKSON, Vice President. Managing Director of
Putnam Management. Vice President of certain of the Putnam
funds.
<PAGE>
DAVID J. EURKUS, Vice President . Senior Vice
President of Putnam Management. Vice President of certain of the
Putnam funds.
THOMAS C. GOGGINS, Vice President .
Vice President of Putnam Management. Director, Putnam
Investments, Inc. Vice President of certain of the Putnam
funds. Prior to June, 1993, Mr. Goggins was a Portfolio
Manager at Transamerica Investments Services, Inc.
INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS
Coopers & Lybrand are the Trust'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 each Trust's Annual
Report for the fiscal year ended November 30, 1993, filed
electronically on February 7, 1994 for the Income Fund and
January 28, 1994 for the Money Market Fund (File nos. 811-3741
and 811-5335, respectively), are incorporated by reference into
this Statement of Additional Information. The financial
highlights of each Fund included in the Prospectus and the
financial statements incorporated by reference into the
Prospectus and the Statement of Additional Information have been
so included and incorporated in reliance upon the reports of the
independent accountants, given on their authority as experts in
auditing and accounting.
<PAGE>
PUTNAM NEW YORK TAX EXEMPT INCOME FUND
PUTNAM NEW YORK TAX EXEMPT MONEY MARKET FUND
FORM N-1A
PART B
STATEMENT OF ADDITIONAL INFORMATION
JUNE 1, 1994
This Statement of Additional Information is not a Prospectus
and is only authorized for distribution when accompanied or
preceded by the Prospectus of Putnam New York Tax Exempt
Income Fund and Putnam New York Tax Exempt Money Market
Fund (the "Funds") dated April 1, 1994, as revised from time
to time . This Statement contains information which may be
useful to investors but which is not included in the Prospectus.
If the Funds have more than one form of current Prospectus, each
reference to the Prospectus in this Statement shall include all
the Funds' Prospectuses, unless otherwise noted. The Statement
should be read together with the applicable Prospectus.
Investors may obtain a free copy of the applicable Prospectus
from Putnam Investor Services, Mailing address: P.O. Box 41203,
Providence, RI 02940-1203.
Part I of this Statement contains specific information about
the Funds. Part II includes information about the Funds and the
other Putnam funds.
TABLE OF CONTENTS
PART I
PAGE
NEW YORK TAX EXEMPT SECURITIES . . . . . . . . . . . . . . . . .I-3
TAX-EXEMPT SECURITY RATINGS. . . . . . . . . . . . . . . . . . .I-6
INVESTMENT RESTRICTIONS OF THE FUNDS . . . . . . . . . . . . . .I-8
FUND CHARGES AND EXPENSES. . . . . . . . . . . . . . . .I- 12
AMORTIZED COST VALUATION AND DAILY DIVIDENDS (THE MONEY MARKET
FUND). . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-15
INVESTMENT PERFORMANCE OF THE FUNDS. . . . . . . . . . .I- 17
EQUIVALENT YIELDS: TAX-EXEMPT VERSUS TAXABLE SECURITIESI- 25
ADDITIONAL OFFICERS OF THE FUNDS . . . . . . . . . . . .I- 27
INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTSI-28
<PAGE>
PART II
MISCELLANEOUS INVESTMENT PRACTICES . . . . . . . . . . . . . . II-1
TAXES. . . . . . . . . . . . . . . . . . . . . . . . . II- 23
MANAGEMENT OF THE FUND . . . . . . . . . . . . . . . . II- 28
DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . II- 37
HOW TO BUY SHARES. . . . . . . . . . . . . . . . . . . II- 39
DISTRIBUTION PLAN. . . . . . . . . . . . . . . . . . . II- 50
INVESTOR SERVICES. . . . . . . . . . . . . . . . . . . II- 51
SIGNATURE GUARANTEES . . . . . . . . . . . . . . . . . II- 57
SUSPENSION OF REDEMPTIONS. . . . . . . . . . . . . . . II- 57
SHAREHOLDER LIABILITY. . . . . . . . . . . . . . . . . II- 58
STANDARD PERFORMANCE MEASURES. . . . . . . . . . . . . II- 58
COMPARISON OF PORTFOLIO PERFORMANCE. . . . . . . . . . II- 59
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . II- 64
<PAGE>
PUTNAM NEW YORK TAX EXEMPT INCOME FUND
PUTNAM NEW YORK TAX EXEMPT MONEY MARKET FUND
STATEMENT OF ADDITIONAL INFORMATION
PART I
NEW YORK TAX EXEMPT SECURITIES
GENERAL DESCRIPTION. As used in the Prospectus and in this
Statement, the term "New York Tax Exempt Securities"
includes debt obligations issued by the State of New York
and its political subdivisions (for example, counties, cities,
towns, villages, districts and authorities) the interest from
which is, in the opinion of bond counsel, exempt from both
federal income tax and New York State and City personal income
taxes. Such obligations are issued to obtain funds for various
public purposes, including the construction of a wide range of
public facilities, such as airports, bridges, highways, housing,
hospitals, mass transportation, schools, streets and water and
sewer works. Other public purposes for which New York Tax Exempt
Securities may be issued include the refunding of outstanding
obligations or obtaining funds for general operating expenses.
Short-term New York Tax Exempt Securities are generally issued by
state and local governments and public authorities as interim
financing in anticipation of tax collections, revenue receipts,
or bond sales to finance such public purposes. In addition,
certain types of "private activity" bonds may be issued by public
authorities to finance such projects as privately operated
housing facilities, and certain local facilities for water
supply, gas, electricity or sewage or solid waste disposal,
student loans, or the obtaining of funds to lend to public or
private institutions for the construction of facilities such as
educational, hospital and housing facilities. Such obligations
are included within the term New York Tax Exempt Securities if
the interest paid thereon is, in the opinion of bond counsel,
exempt from federal income tax (such interest may, however, be
subject to federal alternative minimum tax) and New York
State and City personal income tax. Other types of private
activity bonds, the proceeds of which are used for the
construction, repair or improvement of, or to obtain equipment
for, privately operated industrial or commercial facilities, may
constitute New York Tax Exempt Securities, although the current
federal tax laws place substantial limitations on the size of
such issues. New York Tax Exempt Securities also include short-
term discount notes (tax-exempt commercial paper), which are
promissory notes issued by municipalities to enhance their cash
flows.
PARTICIPATION INTERESTS. The Money Market Fund may invest
in New York Tax Exempt Securities either by purchasing them
directly or by purchasing certificates of accrual or similar
instruments evidencing direct ownership of interest payments or
principal payments, or both, on New York Tax Exempt Securities,
provided that, in the opinion of counsel to the initial seller of
each such certificate or instrument, any discount accruing on the
certificate or instrument that is purchased at a yield not
greater than the coupon rate of interest on the related New York
Tax Exempt Securities will be exempt from federal income tax to
the same extent as interest on the New York Tax Exempt
Securities. The Money Market Fund may also invest in New York
Tax Exempt Securities by purchasing from banks participation
interests in all or part of specific holdings of New York Tax
Exempt Securities. These participations may be backed in whole
or in part by an irrevocable letter of credit or guarantee of the
selling bank. The selling bank may receive a fee from the Money
Market Fund in connection with the arrangement. The Money Market
Fund will not purchase such participation interests unless it
receives an opinion of counsel or a ruling of the Internal
Revenue Service that interest earned by it on New York Tax Exempt
Securities in which it holds such participation interests is
exempt from federal income tax. The Money Market Fund does not
expect to invest more than 5% of its assets in participation
interests.
STAND-BY COMMITMENTS. When a Fund purchases New York
Tax Exempt Securities, it has the authority to acquire stand-by
commitments from banks and broker-dealers with respect to those
New York Tax Exempt Securities. A stand-by commitment may be
considered a security independent of the New York Tax Exempt
Security to which it relates. The amount payable by a bank or
dealer during the time a stand-by commitment is exercisable,
absent unusual circumstances, would be substantially the same as
the market value of the underlying New York Tax Exempt Security
to a third party at any time. The Funds expect that
stand-by commitments generally will be available without the
payment of direct or indirect consideration. The Funds do
not expect to assign any value to stand-by commitments.
YIELDS. The yields on New York Tax Exempt Securities depend
on a variety of factors, including general money market
conditions, effective marginal tax rates, the financial condition
of the issuer, general conditions of the New York Tax Exempt
Security market, the size of a particular offering, the maturity
of the obligation and the rating of the issue. The ratings of
Moody's Investors Service, Inc. and Standard & Poor's
Corporation represent their opinions as to the quality of
the New York Tax Exempt Securities which they undertake to rate.
It should be emphasized, however, that ratings are general and
are not absolute standards of quality. Consequently, New York
Tax Exempt Securities with the same maturity and interest rate
but with different ratings may have the same yield. Yield
disparities may occur for reasons not directly related to the
investment quality of particular issues or the general movement
of interest rates, due to such factors such as changes in
the overall demand or supply of various types of New York Tax
Exempt Securities or changes in the investment objectives of
investors. Subsequent to purchase by a Fund, an issue of New York
Tax Exempt Securities or other investments may cease to be rated
or its rating may be reduced below the minimum rating required
for purchase by that Fund. Neither event will require the
elimination of an investment from the Fund's portfolio, but
Putnam Management will consider such an event in its
determination of whether a Fund should continue to hold an
investment in its portfolio.
"MORAL OBLIGATION" BONDS. Neither Fund currently intends to
invest in so-called "moral obligation" bonds, where repayment is
backed by a moral commitment of an entity other than the issuer,
unless the credit of the issuer itself, without regard to the
"moral obligation," meets the investment criteria established for
investments by that Fund.
ADDITIONAL RISKS. Securities in which the Funds may invest,
including New York Tax Exempt Securities, are subject to the
provisions of bankruptcy, insolvency and other laws affecting the
rights and remedies of creditors, such as the federal Bankruptcy
Code, and laws, if any, which may be enacted by Congress or the
New York legislature extending the time for payment of principal
or interest, or both, or imposing other constraints upon
enforcement of such obligations. There is also the possibility
that as a result of litigation or other conditions the power or
ability of issuers to meet their obligations for the payment of
interest and principal on their New York Tax Exempt Securities
may be materially affected.
From time to time, proposals have been introduced before
Congress for the purpose of restricting or eliminating the
federal income tax exemption for interest on debt obligations
issued by states and their political subdivisions. Federal
tax laws limit the types and amounts of tax-exempt bonds
issuable for certain purposes, especially industrial development
bonds and other types of so-called "private activity bonds."
Such limits may affect the future supply and yields of these
types of New York Tax Exempt Securities. Further proposals
limiting the issuance of tax-exempt bonds may well be introduced
in the future. If it appeared that the availability of New York
Tax Exempt Securities for investment by a Fund and the value of
the Fund's portfolio could be materially affected by such changes
in law, the Trustees of the Fund would reevaluate its investment
objective and policies and consider changes in the structure of
the Fund or its dissolution.
<PAGE>
TAX-EXEMPT SECURITY RATINGS
The ratings services' descriptions of the tax-exempt securities
in which the Funds will invest are:
MOODY'S INVESTORS SERVICE, INC.
BONDS
Aaa -- Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and
are generally referred to as "gilt-edge." Interest payments are
protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such
issues.
Aa -- Bonds which are rated Aa are judged to be of high quality
by all standards. Together with the Aaa group they comprise what
are generally known as high grade bonds. They are rated lower
than the best bonds because margins of protection may not be as
large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger
than in Aaa securities.
*A -- Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest
are considered adequate but elements may be present which suggest
a susceptibility to impairment sometime in the future.
*Baa -- Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear
adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as
well.
*Ba -- Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well assured.
Often the protection of interest and principal payments may be
very moderate and thereby not well safeguarded during both good
and bad times over the future. Uncertainty of position
characterizes bonds in this class.
<PAGE>
NOTES
MIG 1/VMIG 1 -- This designation denotes best quality. There is
present strong protection by established cash flows, superior
liquidity support or demonstrated broad-based access to the
market for refinancing.
MIG 2/VMIG 2 -- This designation denotes high quality. Margins
of protection are ample although not so large as in the preceding
group.
COMMERCIAL PAPER
Issuers rated PRIME-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory
obligations. Prime-1 repayment capacity will normally be
evidenced by the following characteristics:
-- Leading market positions in well established
industries .
-- High rates of return on funds employed .
-- Conservative capitalization structures with
moderate reliance on debt and ample asset
protection .
-- Broad margins in earnings coverage of fixed
financial charges and high internal cash generation
.
-- Well- established access to a range of financial
markets and assured sources of alternate liquidity.
Issuers rated PRIME-2 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory
obligations. This will normally be evidenced by many of the
characteristics cited above to a lesser degree. Earnings trends
and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample
alternate liquidity is maintained.
STANDARD & POOR'S CORPORATION
BONDS
AAA -- Debt rated AAA has the highest rating assigned by Standard
& Poor's. Capacity to pay interest and repay principal is
extremely strong.
AA -- Debt rated AA has a very strong capacity to pay interest
and repay principal and differs from the higher rated issues only
in small degree.
*A -- Debt rated A has a strong capacity to pay interest and
repay principal although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories.
*BBB -- Debt rated BBB is regarded as having an adequate capacity
to pay interest and repay principal. Whereas it normally
exhibits adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal for debt in
this category than in higher rated categories.
*BB -- Debt rated BB is regarded, on balance, as predominantly
speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the
obligation. While such debt will likely have some quality and
protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
NOTES
SP-1 -- Very strong or strong capacity to pay principal and
interest. Those issues determined to possess overwhelming safety
characteristics will be given a plus (+) designation.
SP-2 -- Satisfactory capacity to pay principal and interest.
COMMERCIAL PAPER
A-1 -- This designation indicates that the degree of safety
regarding timely payment is either overwhelming or very strong.
Those issues determined to possess overwhelming safety
characteristics are denoted with a plus (+) sign designation.
A-2 -- Capacity for timely payment on issues with this
designation is strong. However, the relative degree of safety is
not as high as for issues designated "A-1."
*Applies only to the Income Fund.
INVESTMENT RESTRICTIONS OF THE FUNDS
AS FUNDAMENTAL INVESTMENT RESTRICTIONS OF EACH FUND,
WHICH MAY NOT BE CHANGED WITHOUT A VOTE OF A MAJORITY OF THE
OUTSTANDING VOTING SECURITIES OF THAT FUND, THE FUND MAY NOT AND
WILL NOT TAKE ANY OF THE FOLLOWING ACTIONS WITH RESPECT TO SUCH
FUND:
(1) Borrow money in excess of 10% of the value (taken
at the lower of cost or current value) of its total assets (not
including the amount borrowed) at the time the borrowing is made,
and then only from banks as a temporary measure to facilitate the
meeting of redemption requests (not for leverage) which might
otherwise require the untimely disposition of portfolio
investments or for extraordinary or emergency purposes. Such
borrowings will be repaid before any additional investments are
purchased.
(2) (The Income Fund only) Pledge, hypothecate,
mortgage, or otherwise encumber its assets in excess of 10% of
its total assets (taken at the lower of cost or current value) in
connection with borrowings permitted by restriction 1 above
(relating to permitted bank borrowings).
(3) (The Money Market Fund only) Pledge, hypothecate,
mortgage, or otherwise encumber its assets in excess of 10% of
its total assets (taken at the lower of cost or current value)
and then only to secure borrowings permitted by restriction 1
above (relating to permitted bank borrowings). For the purposes
of this restriction, collateral arrangements with respect to
margin for financial futures contracts or options are not deemed
to be a pledge of assets.
(4) Purchase securities on margin, except such short-
term credits as may be necessary for the clearance of purchases
and sales of securities, but it may make margin payments in
connection with financial futures contracts or related options.
(5) Make short sales of securities or maintain a short
position for the account of the Fund unless at all times when a
short position is open it owns an equal amount of such securities
or owns securities which, without payment of any further
consideration, are convertible into or exchangeable for
securities of the same issue as, and equal in amount to, the
securities sold short.
(6) Underwrite securities issued by other persons
except to the extent that, in connection with the disposition of
its portfolio investments, it may be deemed to be an underwriter
under certain federal securities laws.
(7) Purchase or sell real estate, although it may
purchase securities which are secured by or represent interests
in real estate.
(8) Purchase or sell commodities or commodity contracts
except financial futures contracts and related options.
(9) Make loans, except by purchase of debt obligations
in which the Fund may invest consistent with its investment
policies, and through repurchase agreements.
(10) Invest in securities of any issuer if, to the
knowledge of the Fund, officers and Trustees of the Fund and
officers and directors of Putnam Management who beneficially own
more than 0.5% of the securities of that issuer together own more
than 5%.
(11) Invest in securities of any issuer if, immediately
after such investment, more than 5% of the total assets of the
Fund taken at current value would be invested in the securities
of such issuer; provided that this limitation does not apply to
obligations issued or guaranteed as to interest and principal by
the U.S. government, its agencies or instrumentalities or to New
York Tax Exempt Securities.
(12) Purchase securities which are restricted as to
resale, if, as a result, such investments would exceed 15% of the
value of the Fund's net assets, excluding restricted securities
that have been determined by the Trustees of the Fund (or the
person designated by them to make such determinations) to be
readily marketable.
(13) Purchase securities (other than securities of the
U.S. government, its agencies or instrumentalities or New York
Tax Exempt Securities, except obligations backed only by the
assets and revenues of nongovernmental issuers) if, as a result
of such purchase, more than 25% of the Fund's total assets would
be invested in any one industry.
(14) Acquire more than 10% of the voting securities of
any issuer.
(15) Issue any class of securities which is senior to
the Fund's shares of beneficial interest.
IT IS CONTRARY TO THE PRESENT POLICY OF EACH FUND, WHICH POLICY
MAY BE CHANGED WITHOUT SHAREHOLDER APPROVAL, TO:
(1) Invest in securities of registered open-end
investment companies, except as they may be acquired as part of a
merger or consolidation or acquisition of assets or by purchases
in the open market involving only customary brokers' commissions.
(2) Engage in puts, calls, straddles, spreads or any
combination thereof, except that the Fund may buy and sell call
and put options (and any combination thereof) on securities, on
financial futures contracts and on securities indices; in
connection with the purchase of fixed-income securities, however,
the Fund may acquire attached warrants or other rights to
subscribe for securities of companies issuing such fixed-income
securities or securities of parents or subsidiaries of such
companies. (The Fund's investment policies do not currently
permit it to exercise warrants or rights with respect to equity
securities.)
(3) Invest in securities of any issuer if the party
responsible for payment, together with any predecessor, has been
in operation for less than three years, and, as a result of the
investment, the aggregate of such investments would exceed 5% of
the value of the Fund's net assets; provided, however, that this
restriction shall not apply to any obligation of the United
States or its agencies or for the payment of which is pledged the
faith, credit and taxing power of any person authorized to issue
New York Tax Exempt Securities.
(4) Buy or sell oil, gas or other mineral leases,
rights or royalty contracts.
(5) Invest in (a) securities which at the time of such
investment are not readily marketable, (b) securities restricted
as to resale (excluding securities determined by the Trustees of
the Fund (or the person designated by the Trustees of the Fund to
make such determinations) to be readily marketable), and (c)
repurchase agreements maturing in more than seven days, if, as a
result, more than 15% of the Fund's net assets (taken at current
value) would be invested in securities described in (a), (b) and
(c) above.
Although certain of each Fund's fundamental investment
restrictions permit a Fund to borrow money to a limited extent,
the Funds do not currently intend to do so and did not do so last
year. The Money Market Fund has no present intention of engaging
in options or futures transactions and the Income Fund has no
present intention of selling options, as addressed in fundamental
investment restrictions 3, 4 and 8 and non-fundamental investment
restriction 2.
----------
All percentage limitations on investments will apply at the
time of the making of an investment and shall not be considered
violated unless an excess or deficiency occurs or exists
immediately after and as a result of such investment.
The Investment Company Act of 1940 provides that a "vote of
a majority of the outstanding voting securities" of the Funds
means the affirmative vote of the lesser of (1) more than 50% of
the outstanding shares of a Fund, or (2) 67% or more of the
shares present at a meeting if more than 50% of the outstanding
shares are represented at the meeting in person or by proxy.
<PAGE>
FUND CHARGES AND EXPENSES
THE INCOME FUND
MANAGEMENT FEES
Under a Management Contract dated July 11, 1991, the Income
Fund pays a quarterly fee to Putnam Management based on the
average net assets of the Income Fund, as determined at the close
of each business day during the quarter, at an annual rate of
0.60% of the first $500 million of average net assets, 0.50% of
the next $500 million, 0.45% of the next $500 million and 0.40%
of any amount over $1.5 billion. For its 1991 ,
1992 and 1993 fiscal years, pursuant to the Management
Contract (and a management contract in effect prior to July 11,
1991 under which the management fee payable to Putnam
Management was paid at the rate of 0.60% of the first $100
million of average net assets, 0.50% of the next $100 million,
0.40% of the next $300 million, 0.35% of the next $2.0
billion and 0.325% of any amount over $2.5 billion), the
Income Fund incurred fees of $6,662,019 ,
$8,946,558 and $10,741,863 , respectively.
BROKERAGE COMMISSIONS
Most purchases and sales of portfolio investments are with
underwriters of or dealers in New York Tax Exempt Securities and
other tax-exempt securities, acting as principal. Accordingly,
the Income Fund will not ordinarily pay significant brokerage
commissions. During fiscal 1991, the Income Fund incurred no
brokerage commissions on agency transactions. During fiscal
1992 and 1993 , the Income Fund incurred
$67,325 and $589,005 in brokerage commissions on
agency transactions. In fiscal 1991 , 1992 and
1993 , the Income Fund incurred underwriting commissions
aggregating $3,163,949 , $2,068,111 and
$3,193,325 , respectively, on underwritten transactions. In
fiscal 1993 , Putnam Management, on behalf of the Income
Fund, placed agency and underwritten transactions having an
approximate aggregate dollar value of $65,563,305 (13.36%
of the Income Fund's agency and underwritten transactions, on
which approximately $505,438 of commissions were paid)
with brokers and dealers to recognize research,
statistical and quotation services Putnam Management considered
to be particularly useful to it and its affiliates.
ADMINISTRATIVE EXPENSE REIMBURSEMENT
The Income Fund reimbursed Putnam Management $38,655
for administrative services in fiscal 1993, including
$34,396 for the compensation of certain officers of the
Income Fund and their staff and contributions to the
Putnam Investments, Inc. Profit Sharing Retirement
Plan for their benefit.
TRUSTEE FEES
Each Trustee of the Income Fund receives an annual fee of
$3,080 and an additional fee for each Trustees' meeting
attended. Trustees who are not interested persons of Putnam
Management and who serve on committees of the Trustees receive
additional fees for attendance at certain committee meetings.
The Income Fund incurred Trustees' fees aggregating
$47,740 in fiscal 1993 .
OWNERSHIP OF INCOME FUND SHARES
At December 31, 1993 , the officers and Trustees of
the Income Fund as a group owned less than 1% of the outstanding
shares of either class of the Income Fund, and to the knowledge
of the Income Fund no person owned of record or beneficially 5%
or more of the shares of either class of the Income Fund,
except that Merrill Lynch, Pierce, Fenner & Smith, Inc., 4000
Deer Lake Drive E., Jacksonville, FL 32246-6484 , owned of
record 12.6% of the Class A shares and owned
6.8% of the Class B shares .
CLASS A SALES CHARGES , CONTINGENT DEFERRED SALES CHARGES
AND
12B-1 FEES
During fiscal 1991 , 1992 and 1993 ,
Putnam Mutual Funds received $10,093,261 ,
$12,369,841 and $11,303,898 , respectively, in sales
charges on sales of Class A shares of the Income Fund, of which
it retained $625,524 , $800,342 and
$634,632 , respectively, after allowance of dealer
concessions. During fiscal 1991, Putnam Mutual Funds did
not receive any contingent deferred sales charges upon
redemptions of Class A shares. During fiscal 1992 and
1993 , Putnam Mutual Funds received $3,853 and $4,188,
respectively, in contingent deferred sales charges
upon redemptions of Class A shares of the Income Fund.
During fiscal 1993, the Fund incurred $4,027,835 in 12b-1 fees
to Putnam Mutual Funds pursuant to the Fund's Class A
Distribution Plan.
CLASS B CONTINGENT DEFERRED SALES CHARGES AND 12B-1 FEES
During fiscal 1993, Putnam Mutual Funds received $152,891
in contingent deferred sales charges upon redemptions of Class B
shares of the Fund. During fiscal 1993, the Fund incurred
$601,037 in 12b-1 fees to Putnam Mutual Funds pursuant to the
Fund's Class B Distribution Plan .
INVESTOR SERVICING AND CUSTODY FEES AND EXPENSES
During the 1993 fiscal year, the Income Fund
incurred $1,680,720 in fees and out-of-pocket expenses
for investor servicing and custody services provided by Putnam
Fiduciary Trust Company.
THE MONEY MARKET FUND
MANAGEMENT FEES
Under a Management Contract dated July 9, 1992, the Money
Market Fund pays a quarterly fee to Putnam Management based on
the average net assets of the Fund, as determined at the close of
each business day during the quarter, at an annual rate of 0.45%
of the first $500 million of average net assets, 0.35% of the
next $500 million, 0.30% of the next $500 million and 0.25% of
any amount over $1.5 billion. For its 1991 , 1992
and 1993 fiscal years, pursuant to the Management Contract
(and a management contract in effect prior to July 9, 1992 under
which the fee payable to Putnam Management was paid at the rate
of 0.55% of average net assets), the Money Market Fund incurred
fees of $142,572 , $167,369 and $241,921 ,
respectively (reflecting a reduction during fiscal 1991
and 1992 of $221,992 and $151,327, respectively, pursuant
to an expense limitation then in effect).
BROKERAGE COMMISSIONS
It is anticipated that most purchases and sales of
portfolio investments will be with the issuer or with major
dealers in New York tax-exempt money market instruments acting as
principal. Accordingly, it is not anticipated that the Money
Market Fund will pay significant brokerage commissions. The
Money Market Fund incurred no brokerage commissions on agency
transactions in fiscal 1991 , 1992 and
1993 . In underwritten offerings, the price paid by the Money
Market Fund includes a disclosed, fixed commission or discount
retained by the underwriter. There is generally no stated
commission in the case of securities purchased from or sold to
dealers, but the prices of such securities usually include an
undisclosed dealer's mark-up or mark-down. The Money Market Fund
incurred no underwriting commissions on underwritten transactions
in fiscal 1991 , 1992 and 1993 .
ADMINISTRATIVE EXPENSE REIMBURSEMENT
The Money Market Fund reimbursed Putnam Management
$3,851 for administrative services in fiscal 1993,
including $3,427 for the compensation of certain officers
of the Fund and their staff and contributions to the
Putnam Investments, Inc. Profit Sharing Retirement
Plan for their benefit.
QUALIFICATION AND REGISTRATION FEES
The Money Market Fund pays all fees for its qualification
or registration as an issuer or broker-dealer or for registration
of its shares in states in connection with such qualifications or
registrations.
TRUSTEE FEES
Each Trustee of the Money Market Fund receives an annual
fee of $410 and an additional fee for each Trustees'
meeting attended. Trustees who are not interested persons of
Putnam Management and who serve on committees of the Trustees
receive additional fees for attendance at certain committee
meetings. The Money Market Fund incurred Trustees' fees
aggregating $5,415 in fiscal 1993 .
OWNERSHIP OF MONEY MARKET FUND SHARES
At December 31, 1993 the officers and Trustees of
the Money Market Fund as a group owned 551,708 (1.03%) of
the outstanding shares of the Money Market Fund, and to the
knowledge of the Money Market Fund no person owned of record or
beneficially 5% or more of the shares of the Money Market Fund.
SALES CHARGES AND 12B-1 FEES
Shares are distributed directly by the Money Market Fund
through Putnam Mutual Funds, which acts as principal underwriter
for the Money Market Fund. During fiscal 1991 Putnam Mutual
Funds did not receive any contingent deferred sales charges upon
redemptions of shares of the Money Market Fund . During
fiscal 1992 and 1993, Putnam Mutual Funds received $847 and $824,
respectively, in contingent deferred sales charges upon
redemptions of shares of the Money Market Fund. During fiscal
1993 the Money Market Fund incurred $56,108 in 12b-1 fees to
Putnam Mutual Funds pursuant to the Fund's Distribution Plan.
INVESTOR SERVICING AND CUSTODY FEES AND EXPENSES
During the 1993 fiscal year, the Money Market Fund
incurred $122,345 in fees and out-of-pocket expenses for
investor servicing and custody services provided by Putnam
Fiduciary Trust Company.
AMORTIZED COST VALUATION AND DAILY DIVIDENDS (THE MONEY MARKET
FUND)
The valuation of the Money Market Fund's portfolio
instruments at amortized cost is permitted in accordance with
Securities and Exchange Commission Rule 2a-7 and certain
procedures adopted by the Trustees. The amortized cost of an
instrument is determined by valuing it at cost originally and
thereafter amortizing any discount or premium from its face value
at a constant rate until maturity, regardless of the effect of
fluctuating interest rates on the market value of the instrument.
Although the amortized cost method provides certainty in
valuation, it may result at times in determinations of value that
are higher or lower than the price the Money Market Fund would
receive if the instruments were sold. Consequently, in the
absence of circumstances described below, changes in the market
value of portfolio instruments during periods of rising or
falling interest rates will not be reflected either in the
computation of net asset value of the Money Market Fund's
portfolio or in the daily computation of net income. Under the
procedures adopted by the Trustees, the Money Market Fund must
maintain a dollar-weighted average portfolio maturity of 90 days
or less, purchase only instruments having remaining maturities of
397 days or less from the time of investment and invest in
securities determined by the Trustees to be of high quality with
minimal credit risks. The Trustees have also established
procedures designed to stabilize, to the extent reasonably
possible, the Money Market Fund's price per share as computed for
the purpose of distribution, redemption and repurchase at $1.00.
Such procedures will include review of the Money Market Fund's
portfolio holdings by the Trustees, at such intervals as they may
deem appropriate, to determine whether the Money Market Fund's
net asset value calculated by using readily available market
quotations deviates from $1.00 per share, and, if so, whether
such deviation may result in material dilution or is otherwise
unfair to existing shareholders. In the event the Trustees
determine that such a deviation exists, they will take such
corrective action as they regard as necessary and appropriate,
including the sale of portfolio instruments prior to maturity to
realize capital gains or losses or to shorten average portfolio
maturity; withholding dividends; redemption of shares in kind; or
establishing a net asset value per share by using readily
available market quotations.
Since the net income of the Money Market Fund is declared
as a dividend each time it is determined, the net asset value per
share of the Money Market Fund normally remains at $1.00 per
share immediately after such determination and dividend
declaration. Any increase in the value of a shareholder's
investment in the Money Market Fund representing the reinvestment
of dividend income is reflected by an increase in the number of
shares of the Money Market Fund in the shareholder's account on
the tenth day of the next month (or, if that day is not a
business day, on the next business day). It is expected that the
Money Market Fund's net income will be positive each time it is
determined. However, if because an unexecuted liability must be
accrued or a loss realized or for any other reason the net income
of the Money Market Fund determined at any time is a negative
amount, each shareholder's pro rata share of such negative amount
will constitute a liability of the shareholder to the Money
Market Fund. Any such liability will be paid at such times and
in such manner as the Trustees may determine by reducing the
amount of such shareholder's accrued dividend account, by
reducing the number of shares in a shareholder's account, or
otherwise.
<PAGE>
INVESTMENT PERFORMANCE OF THE FUNDS
STANDARD PERFORMANCE MEASURES
THE INCOME FUND
The tax-exempt yield for the thirty-day period
ended November 30, 1993 for Class A shares was 4.73% . A
Class A shareholder in a 46.88% combined federal/New York
State/New York City tax bracket would have to earn 8.90%
from a taxable investment to produce an after-tax yield equal to
the tax-exempt yield of 4.73% . The average annual total
return (compounded annually) for Class A shares for the one-
, five- and ten- year periods ended November 30,
1993 was 6.67%, 8.92%, and 10.57%, respectively. The tax-
exempt yield for the thirty-day period ended November 30, 1993
for Class B shares was 4.29%. A Class B shareholder in a 46.88%
combined federal/New York State/New York City tax bracket would
have to earn 8.08% from a taxable investment to produce an after-
tax yield equal to the tax-exempt yield of 4.29%. The cumulative
total return for Class B shares since inception through the
period ended November 30, 1993 was 4.25% . See "Standard
Performance Measures" in Part II of this Statement for
information on how the Income Fund's tax-exempt yield, total
return and tax-equivalent yield are calculated.
THE MONEY MARKET FUND
Based on the seven-day period ended November 30,
1993 , the Money Market Fund's tax-exempt yield was
1.63% , and its tax-exempt effective yield was
1.66% . A shareholder in a 46.88% combined
federal/New York State/New York City tax bracket would have to
earn 3.07% from a taxable investment to produce an after-
tax yield equal to the Money Market Fund's tax-exempt yield of
1.63% and an effective yield of 3.12% from a
taxable investment to produce an after-tax yield equal to the
Money Market Fund's tax-exempt effective yield of 1.66% .
See "Standard Performance Measures" in Part II of this Statement
for information on how the Money Market Fund's tax-exempt
yield and tax-exempt effective yield are calculated.
PERFORMANCE RATINGS
THE INCOME FUND
For the 1993 fiscal year, the Class A shares of the
Income Fund were ranked 29 of 53 New York State
municipal bond funds by Lipper Analytical Services, Inc. and
105 of 464 municipal single state funds by
CDA/Wiesenberger's Management Results. As of the end of
the fiscal year, Class A shares were given a 2 -
star rating (out of 5 stars) by Morningstar, Inc. For the
1993 fiscal year, the Class B shares of the Income Fund were not
ranked or rated. See "Comparison of Portfolio Performance"
in Part II of this Statement for information about how these
rankings are determined. Past performance is no guarantee of
future results.
THE MONEY MARKET FUND
For the 1993 fiscal year, the Money Market Fund was ranked
28 of 39 New York tax exempt money market funds by Lipper
Analytical Services, Inc. See "Comparison of Portfolio
Performance" in Part II of this Statement for information about
how this ranking is determined. Past performance is no guarantee
of future results.
OTHER PERFORMANCE INFORMATION
The tables below show total return (capital changes plus
reinvestment of all distributions) on a hypothetical investment
in one share of each Fund during the life of that Fund. This was
a period of fluctuating tax-exempt bond prices. The tables do
not project the future performance of the Funds.
<PAGE>
<TABLE>
<CAPTION>
PUTNAM NEW YORK TAX EXEMPT INCOME FUND
CLASS A SHARES
CUMULATIVE
MAXIMUM NET ASSET DISTRIBUTIONS NET ASSET VALUE
OFFERING VALUE ------------------- AT YEAR-
END
FISCAL PRICE AT ----------------- FROM FROM WITH
ALL
YEAR BEGINNING BEGINNING END OF INVESTMENT CAPITAL
DISTRIBUTIONS
ENDED OF YEAR OF YEAR YEAR INCOME GAINS
REINVESTED
- ------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
11/30/83(1) $7.51 $7.15 $7.11 $0.138 --- $7.25
11/30/84 7.46 7.11 7.10 0.650 $0.005 7.93
9/30/85 7.45 7.10 7.57 0.553 --- 9.10
9/30/86 7.95 7.57 8.56 0.656 --- 11.14
9/30/87 8.99 8.56 7.76 0.608 0.070 10.94
11/30/87 8.15 7.76 7.99 0.103 --- 11.42
11/30/88 8.39 7.99 8.33 0.600 0.062 12.90
11/30/89 8.75 8.33 8.61 0.591 --- 14.29
11/30/90 9.04 8.61 8.34 0.568 0.057 14.91
11/30/91 8.76 8.34 8.75 0.591 --- 16.77
11/30/92 9.19 8.75 8.98 0.580 0.083 18.55
11/30/93 9.43 8.98 9.38 0.527 0.121 20.78
------- --------
Total distributions $6.165 $0.398
(1) Investment operations began September 2, 1983.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE CHANGES DURING LIFE OF FUND (CLASS A SHARES)
PUTNAM NEW YORK TAX EXEMPT INCOME FUND
--------------------------------------
MAXIMUM OFFERING NET ASSET VALUE LEHMAN
PRICE TO NET TO NET BROTHERS MUNICIPAL CONSUMER
ASSET VALUE ASSET VALUE BOND INDEX PRICE INDEX
FISCAL ---------------- -------------- ------------- ------------
YEAR CUMULA- CUMULA- CUMULA- CUMULA-
ENDED ANNUAL TIVE ANNUAL TIVE ANNUAL TIVE ANNUAL TIVE
- ---------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C>
11/30/83 (1) --- -3.4% --- +1.4% --- +2.1% --- +1.0%
11/30/84 +4.3% +5.8 +9.5% +11.0 +8.7% +10.9 +4.1%+5.1
9/30/85 +9.3 +21.4 +14.7 +27.4 +13.1 +25.5 +2.9 +8.1
9/30/86 +16.6 +48.5 +22.4 +55.9 +24.7 +56.4 +1.8+10.0
9/30/87- 6.5 +45.9 -1.8 +53.2 +0.5 +57.2 +4.4 +14.8
11/30/87 -0.7 +52.2 +4.3 +59.8 +3.0 +61.9 +0.4 +15.2
11/30/88 +7.6 +72.0 +13.0 +80.5 +10.6 +79.1 +4.3 +20.1
11/30/89 +5.5 +90.5 +10.8 +100.0 +11.0 +98.8 +4.7+25.7
11/30/90 -0.6 +98.8 +4.4 +108.7 +7.7 +114.1 +6.3 +33.5
11/30/91 +7.1 +123.6 +12.4 +134.7 +10.3 +136.1 +3.0 +37.5
11/30/92 +5.3 +147.3 +10.6 +159.6 +10.0 +159.8 +3.1 +41.7
11/30/93 +6.7 +177.0 +12.0 +190.8 +11.1 +188.6 +2.7+45.5
(1) Investment operations began September 2, 1983.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PUTNAM NEW YORK TAX EXEMPT INCOME FUND
CLASS B SHARES
CUMULATIVE
NET ASSET DISTRIBUTIONS NET ASSET VALUE
VALUE ------------------- AT YEAR-END
FISCAL ----------------- FROM FROM WITH ALL
YEAR BEGINNING END OF INVESTMENT CAPITAL DISTRIBUTIONS
ENDED OF YEAR YEAR INCOME GAINSREINVESTED
- ----------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
11/30/93(1) $8.95 $9.37 $ 0.399 $ --- $ 9.78
---- --- -------
Total distributions $ 0.399 $ ---
(1) Class B shares were offered beginning January 4, 1993.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE CHANGES SINCE COMMENCEMENT OF THE PUBLIC OFFERING OF CLASS B SHARES
PUTNAM NEW YORK TAX EXEMPT
INCOME FUND
-------------------------- LEHMAN
NET ASSET VALUE BROTHERS
TO NET MUNICIPAL CONSUMER
FISCAL ASSET VALUE BOND INDEX PRICE INDEX
YEAR CUMULA- CUMULA- CUMULA-
ENDED ANNUAL TIVE ANNUAL TIVE ANNUAL TIVE
- -------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
11/30/93 (1)--- +9.3% --- +10.0% --- +2.8%
(1) Class B shares were offered beginning January 4, 1993.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PUTNAM NEW YORK TAX EXEMPT MONEY MARKET FUND
PUTNAM
NEW YORK CUMULATIVE
TAX EXEMPT DISTRIBUTIONS NET ASSET VALUE
MONEY MARKE -------------------- AT YEAR-END CONSUMER
FUND FROM NET FROM WITH ALL PRICE INDEX
PERIOD CUMULA- INVESTMENT CAPITAL DISTRIBUTIONS
CUMULA-
ENDED ANNUAL TIVE INCOME GAINS REINVESTED ANNUAL TIVE
- --------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
11/30/87(1) --- +0.41% $0.00410 --- $1.00 --- +0.1%
11/30/88 +4.46% +4.89 0.04369 --- 1.05 +4.3% +4.3
11/30/89 +5.44 +10.60 0.05305 --- 1.11 +4.7 +9.2
11/30/90 +5.09 +16.23 0.04975 --- 1.16 +6.3 +16.0
11/30/91 +4.07 +20.96 0.03992 --- 1.21 +3.0 +19.5
11/30/92 +2.61 +24.12 0.02583 --- 1.24 +3.1 +23.2
11/30/93 +1.67 +26.20 0.01664 $.001 1.26 +2.7 +26.5
-------- -----
Total distributions $0.23288 $.001
(1) Investment operations began October 26, 1987.
/TABLE
<PAGE>
The tables are not adjusted for any taxes payable on
reinvested distributions. The total values for the Funds as of
the end of each period reflect reinvestment of all distributions
and all changes in net asset value.
The Lehman Brothers Municipal Bond Index is an unmanaged
list of approximately 20,000 investment-grade, fixed-rate, tax-
exempt bonds. The average quality of bonds held in the index may
differ from the average quality of those bonds in which the Fund
invests. The index does not include bonds in certain of the
lower-rating classifications in which the Fund may invest. The
performance figures for the index reflect changes of market
prices and reinvestment of all interest payments. Because the
Income Fund is a managed portfolio investing primarily in New
York Tax Exempt Securities, the tax-exempt securities it owns
will not match those in the index.
The Consumer Price Index, prepared by the U.S. Bureau of
Labor Statistics, is a commonly used measure of the rate of
inflation. The index shows the average change in the cost of
selected consumer goods and services and does not represent a
return on an investment vehicle.
<PAGE>
<TABLE>
<CAPTION>
EQUIVALENT YIELDS: TAX-EXEMPT VERSUS TAXABLE SECURITIES
The tables below show the effect of the tax status of New York Tax Exempt Securities on the effective yield received by
their individual holders, in the case of table 1, under the federal income tax and New York State personal income tax
laws currently in effect for 1994 and, in the case of table 2, under the federal, New York State and New York City
personal income tax laws currently in effect for 1994. The tables give the approximate yield a taxable security must
earn at various income levels to produce after-tax yields equivalent to those of New York Tax Exempt Securities yielding
from 3.0% to 8.0%.
- ------------------------------------------------------------------------------------------------------------------------
TAXABLE INCOME* 1994 COMBINED NEW YORK TAX-EXEMPT YIELD OF
------------------------ NEW YORK STATE-------------------------------------------
AND FEDERAL
SINGLE JOINT TAX RATE ** 3.0% 4.0% 5.0% 6.0% 7.0% 8.0%
- ------------------------------------------------------------------------------------------------------------------------
EQUIVALENT TAXABLE YIELD IF DOUBLE TAX-EXEMPT
<C> <C> <C> <C> <C> <C> <C> <C> <C>
0 - $6,500 0 - 13,000 18.87% 3.70% 4.93% 6.16% 7.40% 8.63% 9.86%
6,501 - 9,500 13,001 - 19,000 19.72% 3.74% 4.98% 6.23% 7.47% 8.72% 9.96%
9,501 - 12,500 19,001 - 25,000 20.57% 3.78% 5.04% 6.29% 7.55% 8.81% 10.07%
12,501 - 22,750 25,001 - 38,000 21.45% 3.82% 5.09% 6.37% 7.64% 8.91% 10.19%
22,751 - 55,100 38,001 - 91,850 33.47% 4.51% 6.01% 7.52% 9.02% 10.52% 12.02%
55,101 - 115,000*** 91,851 - 140,000*** 36.24% 4.71% 6.27% 7.84% 9.41% 10.98% 12.55%
115,001 - 250,000*** 140,001 - 250,000*** 40.86% 5.07% 6.76% 8.45% 10.15% 11.84% 13.53%
over - 250,000*** over - 250,000*** 44.19% 5.38% 7.17% 8.96% 10.75% 12.54% 14.33%
/TABLE
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
TAXABLE INCOME* 1994 COMBINED NEW YORK TAX-EXEMPT YIELD OF
------------------------ NEW YORK STATE, ------------------------------------
CITY AND FEDERAL
SINGLE JOINT TAX RATE ** 3.0% 4.0% 5.0% 6.0% 7.0% 8.0%
- ------------------------------------------------------------------------------------------------------------------------
EQUIVALENT TAXABLE YIELD IF TRIPLE TAX-EXEMPT
<C> <C> <C> <C> <C> <C> <C> <C> <C>
0 - $6,500 0 - 13,000 21.05% 3.80% 5.07% 6.33% 7.60% 8.87% 10.13%
6,501 - 8,000 13,001 - 14,400 21.90% 3.84% 5.12% 6.40% 7.68% 8.96% 10.24%
8,001 - 8,400 22.48% 3.87% 5.16% 6.45% 7.74% 9.03% 10.32%
8,401 - 9,500 14,401 - 19,000 22.97% 3.89% 5.19% 6.49% 7.79% 9.09% 10.39%
9,501 - 12,500 19,001 - 25,000 23.82% 3.94% 5.25% 6.56% 7.88% 9.19% 10.50%
12,501 - 15,000 25,001 - 27,000 24.71% 3.98% 5.31% 6.64% 7.97% 9.30% 10.63%
15,001 - 22,750 27,001 - 38,000 25.19% 4.01% 5.35% 6.68% 8.02% 9.36% 10.69%
22,751 - 25,000 38,001 - 45,000 36.63% 4.73% 6.31% 7.89% 9.47% 11.05% 12.62%
25,001 - 55,100 45,001 - 91,850 36.64% 4.73% 6.31% 7.89% 9.47% 11.05% 12.63%
55,101 - 60,000 91,851 - 108,000 39.28% 4.94% 6.59% 8.23% 9.88% 11.53% 13.17%
60,001 - 115,000*** 108,001 - 140,000*** 39.32% 4.94% 6.59% 8.24% 9.89% 11.54% 13.18%
115,001 - 250,000*** 140,001 - 250,000*** 43.71% 5.33% 7.11% 8.88% 10.66% 12.44% 14.21%
over 250,000*** over - 250,000*** 46.88% 5.65% 7.53% 9.41% 11.29% 13.18% 15.06%
/TABLE
<PAGE>
* This amount represents taxable income as defined in the
Internal Revenue Code of 1986, as amended (the "Code"). It
is assumed that the definition of taxable income
in the Code is the same as under the New York State
or City Personal Income Tax law; however , New
York State or City taxable income may differ due to
differences in exemptions, itemized deductions, and other
items.
** For federal tax purposes, these combined rates
reflect the marginal rates on taxable income
currently in effect for 1994 . These rates
include the effect of deducting state and , for
the second table, city taxes on your Federal
return. For New York purposes, these combined rates reflect
the expected New York State and New York City income
tax and surcharge rates for 1994.
*** The amount of taxable income in this bracket may be affected
by the phase-out of personal exemptions and the limitation
on itemized deductions , based upon adjusted gross income,
under the Code. A supplemental New York State tax also
applies to filers with adjusted gross income between
$100,000 and $150,000, which phases out the benefit of the
lower marginal brackets. This adjustment is not reflected
in the tables above.
Of course, there is no assurance that either Fund will
achieve any specific tax-exempt yield. While it is expected that
the Funds will invest principally in obligations which pay
interest exempt from federal income tax and New York State and
City personal income taxes, other income received by the Funds
may be taxable. The tables do not take into account any
state or local taxes payable on Fund distributions except for New
York State and City personal income taxes.
ADDITIONAL OFFICERS OF THE FUNDS
In addition to the persons listed as officers of the Funds
in Part II of this Statement, the following persons are also
officers of the Funds. Officers of Putnam Management hold the
same offices in Putnam Management's parent company,
Putnam Investments , Inc.
GARY N. COBURN, Vice President. Senior Managing Director
of Putnam Management . Director, Putnam
Investments, Inc. Vice President of certain of the Putnam funds.
JAMES E. ERICKSON, Vice President. Managing Director of
Putnam Management . Vice President of certain of
the Putnam funds.
<PAGE>
DAVID J. EURKUS, Vice President (Income Fund only).
Senior Vice President of Putnam Management . Vice
President of certain of the Putnam funds.
LINDSEY M. CALLEN, Vice President (Money Market Fund
only). Vice President of Putnam
Management . Vice President of certain of the Putnam
funds.
INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS
Coopers & Lybrand are the Funds' 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 each Fund's Annual Report
for the fiscal year ended November 30, 1993 , filed
electronically on February 7, 1994 for the Income Fund and
January 28, 1994 for the Money Market Fund (File nos. 811-3741
and 811-5335, respectively) , are incorporated by reference
into this Statement of Additional Information. The financial
highlights of each Fund included in the Prospectus and the
financial statements incorporated by reference into
the Prospectus and the Statement of Additional Information
have been so included and incorporated in reliance upon the
reports of the independent accountants, given on their authority
as experts in auditing and accounting .
<PAGE>
<PAGE>
TABLE OF CONTENTS
MISCELLANEOUS INVESTMENT PRACTICES. . . . . . . . . . . . . . . . II-1
TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .II-23
MANAGEMENT OF THE FUND. . . . . . . . . . . . . . . . . . . . . .II-28
DETERMINATION OF NET ASSET VALUE. . . . . . . . . . . . . . . . .II-37
HOW TO BUY SHARES . . . . . . . . . . . . . . . . . . . . . . . .II-39
DISTRIBUTION PLAN . . . . . . . . . . . . . . . . . . . . . . . .II-50
INVESTOR SERVICES . . . . . . . . . . . . . . . . . . . . . . . .II-51
SIGNATURE GUARANTEES. . . . . . . . . . . . . . . . . . . . . . .II-57
SUSPENSION OF REDEMPTIONS . . . . . . . . . . . . . . . . . . . .II-57
SHAREHOLDER LIABILITY . . . . . . . . . . . . . . . . . . . . . .II-58
STANDARD PERFORMANCE MEASURES . . . . . . . . . . . . . . . . . .II-58
COMPARISON OF PORTFOLIO PERFORMANCE . . . . . . . . . . . . . . .II-59
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . .II-64
<PAGE>
THE PUTNAM FUNDS
STATEMENT OF ADDITIONAL INFORMATION
PART II
The following information applies generally to your Fund
and to the other Putnam funds. In certain cases the discussion
applies to some but not all of the funds or their shareholders,
and you should refer to your Prospectus to determine whether the
matter is applicable to you or your Fund. You will also be
referred to Part I for certain information applicable to your
particular Fund. Shareholders who purchase shares at net asset
value through employer-sponsored defined contribution plans
should also consult their employer for information about the
extent to which the matters described below apply to them.
MISCELLANEOUS INVESTMENT PRACTICES
YOUR FUND'S PROSPECTUS STATES WHICH OF THE FOLLOWING
INVESTMENT PRACTICES ARE AVAILABLE TO YOUR FUND. THE FACT THAT
YOUR FUND IS AUTHORIZED TO ENGAGE IN A PARTICULAR PRACTICE DOES
NOT NECESSARILY MEAN THAT IT WILL ACTUALLY DO SO. YOU SHOULD
DISREGARD ANY PRACTICE DESCRIBED BELOW WHICH IS NOT MENTIONED IN
THE PROSPECTUS.
SHORT-TERM TRADING
In seeking the Fund's objective, Putnam Management will
buy or sell portfolio securities whenever Putnam Management
believes it appropriate to do so. In deciding whether to sell a
portfolio security, Putnam Management does not consider how long
the Fund has owned the security. From time to time the Fund will
buy securities intending to seek short-term trading profits. A
change in the securities held by the Fund is known as "portfolio
turnover" and generally involves some expense to the Fund. These
expenses may include brokerage commissions or dealer mark-ups and
other transaction costs on both the sale of securities and the
reinvestment of the proceeds in other securities. If sales of
portfolio securities cause the Fund to realize net short-term
capital gains, such gains will be taxable as ordinary income. As
a result of the Fund's investment policies, under certain market
conditions the Fund's portfolio turnover rate may be higher than
that of other mutual funds. Portfolio turnover rate for a fiscal
year is the ratio of the lesser of purchases or sales of
portfolio securities to the monthly average of the value of
portfolio securities -- excluding securities whose maturities at
acquisition were one year or less. The Fund's portfolio turnover
rate is not a limiting factor when Putnam Management considers a
change in the Fund's portfolio.
LOWER-RATED SECURITIES
The Fund may invest in lower-rated fixed-income securities
(commonly known as "junk bonds"), to the extent described in the
Prospectus. The lower ratings of certain securities held by the
Fund reflect a greater possibility that adverse changes in the
financial condition of the issuer or in general economic
conditions, or both, or an unanticipated rise in interest rates,
may impair the ability of the issuer to make payments of interest
and principal. The inability (or perceived inability) of issuers
to make timely payment of interest and principal would likely
make the values of securities held by the Fund more volatile and
could limit the Fund's ability to sell its securities at prices
approximating the values the Fund had placed on such securities.
In the absence of a liquid trading market for securities held by
it, the Fund may be unable at times to establish the fair value
of such securities. The rating assigned to a security by Moody's
Investors Service, Inc. or Standard & Poor's Corporation (or by
any other nationally recognized securities rating organization)
does not reflect an assessment of the volatility of the
security's market value or the liquidity of an investment in the
security. See the Prospectus or Part I of this Statement for a
description of security ratings.
Like those of other fixed-income securities, the values of
lower-rated securities fluctuate in response to changes in
interest rates. Thus, a decrease in interest rates will
generally result in an increase in the value of the Fund's
assets. Conversely, during periods of rising interest rates, the
value of the Fund's assets will generally decline. In addition,
the values of such securities are also affected by changes in
general economic conditions and business conditions affecting the
specific industries of their issuers. Changes by recognized
rating services in their ratings of any fixed-income security and
in the ability of an issuer to make payments of interest and
principal may also affect the value of these investments.
Changes in the value of portfolio securities generally will not
affect cash income derived from such securities, but will affect
the Fund's net asset value. The Fund will not necessarily
dispose of a security when its rating is reduced below its rating
at the time of purchase, although Putnam Management will monitor
the investment to determine whether its retention will assist in
meeting the Fund's investment objective.
At times, a substantial portion of the Fund's assets may
be invested in securities as to which the Fund, by itself or
together with other funds and accounts managed by Putnam
Management and its affiliates, holds a major portion or all of
such securities. Although Putnam Management generally considers
such securities to be liquid because of the availability of an
institutional market for such securities, it is possible that,
under adverse market or economic conditions or in the event of
adverse changes in the financial condition of the issuer, the
Fund could find it more difficult to sell such securities when
Putnam Management believes it advisable to do so or may be able
to sell such securities only at prices lower than if such
securities were more widely held. Under such circumstances, it
may also be more difficult to determine the fair value of such
securities for purposes of computing the Fund's net asset value.
In order to enforce its rights in the event of a default under
such securities, the Fund may be required to take possession of
and manage assets securing the issuer's obligations on such
securities, which may increase the Fund's operating expenses and
adversely affect the Fund's net asset value. In the case of
tax-exempt funds, any income derived from the Fund's ownership or
operation of such assets would not be tax-exempt. In addition,
the Fund's intention to qualify as a "regulated investment
company" under the Internal Revenue Code may limit the extent to
which the Fund may exercise its rights by taking possession of
such assets.
Certain securities held by the Fund may permit the issuer
at its option to "call", or redeem, its securities. If an issuer
were to redeem securities held by the Fund during a time of
declining interest rates, the Fund may not be able to reinvest
the proceeds in securities providing the same investment return
as the securities redeemed.
If the Fund's Prospectus describes so-called "zero-coupon"
bonds and "payment-in-kind" bonds as possible investments, the
Fund may invest without limit in such bonds unless otherwise
specified in the Prospectus. Zero-coupon bonds are issued at a
significant discount from their principal amount in lieu of
paying interest periodically. Payment-in-kind bonds allow the
issuer, at its option, to make current interest payments on the
bonds either in cash or in additional bonds. Because zero-coupon
bonds do not pay current interest, their value is subject to
greater fluctuation in response to changes in market interest
rates than bonds which pay interest currently. Both zero-coupon
and payment-in-kind bonds allow an issuer to avoid the need to
generate cash to meet current interest payments. Accordingly,
such bonds may involve greater credit risks than bonds paying
interest currently. Even though such bonds do not pay current
interest in cash, the Fund is nonetheless required to accrue
interest income on such investments and to distribute such
amounts at least annually to shareholders. Thus, the Fund could
be required at times to liquidate investments in order to satisfy
its dividend requirements.
The amount of information about the financial condition of
an issuer of tax exempt securities may not be as extensive as
that which is made available by corporations whose securities are
publicly traded. Therefore, to the extent the Fund invests in
tax exempt securities in the lower rating categories, the
achievement of the Fund's goals is more dependent on Putnam
Management's investment analysis than would be the case if the
Fund were investing in securities in the higher rating
categories.
SECURITIES LOANS
The Fund may make secured loans of its portfolio
securities, on either a short-term or long-term basis, amounting
to not more than 25% of its total assets, thereby realizing
additional income. The risks in lending portfolio securities, as
with other extensions of credit, consist of possible delay in
recovery of the securities or possible loss of rights in the
collateral should the borrower fail financially. As a matter of
policy, securities loans are made to broker-dealers pursuant to
agreements requiring that loans be continuously secured by
collateral consisting of cash or short-term debt obligations at
least equal at all times to the value of the securities on loan,
"marked-to-market" daily. The borrower pays to the Fund an
amount equal to any dividends or interest received on securities
lent. The Fund retains all or a portion of the interest received
on investment of the cash collateral or receives a fee from the
borrower. Although voting rights, or rights to consent, with
respect to the loaned securities pass to the borrower, the Fund
retains the right to call the loans at any time on reasonable
notice, and it will do so to enable the Fund to exercise voting
rights on any matters materially affecting the investment. The
Fund may also call such loans in order to sell the securities.
FORWARD COMMITMENTS
The Fund may enter into contracts to purchase securities
for a fixed price at a future date beyond customary settlement
time ("forward commitments") if the Fund holds, and maintains
until the settlement date in a segregated account, cash or
high-grade debt obligations in an amount sufficient to meet the
purchase price, or if the Fund enters into offsetting contracts
for the forward sale of other securities it owns. In the case of
to-be-announced ("TBA") purchase commitments, the unit price and
the estimated principal amount are established when the Fund
enters into a contract, with the actual principal amount being
within a specified range of the estimate. Forward commitments
may be considered securities in themselves, and involve a risk of
loss if the value of the security to be purchased declines prior
to the settlement date, which risk is in addition to the risk of
decline in the value of the Fund's other assets. Where such
purchases are made through dealers, the Fund relies on the dealer
to consummate the sale. The dealer's failure to do so may result
in the loss to the Fund of an advantageous yield or price.
Although the Fund will generally enter into forward commitments
with the intention of acquiring securities for its portfolio or
for delivery pursuant to options contracts it has entered into,
the Fund may dispose of a commitment prior to settlement if
Putnam Management deems it appropriate to do so. The Fund may
realize short-term profits or losses upon the sale of forward
commitments.
The Fund may enter into TBA sale commitments to hedge its
portfolio positions or to sell mortgage-backed securities it owns
under delayed delivery arrangements. Proceeds of TBA sale
commitments are not received until the contractual settlement
date. During the time a TBA sale commitment is outstanding,
equivalent deliverable securities, or an offsetting TBA purchase
commitment deliverable on or before the sale commitment date, are
held as "cover" for the transaction. Unsettled TBA sale
commitments are valued at current market value of the underlying
securities. If the TBA sale commitment is closed through the
acquisition of an offsetting purchase commitment, the Fund
realizes a gain or loss on the commitment without regard to any
unrealized gain or loss on the underlying security. If the Fund
delivers securities under the commitment, the Fund realizes a
gain or loss from the sale of the securities based upon the unit
price established at the date the commitment was entered into.
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements up to the
limit specified in the Prospectus. A repurchase agreement is a
contract under which the Fund acquires a security for a
relatively short period (usually not more than one week) subject
to the obligation of the seller to repurchase and the Fund to
resell such security at a fixed time and price (representing the
Fund's cost plus interest). It is the Fund's present intention
to enter into repurchase agreements only with commercial banks
and registered broker-dealers and only with respect to
obligations of the U.S. government or its agencies or
instrumentalities. Repurchase agreements may also be viewed as
loans made by the Fund which are collateralized by the securities
subject to repurchase. Putnam Management will monitor such
transactions to ensure that the value of the underlying
securities will be at least equal at all times to the total
amount of the repurchase obligation, including the interest
factor. If the seller defaults, the Fund could realize a loss on
the sale of the underlying security to the extent that the
proceeds of sale including accrued interest are less than the
resale price provided in the agreement including interest. In
addition, if the seller should be involved in bankruptcy or
insolvency proceedings, the Fund may incur delay and costs in
selling the underlying security or may suffer a loss of principal
and interest if the Fund is treated as an unsecured creditor and
required to return the underlying collateral to the seller's
estate.
Pursuant to an exemptive order issued by the Securities
and Exchange Commission, the Fund may transfer uninvested cash
balances into a joint account, along with cash of other Putnam
funds and certain other accounts. These balances may be invested
in one or more repurchase agreements and/or short-term money
market instruments.
OPTIONS ON SECURITIES
WRITING COVERED OPTIONS. The Fund may write covered call
options and covered put options on optionable securities held in
its portfolio, when in the opinion of Putnam Management such
transactions are consistent with the Fund's investment objectives
and policies. Call options written by the Fund give the
purchaser the right to buy the underlying securities from the
Fund at a stated exercise price; put options give the purchaser
the right to sell the underlying securities to the Fund at a
stated price.
The Fund may write only covered options, which means that,
so long as the Fund is obligated as the writer of a call option,
it will own the underlying securities subject to the option (or
comparable securities satisfying the cover requirements of
securities exchanges). In the case of put options, the Fund will
hold cash and/or high-grade short-term debt obligations equal to
the price to be paid if the option is exercised. In addition,
the Fund will be considered to have covered a put or call option
if and to the extent that it holds an option that offsets some or
all of the risk of the option it has written. The Fund may write
combinations of covered puts and calls on the same underlying
security.
The Fund will receive a premium from writing a put or call
option, which increases the Fund's return on the underlying
security in the event the option expires unexercised or is closed
out at a profit. The amount of the premium reflects, among other
things, the relationship between the exercise price and the
current market value of the underlying security, the volatility
of the underlying security, the amount of time remaining until
expiration, current interest rates, and the effect of supply and
demand in the options market and in the market for the underlying
security. By writing a call option, the Fund limits its
opportunity to profit from any increase in the market value of
the underlying security above the exercise price of the option
but continues to bear the risk of a decline in the value of the
underlying security. By writing a put option, the Fund assumes
the risk that it may be required to purchase the underlying
security for an exercise price higher than its then-current
market value, resulting in a potential capital loss unless the
security subsequently appreciates in value.
The Fund may terminate an option that it has written prior
to its expiration by entering into a closing purchase
transaction, in which it purchases an offsetting option. The
Fund realizes a profit or loss from a closing transaction if the
cost of the transaction (option premium plus transaction costs)
is less or more than the premium received from writing the
option. Because increases in the market price of a call option
generally reflect increases in the market price of the security
underlying the option, any loss resulting from a closing purchase
transaction may be offset in whole or in part by unrealized
appreciation of the underlying security owned by the Fund.
If the Fund writes a call option but does not own the
underlying security, and when it writes a put option, the Fund
may be required to deposit cash or securities with its broker as
"margin", or collateral, for its obligation to buy or sell the
underlying security. As the value of the underlying security
varies, the Fund may have to deposit additional margin with the
broker. Margin requirements are complex and are fixed by
individual brokers, subject to minimum requirements currently
imposed by the Federal Reserve Board and by stock exchanges and
other self-regulatory organizations.
PURCHASING PUT OPTIONS. The Fund may purchase put options
to protect its portfolio holdings in an underlying security
against a decline in market value. Such protection is provided
during the life of the put option since the Fund, as holder of
the option, is able to sell the underlying security at the put
exercise price regardless of any decline in the underlying
security's market price. In order for a put option to be
profitable, the market price of the underlying security must
decline sufficiently below the exercise price to cover the
premium and transaction costs. By using put options in this
manner, the Fund will reduce any profit it might otherwise have
realized from appreciation of the underlying security by the
premium paid for the put option and by transaction costs.
PURCHASING CALL OPTIONS. The Fund may purchase call
options to hedge against an increase in the price of securities
that the Fund wants ultimately to buy. Such hedge protection is
provided during the life of the call option since the Fund, as
holder of the call option, is able to buy the underlying security
at the exercise price regardless of any increase in the
underlying security's market price. In order for a call option
to be profitable, the market price of the underlying security
must rise sufficiently above the exercise price to cover the
premium and transaction costs.
RISK FACTORS IN OPTIONS TRANSACTIONS
The successful use of the Fund's options strategies
depends on the ability of Putnam Management to forecast correctly
interest rate and market movements. For example, if the Fund
were to write a call option based on Putnam Management's
expectation that the price of the underlying security would fall,
but the price were to rise instead, the Fund could be required to
sell the security upon exercise at a price below the current
market price. Similarly, if the Fund were to write a put option
based on Putnam Management's expectation that the price of the
underlying security would rise, but the price were to fall
instead, the Fund could be required to purchase the security upon
exercise at a price higher than the current market price.
When the Fund purchases an option, it runs the risk that
it will lose its entire investment in the option in a relatively
short period of time, unless the Fund exercises the option or
enters into a closing sale transaction before the option's
expiration. If the price of the underlying security does not
rise (in the case of a call) or fall (in the case of a put) to an
extent sufficient to cover the option premium and transaction
costs, the Fund will lose part or all of its investment in the
option. This contrasts with an investment by the Fund in the
underlying security, since the Fund will not realize a loss if
the security's price does not change.
The effective use of options also depends on the Fund's
ability to terminate option positions at times when Putnam
Management deems it desirable to do so. There is no assurance
that the Fund will be able to effect closing transactions at any
particular time or at an acceptable price.
If a secondary market in options were to become
unavailable, the Fund could no longer engage in closing
transactions. Lack of investor interest might adversely affect
the liquidity of the market for particular options or series of
options. A market may discontinue trading of a particular option
or options generally. In addition, a market could become
temporarily unavailable if unusual events -- such as volume in
excess of trading or clearing capability -- were to interrupt its
normal operations.
A market may at times find it necessary to impose
restrictions on particular types of options transactions, such as
opening transactions. For example, if an underlying security
ceases to meet qualifications imposed by the market or the
Options Clearing Corporation, new series of options on that
security will no longer be opened to replace expiring series, and
opening transactions in existing series may be prohibited. If an
options market were to become unavailable, the Fund as a holder
of an option would be able to realize profits or limit losses
only by exercising the option, and the Fund, as option writer,
would remain obligated under the option until expiration or
exercise.
Disruptions in the markets for the securities underlying
options purchased or sold by the Fund could result in losses on
the options. If trading is interrupted in an underlying
security, the trading of options on that security is normally
halted as well. As a result, the Fund as purchaser or writer of
an option will be unable to close out its positions until options
trading resumes, and it may be faced with considerable losses if
trading in the security reopens at a substantially different
price. In addition, the Options Clearing Corporation or other
options markets may impose exercise restrictions. If a
prohibition on exercise is imposed at the time when trading in
the option has also been halted, the Fund as purchaser or writer
of an option will be locked into its position until one of the
two restrictions has been lifted. If the Options Clearing
Corporation were to determine that the available supply of an
underlying security appears insufficient to permit delivery by
the writers of all outstanding calls in the event of exercise, it
may prohibit indefinitely the exercise of put options. The Fund,
as holder of such a put option, could lose its entire investment
if the prohibition remained in effect until the put option's
expiration.
Special risks are presented by internationally-traded
options. Because of time differences between the United States
and various foreign countries, and because different holidays are
observed in different countries, foreign options markets may be
open for trading during hours or on days when U.S. markets are
closed. As a result, option premiums may not reflect the current
prices of the underlying interest in the United States.
OVER-THE-COUNTER OPTIONS
The Staff of the Division of Investment Management of the
Securities and Exchange Commission has taken the position that
over-the-counter ("OTC") options purchased by the Fund and assets
held to cover OTC options written by the Fund are illiquid
securities. Although the Staff has indicated that it is
continuing to evaluate this issue, pending further developments,
the Fund intends to enter into OTC options transactions only with
primary dealers in U.S. Government Securities and, in the case of
OTC options written by the Fund, only pursuant to agreements that
will assure that the Fund will at all times have the right to
repurchase the option written by it from the dealer at a
specified formula price. The Fund will treat the amount by which
such formula price exceeds the amount, if any, by which the
option may be "in-the-money" as an illiquid investment. It is
the present policy of the Fund not to enter into any OTC option
transaction if, as a result, more than 15% of the Fund's net
assets would be invested in (i) illiquid investments (determined
under the foregoing formula) relating to OTC options written by
the Fund, (ii) OTC options purchased by the Fund, (iii)
securities which are not readily marketable, and (iv) repurchase
agreements maturing in more than seven days.
FUTURES CONTRACTS AND RELATED OPTIONS
Subject to applicable law, and unless otherwise specified
in the Prospectus, the Fund may invest without limit in the types
of futures contracts and related options identified in the
Prospectus. A financial futures contract sale creates an
obligation by the seller to deliver the type of financial
instrument called for in the contract in a specified delivery
month for a stated price. A financial futures contract purchase
creates an obligation by the purchaser to take delivery of the
type of financial instrument called for in the contract in a
specified delivery month at a stated price. The specific
instruments delivered or taken, respectively, at settlement date
are not determined until on or near that date. The determination
is made in accordance with the rules of the exchange on which the
futures contract sale or purchase was made. Futures contracts
are traded in the United States only on commodity exchanges or
boards of trade -- known as "contract markets" -- approved for
such trading by the Commodity Futures Trading Commission (the
"CFTC"), and must be executed through a futures commission
merchant or brokerage firm which is a member of the relevant
contract market.
Although futures contracts by their terms call for actual
delivery or acceptance of commodities or securities, in most
cases the contracts are closed out before the settlement date
without the making or taking of delivery. Closing out a futures
contract sale is effected by purchasing a futures contract for
the same aggregate amount of the specific type of financial
instrument or commodity with the same delivery date. If the
price of the initial sale of the futures contract exceeds the
price of the offsetting purchase, the seller is paid the
difference and realizes a gain. Conversely, if the price of the
offsetting purchase exceeds the price of the initial sale, the
seller realizes a loss. Similarly, the closing out of a futures
contract purchase is effected by the purchaser's entering into a
futures contract sale. If the offsetting sale price exceeds the
purchase price, the purchaser realizes a gain, and if the
purchase price exceeds the offsetting sale price, he realizes a
loss. In general 40% of the gain or loss arising from the
closing out of a futures contract traded on an exchange approved
by the CFTC is treated as short-term gain or loss, and 60% is
treated as long-term gain or loss.
Unlike when the Fund purchases or sells a security, no
price is paid or received by the Fund upon the purchase or sale
of a futures contract. Upon entering into a contract, the Fund
is required to deposit with its custodian in a segregated account
in the name of the futures broker an amount of cash and/or U.S.
Government Securities. This amount is known as "initial margin."
The nature of initial margin in futures transactions is different
from that of margin in security transactions in that futures
contract margin does not involve the borrowing of funds to
finance the transactions. Rather, initial margin is similar to a
performance bond or good faith deposit which is returned to the
Fund upon termination of the futures contract, assuming all
contractual obligations have been satisfied. Futures contracts
also involve brokerage costs.
Subsequent payments, called "variation margin" or
"maintenance margin", to and from the broker (or the custodian)
are made on a daily basis as the price of the underlying security
or commodity fluctuates, making the long and short positions in
the futures contract more or less valuable, a process known as
"marking to the market." For example, when the Fund has
purchased a futures contract on a security and the price of the
underlying security has risen, that position will have increased
in value and the Fund will receive from the broker a variation
margin payment based on that increase in value. Conversely, when
the Fund has purchased a security futures contract and the price
of the underlying security has declined, the position would be
less valuable and the Fund would be required to make a variation
margin payment to the broker.
The Fund may elect to close some or all of its futures
positions at any time prior to their expiration in order to
reduce or eliminate a hedge position then currently held by the
Fund. The Fund may close its positions by taking opposite
positions which will operate to terminate the Fund's position in
the futures contracts. Final determinations of variation margin
are then made, additional cash is required to be paid by or
released to the Fund, and the Fund realizes a loss or a gain.
Such closing transactions involve additional commission costs.
OPTIONS ON FUTURES CONTRACTS. The Fund may purchase and
write call and put options on futures contracts it may buy or
sell and enter into closing transactions with respect to such
options to terminate existing positions. Options on future
contracts give the purchaser the right in return for the premium
paid to assume a position in a futures contract at the specified
option exercise price at any time during the period of the
option. The Fund may use options on futures contracts in lieu of
writing or buying options directly on the underlying securities
or purchasing and selling the underlying futures contracts. For
example, to hedge against a possible decrease in the value of its
portfolio securities, the Fund may purchase put options or write
call options on futures contracts rather than selling futures
contracts. Similarly, the Fund may purchase call options or
write put options on futures contracts as a substitute for the
purchase of futures contracts to hedge against a possible
increase in the price of securities which the Fund expects to
purchase. Such options generally operate in the same manner as
options purchased or written directly on the underlying
investments.
As with options on securities, the holder or writer of an
option may terminate his position by selling or purchasing an
offsetting option. There is no guarantee that such closing
transactions can be effected.
The Fund will be required to deposit initial margin and
maintenance margin with respect to put and call options on
futures contracts written by it pursuant to brokers' requirements
similar to those described above in connection with the
discussion of futures contracts.
RISKS OF TRANSACTIONS IN FUTURES CONTRACTS AND RELATED
OPTIONS. Successful use of futures contracts by the Fund is
subject to Putnam Management's ability to predict movements in
the direction of interest rates and other factors affecting
securities markets. For example, if the Fund has hedged against
the possibility of decline in the values of its investments and
the values of its investments increase instead, the Fund will
lose part or all of the benefit of the increase through payments
of daily maintenance margin. The Fund may have to sell
investments at a time when it may be disadvantageous to do so in
order to meet margin requirements.
Compared to the purchase or sale of futures contracts, the
purchase of call or put options on futures contracts involves
less potential risk to the Fund because the maximum amount at
risk is the premium paid for the options (plus transaction
costs). However, there may be circumstances when the purchase of
a call or put option on a futures contract would result in a loss
to the Fund when the purchase or sale of a futures contract would
not, such as when there is no movement in the prices of the
hedged investments. The writing of an option on a futures
contract involves risks similar to those risks relating to the
sale of futures contracts.
There is no assurance that higher than anticipated trading
activity or other unforeseen events might not, at times, render
certain market clearing facilities inadequate, and thereby result
in the institution by exchanges of special procedures which may
interfere with the timely execution of customer orders.
To reduce or eliminate a hedge position held by the Fund,
the Fund may seek to close out a position. The ability to
establish and close out positions will be subject to the
development and maintenance of a liquid secondary market. It is
not certain that this market will develop or continue to exist
for a particular futures contract or option. Reasons for the
absence of a liquid secondary market on an exchange include the
following: (i) there may be insufficient trading interest in
certain contracts or options; (ii) restrictions may be imposed by
an exchange on opening transactions or closing transactions or
both; (iii) trading halts, suspensions or other restrictions may
be imposed with respect to particular classes or series of
contracts or options, or underlying securities; (iv) unusual or
unforeseen circumstances may interrupt normal operations on an
exchange; (v) the facilities of an exchange or a clearing
corporation may not at all times be adequate to handle current
trading volume; or (vi) one or more exchanges could, for economic
or other reasons, decide or be compelled at some future date to
discontinue the trading of contracts or options (or a particular
class or series of contracts or options), in which event the
secondary market on that exchange for such contracts or options
(or in the class or series of contracts or options) would cease
to exist, although outstanding contracts or options on the
exchange that had been issued by a clearing corporation as a
result of trades on that exchange would continue to be
exercisable in accordance with their terms.
U.S. TREASURY SECURITY FUTURES CONTRACTS AND OPTIONS. If
the Fund invests in tax-exempt securities issued by a
governmental entity, the Fund may purchase and sell futures
contracts and related options on U.S. Treasury securities when,
in the opinion of Putnam Management, price movements in Treasury
security futures and related options will correlate closely with
price movements in the tax-exempt securities which are the
subject of the hedge. U.S. Treasury security futures contracts
require the seller to deliver, or the purchaser to take delivery
of, the type of U.S. Treasury security called for in the contract
at a specified date and price. Options on U.S. Treasury security
futures contracts give the purchaser the right in return for the
premium paid to assume a position in a U.S. Treasury security
futures contract at the specified option exercise price at any
time during the period of the option.
Successful use of U.S. Treasury security futures contracts
by the Fund is subject to Putnam Management's ability to predict
movements in the direction of interest rates and other factors
affecting markets for debt securities. For example, if the Fund
has sold U.S. Treasury security futures contracts in order to
hedge against the possibility of an increase in interest rates
which would adversely affect tax-exempt securities held in its
portfolio, and the prices of the Fund's tax-exempt securities
increase instead as a result of a decline in interest rates, the
Fund will lose part or all of the benefit of the increased value
of its securities which it has hedged because it will have
offsetting losses in its futures positions. In addition, in such
situations, if the Fund has insufficient cash, it may have to
sell securities to meet daily maintenance margin requirements at
a time when it may be disadvantageous to do so.
There is also a risk that price movements in U.S. Treasury
security futures contracts and related options will not correlate
closely with price movements in markets for tax-exempt
securities. For example, if the Fund has hedged against a
decline in the values of tax-exempt securities held by it by
selling Treasury security futures and the values of Treasury
securities subsequently increase while the values of its
tax-exempt securities decrease, the Fund would incur losses on
both the Treasury security futures contracts written by it and
the tax-exempt securities held in its portfolio. Putnam
Management will seek to reduce this risk by monitoring movements
in markets for U.S. Treasury security futures and options and for
tax-exempt securities closely. The Fund will only purchase or
sell Treasury security futures or related options when, in the
opinion of Putnam Management, price movements in Treasury
security futures and related options will correlate closely with
price movements in tax-exempt securities in which the Fund
invests.
INDEX FUTURES CONTRACTS. An index futures contract is a
contract to buy or sell units of an index at a specified future
date at a price agreed upon when the contract is made. Entering
into a contract to buy units of an index is commonly referred to
as buying or purchasing a contract or holding a long position in
the index. Entering into a contract to sell units of an index is
commonly referred to as selling a contract or holding a short
position. A unit is the current value of the index. The Fund
may enter into stock index futures contracts, debt index futures
contracts, or other index futures contracts appropriate to its
objective. The Fund may also purchase and sell options on index
futures contracts.
For example, the Standard & Poor's Composite 500 Stock
Price Index ("S&P 500") is composed of 500 selected common
stocks, most of which are listed on the New York Stock Exchange.
The S&P 500 assigns relative weightings to the common stocks
included in the Index, and the value fluctuates with changes in
the market values of those common stocks. In the case of the S&P
500, contracts are to buy or sell 500 units. Thus, if the value
of the S&P 500 were $150, one contract would be worth $75,000
(500 units x $150). The stock index futures contract specifies
that no delivery of the actual stocks making up the index will
take place. Instead, settlement in cash must occur upon the
termination of the contract, with the settlement being the
difference between the contract price and the actual level of the
stock index at the expiration of the contract. For example, if
the Fund enters into a futures contract to buy 500 units of the
S&P 500 at a specified future date at a contract price of $150
and the S&P 500 is at $154 on that future date, the Fund will
gain $2,000 (500 units x gain of $4). If the Fund enters into a
futures contract to sell 500 units of the stock index at a
specified future date at a contract price of $150 and the S&P 500
is at $152 on that future date, the Fund will lose $1,000 (500
units x loss of $2).
There are several risks in connection with the use by the
Fund of index futures as a hedging device. One risk arises
because of the imperfect correlation between movements in the
prices of the index futures and movements in the prices of
securities which are the subject of the hedge. Putnam Management
will, however, attempt to reduce this risk by buying or selling,
to the extent possible, futures on indices the movements of which
will, in its judgment, have a significant correlation with
movements in the prices of the securities sought to be hedged.
Successful use of index futures by the Fund for hedging
purposes is also subject to Putnam Management's ability to
predict movements in the direction of the market. It is possible
that, where the Fund has sold futures to hedge its portfolio
against a decline in the market, the index on which the futures
are written may advance and the value of securities held in the
Fund's portfolio may decline. If this occurred, the Fund would
lose money on the futures and also experience a decline in value
in its portfolio securities. It is also possible that, if the
Fund has hedged against the possibility of a decline in the
market adversely affecting securities held in its portfolio and
securities prices increase instead, the Fund will lose part or
all of the benefit of the increased value of those securities it
has hedged because it will have offsetting losses in its futures
positions. In addition, in such situations, if the Fund has
insufficient cash, it may have to sell securities to meet daily
variation margin requirements at a time when it is
disadvantageous to do so.
In addition to the possibility that there may be an
imperfect correlation, or no correlation at all, between
movements in the index futures and the portion of the portfolio
being hedged, the prices of index futures may not correlate
perfectly with movements in the underlying index due to certain
market distortions. First, all participants in the futures
market are subject to margin deposit and maintenance
requirements. Rather than meeting additional margin deposit
requirements, investors may close futures contracts through
offsetting transactions which could distort the normal
relationship between the index and futures markets. Second,
margin requirements in the futures market are less onerous than
margin requirements in the securities market, and as a result the
futures market may attract more speculators than the securities
market does. Increased participation by speculators in the
futures market may also cause temporary price distortions. Due
to the possibility of price distortions in the futures market and
also because of the imperfect correlation between movements in
the index and movements in the prices of index futures, even a
correct forecast of general market trends by Putnam Management
may still not result in a successful hedging transaction over a
short time period.
OPTIONS ON STOCK INDEX FUTURES. Options on index futures
are similar to options on securities except that options on index
futures give the purchaser the right, in return for the premium
paid, to assume a position in an index futures contract (a long
position if the option is a call and a short position if the
option is a put) at a specified exercise price at any time during
the period of the option. Upon exercise of the option, the
delivery of the futures position by the writer of the option to
the holder of the option will be accompanied by delivery of the
accumulated balance in the writer's futures margin account which
represents the amount by which the market price of the index
futures contract, at exercise, exceeds (in the case of a call) or
is less than (in the case of a put) the exercise price of the
option on the index future. If an option is exercised on the
last trading day prior to its expiration date, the settlement
will be made entirely in cash equal to the difference between the
exercise price of the option and the closing level of the index
on which the future is based on the expiration date. Purchasers
of options who fail to exercise their options prior to the
exercise date suffer a loss of the premium paid.
OPTIONS ON INDICES
As an alternative to purchasing call and put options on
index futures, the Fund may purchase and sell call and put
options on the underlying indices themselves. Such options would
be used in a manner identical to the use of options on index
futures.
INDEX WARRANTS
The Fund may purchase put warrants and call warrants whose
values vary depending on the change in the value of one or more
specified securities indices ("index warrants"). Index warrants
are generally issued by banks or other financial institutions and
give the holder the right, at any time during the term of the
warrant, to receive upon exercise of the warrant a cash payment
from the issuer based on the value of the underlying index at the
time of exercise. In general, if the value of the underlying
index rises above the exercise price of the index warrant, the
holder of a call warrant will be entitled to receive a cash
payment from the issuer upon exercise based on the difference
between the value of the index and the exercise price of the
warrant; if the value of the underlying index falls, the holder
of a put warrant will be entitled to receive a cash payment from
the issuer upon exercise based on the difference between the
exercise price of the warrant and the value of the index. The
holder of a warrant would not be entitled to any payments from
the issuer at any time when, in the case of a call warrant, the
exercise price is greater than the value of the underlying index,
or, in the case of a put warrant, the exercise price is less than
the value of the underlying index. If the Fund were not to
exercise an index warrant prior to its expiration, then the Fund
would lose the amount of the purchase price paid by it for the
warrant.
The Fund will normally use index warrants in a manner
similar to its use of options on securities indices. The risks
of the Fund's use of index warrants are generally similar to
those relating to its use of index options. Unlike most index
options, however, index warrants are issued in limited amounts
and are not obligations of a regulated clearing agency, but are
backed only by the credit of the bank or other institution which
issues the warrant. Also, index warrants generally have longer
terms than index options. Although the Fund will normally invest
only in exchange-listed warrants, index warrants are not likely
to be as liquid as certain index options backed by a recognized
clearing agency. In addition, the terms of index warrants may
limit the Fund's ability to exercise the warrants at such time,
or in such quantities, as the Fund would otherwise wish to do.
FOREIGN SECURITIES
Under its current policy, which may be changed without
shareholder approval, the Fund may invest up to the limit of its
total assets specified in its Prospectus in securities
principally traded in markets outside the United States.
Eurodollar certificates of deposit are excluded for purposes of
this limitation. Foreign investments can be affected favorably
or unfavorably by changes in currency exchange rates and in
exchange control regulations. There may be less publicly
available information about a foreign company than about a U.S.
company, and foreign companies may not be subject to accounting,
auditing and financial reporting standards and requirements
comparable to those applicable to U.S. companies. Securities of
some foreign companies are less liquid or more volatile than
securities of U.S. companies, and foreign brokerage commissions
and custodian fees are generally higher than in the United
States. Investments in foreign securities can involve other
risks different from those affecting U.S. investments, including
local political or economic developments, expropriation or
nationalization of assets and imposition of withholding taxes on
dividend or interest payments. To hedge against possible
variations in foreign exchange rates, the Fund may purchase and
sell forward foreign currency contracts. These represent
agreements to purchase or sell specified currencies at specified
dates and prices. The Fund will only purchase and sell forward
foreign currency contracts in amounts Putnam Management deems
appropriate to hedge existing or anticipated portfolio positions
and will not use such forward contracts for speculative purposes.
Foreign securities, like other assets of the Fund, will be held
by the Fund's custodian or by a subcustodian.
FOREIGN CURRENCY TRANSACTIONS
The Fund may engage in currency exchange transactions to
protect against uncertainty in the level of future currency
exchange rates. In addition, the Fund may write covered call and
put options on foreign currencies for the purpose of increasing
its current return.
Generally, the Fund may engage in both "transaction
hedging" and "position hedging". When it engages in transaction
hedging, the Fund enters into foreign currency transactions with
respect to specific receivables or payables, generally arising in
connection with the purchase or sale of portfolio securities.
The Fund will engage in transaction hedging when it desires to
"lock in" the U.S. dollar price of a security it has agreed to
purchase or sell, or the U.S. dollar equivalent of a dividend or
interest payment in a foreign currency. By transaction hedging
the Fund will attempt to protect itself against a possible loss
resulting from an adverse change in the relationship between the
U.S. dollar and the applicable foreign currency during the period
between the date on which the security is purchased or sold, or
on which the dividend or interest payment is earned, and the date
on which such payments are made or received.
The Fund may purchase or sell a foreign currency on a spot
(or cash) basis at the prevailing spot rate in connection with
the settlement of transactions in portfolio securities
denominated in that foreign currency. The Fund may also enter
into contracts to purchase or sell foreign currencies at a future
date ("forward contracts") and purchase and sell foreign currency
futures contracts.
For transaction hedging purposes the Fund may also
purchase exchange-listed and over-the-counter call and put
options on foreign currency futures contracts and on foreign
currencies. A put option on a futures contract gives the Fund
the right to assume a short position in the futures contract
until the expiration of the option. A put option on a currency
gives the Fund the right to sell the currency at an exercise
price until the expiration of the option. A call option on a
futures contract gives the Fund the right to assume a long
position in the futures contract until the expiration of the
option. A call option on a currency gives the Fund the right to
purchase the currency at the exercise price until the expiration
of the option.
When it engages in position hedging, the Fund enters into
foreign currency exchange transactions to protect against a
decline in the values of the foreign currencies in which its
portfolio securities are denominated (or an increase in the value
of currency for securities which the Fund expects to purchase,
when the Fund holds cash or short-term investments). In
connection with position hedging, the Fund may purchase put or
call options on foreign currency and on foreign currency futures
contracts and buy or sell forward contracts and foreign currency
futures contracts. The Fund may also purchase or sell foreign
currency on a spot basis.
The precise matching of the amounts of foreign currency
exchange transactions and the value of the portfolio securities
involved will not generally be possible since the future value of
such securities in foreign currencies will change as a
consequence of market movements in the value of those securities
between the dates the currency exchange transactions are entered
into and the dates they mature.
It is impossible to forecast with precision the market
value of portfolio securities at the expiration or maturity of a
forward or futures contract. Accordingly, it may be necessary
for the Fund to purchase additional foreign currency on the spot
market (and bear the expense of such purchase) if the market
value of the security or securities being hedged is less than the
amount of foreign currency the Fund is obligated to deliver and a
decision is made to sell the security or securities and make
delivery of the foreign currency. Conversely, it may be
necessary to sell on the spot market some of the foreign currency
received upon the sale of the portfolio security or securities if
the market value of such security or securities exceeds the
amount of foreign currency the Fund is obligated to deliver.
Transaction and position hedging do not eliminate
fluctuations in the underlying prices of the securities which the
Fund owns or intends to purchase or sell. They simply establish
a rate of exchange which one can achieve at some future point in
time. Additionally, although these techniques tend to minimize
the risk of loss due to a decline in the value of the hedged
currency, they tend to limit any potential gain which might
result from the increase in value of such currency.
The Fund may seek to increase its current return or to
offset some of the costs of hedging against fluctuations in
current exchange rates by writing covered call options and
covered put options on foreign currencies. The Fund receives a
premium from writing a call or put option, which increases the
Fund's current return if the option expires unexercised or is
closed out at a net profit. The Fund may terminate an option
that it has written prior to its expiration by entering into a
closing purchase transaction in which it purchases an option
having the same terms as the option written.
The Fund's currency hedging transactions may call for the
delivery of one foreign currency in exchange for another foreign
currency and may at times not involve currencies in which its
portfolio securities are then denominated. Putnam Management
will engage in such "cross hedging" activities when it believes
that such transactions provide significant hedging opportunities
for the Fund. Cross hedging transactions by the Fund involve the
risk of imperfect correlation between changes in the values of
the currencies to which such transactions relate and changes in
the value of the currency or other asset or liability which is
the subject of the hedge.
CURRENCY FORWARD AND FUTURES CONTRACTS. A forward foreign
currency contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number
of days from the date of the contract as agreed by the parties,
at a price set at the time of the contract. In the case of a
cancelable forward contract, the holder has the unilateral right
to cancel the contract at maturity by paying a specified fee.
The contracts are traded in the interbank market conducted
directly between currency traders (usually large commercial
banks) and their customers. A forward contract generally has no
deposit requirement, and no commissions are charged at any stage
for trades. A foreign currency futures contract is a
standardized contract for the future delivery of a specified
amount of a foreign currency at a future date at a price set at
the time of the contract. Foreign currency futures contracts
traded in the United States are designed by and traded on
exchanges regulated by the CFTC, such as the New York Mercantile
Exchange.
Forward foreign currency exchange contracts differ from
foreign currency futures contracts in certain respects. For
example, the maturity date of a forward contract may be any fixed
number of days from the date of the contract agreed upon by the
parties, rather than a predetermined date in a given month.
Forward contracts may be in any amounts agreed upon by the
parties rather than predetermined amounts. Also, forward foreign
exchange contracts are traded directly between currency traders
so that no intermediary is required. A forward contract
generally requires no margin or other deposit.
At the maturity of a forward or futures contract, the Fund
either may accept or make delivery of the currency specified in
the contract, or at or prior to maturity enter into a closing
transaction involving the purchase or sale of an offsetting
contract. Closing transactions with respect to forward contracts
are usually effected with the currency trader who is a party to
the original forward contract. Closing transactions with respect
to futures contracts are effected on a commodities exchange; a
clearing corporation associated with the exchange assumes
responsibility for closing out such contracts.
Positions in the foreign currency futures contracts may be
closed out only on an exchange or board of trade which provides a
secondary market in such contracts. Although the Fund intends to
purchase or sell foreign currency futures contracts only on
exchanges or boards of trade where there appears to be an active
secondary market, there is no assurance that a secondary market
on an exchange or board of trade will exist for any particular
contract or at any particular time. In such event, it may not be
possible to close a futures position and, in the event of adverse
price movements, the Fund would continue to be required to make
daily cash payments of variation margin.
FOREIGN CURRENCY OPTIONS. In general, options on foreign
currencies operate similarly to options on securities and are
subject to many similar risks. Foreign currency options are
traded primarily in the over-the-counter market, although options
on foreign currencies have recently been listed on several
exchanges. Options are traded not only on the currencies of
individual nations, but also on the European Currency Unit
("ECU"). The ECU is composed of amounts of a number of
currencies, and is the official medium of exchange of the
European Community's European Monetary System.
The Fund will only purchase or write foreign currency
options when Putnam Management believes that a liquid secondary
market exists for such options. There can be no assurance that a
liquid secondary market will exist for a particular option at any
specific time. Options on foreign currencies are affected by all
of those factors which influence foreign exchange rates and
investments generally.
The value of any currency, including U.S. dollars and
foreign currencies, may be affected by complex political and
economic factors applicable to the issuing country. In addition,
the exchange rates of foreign currencies (and therefore the
values of foreign currency options) may be affected
significantly, fixed, or supported directly or indirectly by U.S.
and foreign government actions. Government intervention may
increase risks involved in purchasing or selling foreign currency
options, since exchange rates may not be free to fluctuate in
response to other market forces.
The value of a foreign currency option reflects the value
of an exchange rate, which in turn reflects relative values of
two currencies, the U.S. dollar and the foreign currency in
question. Because foreign currency transactions occurring in the
interbank market involve substantially larger amounts than those
that may be involved in the exercise of foreign currency options,
investors may be disadvantaged by having to deal in an odd lot
market for the underlying foreign currencies in connection with
options at prices that are less favorable than for round lots.
Foreign governmental restrictions or taxes could result in
adverse changes in the cost of acquiring or disposing of foreign
currencies.
There is no systematic reporting of last sale information
for foreign currencies and there is no regulatory requirement
that quotations available through dealers or other market sources
be firm or revised on a timely basis. Available quotation
information is generally representative of very large round-lot
transactions in the interbank market and thus may not reflect
exchange rates for smaller odd-lot transactions (less than $1
million) where rates may be less favorable. The interbank market
in foreign currencies is a global, around-the-clock market. To
the extent that options markets are closed while the markets for
the underlying currencies remain open, significant price and rate
movements may take place in the underlying markets that cannot be
reflected in the options markets.
SETTLEMENT PROCEDURES. Settlement procedures relating to
the Fund's investments in foreign securities and to the Fund's
foreign currency exchange transactions may be more complex than
settlements with respect to investments in debt or equity
securities of U.S. issuers, and may involve certain risks not
present in the Fund's domestic investments. For example,
settlement of transactions involving foreign securities or
foreign currency may occur within a foreign country, and the Fund
may be required to accept or make delivery of the underlying
securities or currency in conformity with any applicable U.S. or
foreign restrictions or regulations, and may be required to pay
any fees, taxes or charges associated with such delivery. Such
investments may also involve the risk that an entity involved in
the settlement may not meet its obligations.
FOREIGN CURRENCY CONVERSION. Although foreign exchange
dealers do not charge a fee for currency conversion, they do
realize a profit based on the difference (the "spread") between
prices at which they are buying and selling various currencies.
Thus, a dealer may offer to sell a foreign currency to the Fund
at one rate, while offering a lesser rate of exchange should the
Fund desire to resell that currency to the dealer.
RESTRICTED SECURITIES
The SEC Staff currently takes the view that any
designation by the Trustees of the authority to determine that a
restricted security is readily marketable (as described in the
investment restrictions of the Funds) must be pursuant to written
procedures established by the Trustees. It is the present
intention of the Funds' Trustees that, if the Trustees decide to
delegate such determinations to Putnam Management or another
person, they would do so pursuant to written procedures,
consistent with the Staff's position. Should the Staff modify
its position in the future, the Trustees would consider what
action would be appropriate in light of the Staff's position at
that time.
TAXES
TAXATION OF THE FUND. The Fund intends to qualify each
year as a regulated investment company under Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"). In order
so to qualify and to qualify for the special tax treatment
accorded regulated investment companies and their shareholders,
the Fund must, among other things:
(a) Derive at least 90% of its gross income from
dividends, interest, payments with respect to certain securities
loans, and gains from the sale of stock, securities and foreign
currencies, or other income (including but not limited to gains
from options, futures, or forward contracts) derived with respect
to its business of investing in such stock, securities, or
currencies;
(b) derive less than 30% of its gross income from the
sale or other disposition of certain assets (including stock or
securities and certain options, futures contracts and forward
contracts) held for less than three months;
(c) distribute with respect to each taxable year at least
90% of the sum of its taxable net investment income, its net
tax-exempt income, and the excess, if any, of net short-term
capital gains over net long-term capital losses for such year;
and
(d) diversify its holdings so that, at the end of each
fiscal quarter, (i) at least 50% of the market value of the
Fund's assets is represented by cash and cash items, U.S.
Government securities, securities of other regulated investment
companies, and other securities limited in respect of any one
issuer to a value not greater than 5% of the value of the Fund's
total assets and 10% of the outstanding voting securities of such
issuer, and (ii) not more than 25% of the value of its assets is
invested in the securities (other than those of the U.S.
Government or other regulated investment companies) of any one
issuer or of two or more issuers which the Fund controls and
which are engaged in the same, similar, or related trades or
businesses.
If the Fund qualifies as a regulated investment company
that is accorded special tax treatment, the Fund will not be
subject to federal income tax on income paid to its shareholders
in the form of dividends (including capital gain dividends).
If the Fund failed to qualify as a regulated investment
company accorded special tax treatment in any taxable year, the
Fund would be subject to tax on its taxable income at corporate
rates, and all distributions from earnings and profits, including
any distributions of net tax-exempt income and net long-term
capital gains, would be taxable to shareholders as ordinary
income. In addition, the Fund could be required to recognize
unrealized gains, pay substantial taxes and interest and make
substantial distributions before requalifying as a regulated
investment company that is accorded special tax treatment.
If the Fund fails to distribute in a calendar year
substantially all of its ordinary income for such year and
substantially all of its capital gain net income for the one-year
period ending October 31 (or later if the Fund is permitted so to
elect and so elects), plus any retained amount from the prior
year, the Fund will be subject to a 4% excise tax on the
undistributed amounts. A dividend paid to shareholders by the
Fund in January of a year generally is deemed to have been paid
by the Fund on December 31 of the preceding year, if the dividend
was declared and payable to shareholders of record on a date in
October, November or December of that preceding year. The Fund
intends generally to make distributions sufficient to avoid
imposition of the 4% excise tax.
EXEMPT-INTEREST DIVIDENDS. The Fund will be qualified to
pay exempt-interest dividends to its shareholders only if, at the
close of each quarter of the Fund's taxable year, at least 50% of
the total value of the Fund's assets consists of obligations the
interest on which is exempt from federal income tax.
Distributions that the Fund properly designates as exempt-
interest dividends are treated by shareholders as interest
excludable from their gross income for federal income tax
purposes but may be taxable for federal alternative minimum tax
purposes. If the Fund intends to be qualified to pay
exempt-interest dividends, the Fund may be limited in its ability
to engage in such taxable transactions as forward commitments,
repurchase agreements, financial futures, and options contracts
on financial futures, tax-exempt bond indices, and other assets.
Part or all of the interest on indebtedness, if any, incurred or
continued by a shareholder to purchase or carry shares of a Fund
paying exempt-interest dividends is not deductible. The portion
of interest that is not deductible is equal to the total interest
paid or accrued on the indebtedness, multiplied by the percentage
of the Fund's total distributions (not including distributions
from net long-term capital gains) paid to the shareholder that
are exempt-interest dividends. Under rules used by the Internal
Revenue Service for determining when borrowed funds are
considered used for the purpose of purchasing or carrying
particular assets, the purchase of shares may be considered to
have been made with borrowed funds even though such funds are not
directly traceable to the purchase of shares.
In general, exempt-interest dividends, if any,
attributable to interest received on certain private activity
obligations and certain industrial development bonds will not be
tax-exempt to any shareholders who are "substantial users" of the
facilities financed by such obligations or bonds or who are
"related persons" of such substantial users.
A Fund which is qualified to pay exempt-interest dividends
will inform investors within 60 days of the Fund's fiscal
year-end of the percentage of its income distributions designated
as tax-exempt. The percentage is applied uniformly to all
distributions made during the year. The percentage of income
designated as tax-exempt for any particular distribution may be
substantially different from the percentage of the Fund's income
that was tax-exempt during the period covered by the
distribution.
HEDGING TRANSACTIONS. If the Fund engages in
transactions, including hedging transactions in options, futures
contracts, and straddles, or other similar transactions, it will
be subject to special tax rules (including mark-to-market,
straddle, wash sale, and short sale rules), the effect of which
may be to accelerate income to the Fund, defer losses to the
Fund, cause adjustments in the holding periods of the Fund's
securities, or convert short-term capital losses into long-term
capital losses. These rules could therefore affect the amount,
timing and character of distributions to shareholders. The Fund
will endeavor to make any available elections pertaining to such
transactions in a manner believed to be in the best interests of
the Fund.
Under the 30% of gross income test described above (see
"Taxation of the Fund"), the Fund will be restricted in selling
assets held or considered under Code rules to have been held for
less than three months, and in engaging in certain hedging
transactions (including hedging transactions in options and
futures) that in some circumstances could cause certain Fund
assets to be treated as held for less than three months.
Certain of the Fund's hedging activities (including its
transactions, if any, in foreign currencies or foreign
currency-denominated instruments) are likely to produce a
difference between its book income and its taxable income. If
the Fund's book income exceeds its taxable income, the
distribution (if any) of such excess will be treated as a
dividend to the extent of the Fund's remaining earnings and
profits, and thereafter as a return of capital or as gain from
the sale or exchange of a capital asset, as the case may be. If
the Fund's book income is less than its taxable income, the Fund
could be required to make distributions exceeding book income to
qualify as a regulated investment company that is accorded
special tax treatment.
RETURN OF CAPITAL DISTRIBUTIONS. If the Fund makes a
distribution to you in excess of its current and accumulated
"earnings and profits" in any taxable year, the excess
distribution will be treated as a return of capital to the extent
of your tax basis in your shares, and thereafter as capital gain.
A return of capital is not taxable, but it reduces your tax basis
in your shares.
SECURITIES ISSUED OR PURCHASED AT A DISCOUNT. The Fund's
investment in securities issued at a discount and certain other
obligations will (and investments in securities purchased at a
discount may) require the Fund to accrue and distribute income
not yet received. In order to generate sufficient cash to make
the requisite distributions, the Fund may be required to sell
securities in its portfolio that it otherwise would have
continued to hold.
CAPITAL LOSS CARRYOVER. The amounts and expiration dates
of any capital loss carryovers available to the Fund are shown in
Note 1 (Federal income taxes) to the financial statements
included in Part I of this Statement or incorporated by reference
into this Statement.
FOREIGN CURRENCY-DENOMINATED SECURITIES AND RELATED
HEDGING TRANSACTIONS. The Fund's transactions in foreign
currency-denominated debt securities, certain foreign currency
options, futures contracts, and forward contracts may give rise
to ordinary income or loss to the extent such income or loss
results from fluctuations in the value of the foreign currency
concerned.
If more than 50% of the Fund's assets at year end consists
of the debt and equity securities of foreign corporations, the
Fund may elect to permit shareholders to claim a credit or
deduction on their income tax returns for their pro rata portion
of qualified taxes paid by the Fund to foreign countries. In
such a case, shareholders will include in gross income from
foreign sources their pro rata shares of such taxes. A
shareholder's ability to claim a foreign tax credit or deduction
in respect of foreign taxes paid by the Fund may be subject to
certain limitations imposed by the Code, as a result of which a
shareholder may not get a full credit or deduction for the amount
of such taxes. Shareholders who do not itemize on their federal
income tax returns may claim a credit (but no deduction) for such
foreign taxes.
Investment by the Fund in certain "passive foreign
investment companies" could subject the Fund to a U.S. federal
income tax or other charge on the proceeds from the sale of its
investment in such a company; however, this tax can be avoided by
making an election to mark such investments to market annually or
to treat the passive foreign investment company as a "qualified
electing fund."
SALE OR REDEMPTION OF SHARES. The sale, exchange or
redemption of Fund shares may give rise to a gain or loss. In
general, any gain or loss realized upon a taxable disposition of
shares will be treated as long-term capital gain or loss if the
shares have been held for more than 12 months, and otherwise as
short-term capital gain or loss. However, if a shareholder sells
shares at a loss within six months of purchase, any loss will be
disallowed for Federal income tax purposes to the extent of any
exempt-interest dividends received on such shares. In addition,
any loss (not already disallowed as provided in the preceding
sentence) realized upon a taxable disposition of shares held for
six months or less will be treated as long-term, rather than
short-term, to the extent of any long-term capital gain
distributions received by the shareholder with respect to the
shares. All or a portion of any loss realized upon a taxable
disposition of Fund shares will be disallowed if other Fund
shares are purchased within 30 days before or after the
disposition. In such a case, the basis of the newly purchased
shares will be adjusted to reflect the disallowed loss.
SHARES PURCHASED THROUGH TAX-QUALIFIED PLANS. Special tax
rules apply to investments though defined contribution plans and
other tax-qualified plans. Shareholders should consult their tax
adviser to determine the suitability of shares of a fund as an
investment through such plans and the precise effect of an
investment on their particular tax situation.
BACKUP WITHHOLDING. The Fund generally is required to
withhold and remit to the U.S. Treasury 31% of the taxable
dividends and other distributions paid to any individual
shareholder who fails to furnish the Fund with a correct taxpayer
identification number, who has underreported dividends or
interest income, or who fails to certify to the Fund that he or
she is not subject to such withholding. An individual's taxpayer
identification number is his or her social security number.
MANAGEMENT OF THE FUND
TRUSTEES
*+GEORGE PUTNAM, Chairman and President. Chairman and
Director of Putnam Investment Management, Inc. and Putnam Mutual
Funds. Director, The Boston Company, Inc., Boston Safe Deposit
and Trust Company, Freeport-McMoRan, Inc., General Mills, Inc.,
Houghton Mifflin Company, Marsh & McLennan Companies, Inc. and
Rockefeller Group, Inc.
+WILLIAM F. POUNDS, Vice Chairman. Professor of
Management, Alfred P. Sloan School of Management, Massachusetts
Institute of Technology. Director of Fisher Price, Inc., IDEXX,
M/A-COM, Inc., EG&G, Inc. and Sun Company, Inc.
JAMESON A. BAXTER, Trustee. President, Baxter Associates,
Inc. (consultants to management). Director of Banta Corporation,
Avondale Federal Savings Bank and ASHTA Chemicals, Inc. Chairman
of the Board of Trustees, Mount Holyoke College.
+HANS H. ESTIN, Trustee. Vice Chairman, North American
Management Corp. (a registered investment adviser). Director of
The Boston Company, Inc. and Boston Safe Deposit and Trust
Company.
ELIZABETH T. KENNAN, Trustee. President of Mount Holyoke
College. Director, NYNEX Corporation, Northeast Utilities and
the Kentucky Home Life Insurance Companies and Trustee of the
University of Notre Dame.
*LAWRENCE J. LASSER, Trustee and Vice President.
President, Chief Executive Officer and Director of Putnam
Investments, Inc. and Putnam Investment Management, Inc.
Director of Marsh & McLennan Companies, Inc. Vice President of
the Putnam funds.
JOHN A. HILL, Trustee. Chairman and Managing Director,
First Reserve Corporation (a registered investment adviser).
Director, Lantana Corporation, Maverick Tube Corporation, Snyder
Oil Corporation and various First Reserve Funds.
+ROBERT E. PATTERSON, Trustee. Executive Vice President,
Cabot Partners Limited Partnership (a registered investment
adviser).
DONALD S. PERKINS, Trustee. Director of various
corporations, including American Telephone & Telegraph Company,
AON Corp., Cummins Engine Company, Inc., Illinois Power Company,
Inland Steel Industries, Inc., K mart Corporation, LaSalle Street
Fund, Inc., Springs Industries, Inc., TBG, Inc. and Time Warner
Inc.
*#GEORGE PUTNAM, III, Trustee. President, New Generation
Research, Inc. (publisher of bankruptcy information). Director,
World Environment Center.
*A.J.C. SMITH, Trustee. Chairman, Chief Executive Officer
and Director, Marsh & McLennan Companies, Inc.
W. NICHOLAS THORNDIKE, Trustee. Director of various
corporations and charitable organizations, including Providence
Journal Co. and Courier Corporation. Also, Trustee and President
of Massachusetts General Hospital and Trustee of Bradley Real
Estate Trust and Eastern Utilities Associates.
OFFICERS
CHARLES E. PORTER, Executive Vice President. Managing
Director of Putnam Investments, Inc. and Putnam Investment
Management, Inc. Executive Vice President of the Putnam funds.
PATRICIA C. FLAHERTY, Senior Vice President. Senior Vice
President of Putnam Investments, Inc. and Putnam Investment
Management, Inc.
WILLIAM N. SHIEBLER, Vice President. Director and Senior
Managing Director of Putnam Investments, Inc. President, Chief
Operating Officer and Director of Putnam Mutual Funds. Vice
President of the Putnam funds.
GORDON H. SILVER, Vice President. Senior Managing
Director of Putnam Investments, Inc. and Putnam Investment
Management, Inc. Director, Putnam Investments, Inc. and Putnam
Investment Management, Inc. Vice President of the Putnam funds.
JOHN R. VERANI, Vice President. Senior Vice President of
Putnam Investments, Inc. and Putnam Investment Management, Inc.
Vice President of the Putnam funds.
PAUL M. O'NEIL, Vice President. Vice President of Putnam
Investments, Inc. and Putnam Investment Management, Inc. Vice
President of the Putnam funds.
JOHN D. HUGHES, Vice President and Treasurer. Vice
President and Treasurer of the Putnam funds.
BEVERLY MARCUS, Clerk and Assistant Treasurer. Clerk and
Assistant Treasurer of the Putnam funds.
*Trustees who are "interested persons" (as defined in the
Investment Company Act of 1940) of the Fund, Putnam Management or
Putnam Mutual Funds.
+Members of the Executive Committee of the Trustees. The
Executive Committee meets between regular meetings of the
Trustees as may be required to review investment matters and
other affairs of the Fund and may exercise all of the powers of
the Trustees.
#George Putnam, III is the son of George Putnam.
-----------------
Certain other officers of Putnam Management are officers
of your Fund. SEE "ADDITIONAL OFFICERS OF THE FUND" IN PART I OF
THIS STATEMENT. The mailing address of each of the officers and
Trustees is One Post Office Square, Boston, Massachusetts 02109.
Except as stated below, the principal occupations of the
officers and Trustees for the last five years have been with the
employers as shown above, although in some cases they have held
different positions with such employers. Also, prior to January,
1992, Ms. Baxter was Vice President and Principal, Regency Group,
Inc. and Consultant, The First Boston Corporation. Prior to May,
1991, Mr. Pounds was Senior Advisor to the Rockefeller Family and
Associates, Chairman of Rockefeller Trust Company and Director of
Rockefeller Group, Inc. Prior to November, 1990, Mr. Shiebler
was President and Chief Operating Officer of the Intercapital
Division of Dean Witter Reynolds, Inc., Vice President of the
Dean Witter Funds and Director of Dean Witter Trust Company.
Each Trustee of the Fund receives an annual fee and an
additional fee for each Trustees' meeting attended. Trustees who
are not interested persons of Putnam Management and who serve on
committees of the Trustees receive additional fees for attendance
at certain committee meetings and for special services rendered
in that connection. All of the Trustees are Trustees of all the
Putnam funds and each receives fees for his or her services. FOR
DETAILS OF TRUSTEES' FEES PAID BY THE FUND, SEE "FUND CHARGES AND
EXPENSES" IN PART I OF THIS STATEMENT.
The Agreement and Declaration of Trust of the Fund
provides that the Fund will indemnify its Trustees and officers
against liabilities and expenses incurred in connection with
litigation in which they may be involved because of their offices
with the Fund, except if it is determined in the manner specified
in the Agreement and Declaration of Trust that they have not
acted in good faith in the reasonable belief that their actions
were in the best interests of the Fund or that such
indemnification would relieve any officer or Trustee of any
liability to the Fund or its shareholders by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of
his or her duties. The Fund, at its expense, provides liability
insurance for the benefit of its Trustees and officers.
Putnam Management, Putnam Mutual Funds and Putnam
Fiduciary Trust Company are subsidiaries of Putnam Investments,
Inc., a holding company which is in turn wholly owned by Marsh &
McLennan Companies, Inc., a publicly owned holding company whose
principal operating subsidiaries are international insurance and
reinsurance brokers, investment managers and management
consultants.
Trustees and officers of the Fund who are also officers of
Putnam Management or its affiliates or who are stockholders of
Marsh & McLennan Companies, Inc. will benefit from the advisory
fees, sales commissions, distribution fees (if any), custodian
fees and transfer agency fees paid or allowed by the Fund.
PUTNAM MANAGEMENT
Putnam Management is one of America's oldest and largest
money management firms. Putnam Management's staff of experienced
portfolio managers and research analysts selects securities and
constantly supervises the Fund's portfolio. By pooling an
investor's money with that of other investors, a greater variety
of securities can be purchased than would be the case
individually; the resulting diversification helps reduce
investment risk. Putnam Management has been managing mutual funds
since 1937. Today, the firm serves as the investment manager for
the funds in the Putnam Family, with over $64 billion in assets
in nearly 3.5 million shareholder accounts at December 31, 1993.
An affiliate, The Putnam Advisory Company, Inc., manages domestic
and foreign institutional accounts and mutual funds, including
the accounts of many Fortune 500 companies. Another affiliate,
Putnam Fiduciary Trust Company, provides investment advice to
institutional clients under its banking and fiduciary powers. At
December 31, 1993, Putnam Management and its affiliates managed
nearly $91 billion in assets, including over $17 billion in tax
exempt securities and nearly $31 billion in retirement plan
assets.
<PAGE>
THE MANAGEMENT CONTRACT
Under a Management Contract between the Fund and Putnam
Management, subject to such policies as the Trustees may
determine, Putnam Management, at its expense, furnishes
continuously an investment program for the Fund and makes
investment decisions on behalf of the Fund. Subject to the
control of the Trustees, Putnam Management also manages,
supervises and conducts the other affairs and business of the
Fund, furnishes office space and equipment, provides bookkeeping
and clerical services (including determination of the Fund's net
asset value, but excluding shareholder accounting services) and
places all orders for the purchase and sale of the Fund's
portfolio securities. Putnam Management may place Fund portfolio
transactions with broker-dealers which furnish Putnam Management,
without cost to it, certain research, statistical and quotation
services of value to Putnam Management and its affiliates in
advising the Fund and other clients. In so doing, Putnam
Management may cause the Fund to pay greater brokerage
commissions than it might otherwise pay.
FOR DETAILS OF PUTNAM MANAGEMENT'S COMPENSATION UNDER THE
MANAGEMENT CONTRACT, SEE "FUND CHARGES AND EXPENSES" IN PART I OF
THIS STATEMENT. Putnam Management's compensation under the
Management Contract may be reduced in any year if the Fund's
expenses exceed the limits on investment company expenses imposed
by any statute or regulatory authority of any jurisdiction in
which shares of the Fund are qualified for offer or sale. The
term "expenses" is defined in the statutes or regulations of such
jurisdictions, and generally, excludes brokerage commissions,
taxes, interest, extraordinary expenses and, if the Fund has a
Distribution Plan, payments made under such Plan. The only such
limitation as of the date of this Statement (applicable to any
Fund registered for sale in California) was 2.5% of the first $30
million of average net assets, 2% of the next $70 million and
1.5% of any excess over $100 million.
Under the Management Contract, Putnam Management may
reduce its compensation to the extent that the Fund's expenses
exceed such lower expense limitation as Putnam Management may, by
notice to the Fund, declare to be effective. The expenses
subject to this limitation are exclusive of brokerage
commissions, interest, taxes, deferred organizational and
extraordinary expenses and, if the Fund has a Distribution Plan,
payments required under such Plan. THE TERMS OF ANY EXPENSE
LIMITATION FROM TIME TO TIME IN EFFECT ARE DESCRIBED IN EITHER
THE PROSPECTUS OR PART I OF THIS STATEMENT.
In addition to the fee paid to Putnam Management, the Fund
reimburses Putnam Management for the compensation and related
expenses of certain officers of the Fund and their assistants who
provide certain administrative services for the Fund and the
other funds in the Putnam Family, each of which bears an
allocated share of the foregoing costs. The aggregate amount of
all such payments and reimbursements is determined annually by
the Trustees. THE AMOUNT OF THIS REIMBURSEMENT FOR THE FUND'S
MOST RECENT FISCAL YEAR IS INCLUDED IN "FUND CHARGES AND
EXPENSES" IN PART I OF THIS STATEMENT. Putnam Management pays
all other salaries of officers of the Fund. The Fund pays all
expenses not assumed by Putnam Management including, without
limitation, auditing, legal, custodial, investor servicing and
shareholder reporting expenses. The Fund pays the cost of
typesetting for its Prospectuses and the cost of printing and
mailing any Prospectuses sent to its shareholders. Putnam Mutual
Funds pays the cost of printing and distributing all other
Prospectuses.
The Management Contract provides that Putnam Management
shall not be subject to any liability to the Fund or to any
shareholder of the Fund for any act or omission in the course of
or connected with rendering services to the Fund in the absence
of willful misfeasance, bad faith, gross negligence or reckless
disregard of its duties on the part of Putnam Management.
The Management Contract may be terminated without penalty
by vote of the Trustees or the shareholders of the Fund, or by
Putnam Management, on 30 days' written notice. It may be amended
only by a vote of the shareholders of the Fund. The Management
Contract also terminates without payment of any penalty in the
event of its assignment. The Management Contract provides that
it will continue in effect only so long as such continuance is
approved at least annually by vote of either the Trustees or the
shareholders, and, in either case, by a majority of the Trustees
who are not "interested persons" of Putnam Management or the
Fund. In each of the foregoing cases, the vote of the
shareholders is the affirmative vote of a "majority of the
outstanding voting securities" as defined in the Investment
Company Act of 1940.
PORTFOLIO TRANSACTIONS
INVESTMENT DECISIONS. Investment decisions for the Fund
and for the other investment advisory clients of Putnam
Management and its affiliates are made with a view to achieving
their respective investment objectives. Investment decisions are
the product of many factors in addition to basic suitability for
the particular client involved. Thus, a particular security may
be bought or sold for certain clients even though it could have
been bought or sold for other clients at the same time.
Likewise, a particular security may be bought for one or more
clients when one or more other clients are selling the security.
In some instances, one client may sell a particular security to
another client. It also sometimes happens that two or more
clients simultaneously purchase or sell the same security, in
which event each day's transactions in such security are, insofar
as possible, averaged as to price and allocated between such
clients in a manner which in Putnam Management's opinion is
equitable to each and in accordance with the amount being
purchased or sold by each. There may be circumstances when
purchases or sales of portfolio securities for one or more
clients will have an adverse effect on other clients.
BROKERAGE AND RESEARCH SERVICES. Transactions on U.S.
stock exchanges, commodities markets and futures markets and
other agency transactions involve the payment by the Fund of
negotiated brokerage commissions. Such commissions vary among
different brokers. A particular broker may charge different
commissions according to such factors as the difficulty and size
of the transaction. Transactions in foreign investments often
involve the payment of fixed brokerage commissions, which may be
higher than those in the United States. There is generally no
stated commission in the case of securities traded in the
over-the-counter markets, but the price paid by the Fund usually
includes an undisclosed dealer commission or mark-up. In
underwritten offerings, the price paid by the Fund includes a
disclosed, fixed commission or discount retained by the
underwriter or dealer. It is anticipated that most purchases and
sales of securities by funds investing primarily in tax-exempt
securities and certain other fixed-income securities will be with
the issuer or with underwriters of or dealers in those
securities, acting as principal. Accordingly, those funds would
not ordinarily pay significant brokerage commissions with respect
to securities transactions. SEE "FUND CHARGES AND EXPENSES" IN
PART I OF THIS STATEMENT FOR INFORMATION CONCERNING COMMISSIONS
PAID BY THE FUND.
It has for many years been a common practice in the
investment advisory business for advisers of investment companies
and other institutional investors to receive brokerage and
research services (as defined in the Securities Exchange Act of
1934, as amended (the "1934 Act")) from broker-dealers that
execute portfolio transactions for the clients of such advisers
and from third parties with which such broker-dealers have
arrangements. Consistent with this practice, Putnam Management
receives brokerage and research services and other similar
services from many broker-dealers with which Putnam Management
places the Fund's portfolio transactions and from third parties
with which these broker-dealers have arrangements. These
services include such matters as general economic and market
reviews, industry and company reviews, evaluations of
investments, recommendations as to the purchase and sale of
investments, newspapers, magazines, pricing services, quotation
services, news services and personal computers utilized by Putnam
Management's managers and analysts. Where the services referred
to above are not used exclusively by Putnam Management for
research purposes, Putnam Management, based upon its own
allocations of expected use, bears that portion of the cost of
these services which directly relates to their non-research use.
Some of these services are of value to Putnam Management and its
affiliates in advising various of their clients (including the
Fund), although not all of these services are necessarily useful
and of value in managing the Fund. The management fee paid by
the Fund is not reduced because Putnam Management and its
affiliates receive these services even though Putnam Management
might otherwise be required to purchase some of these services
for cash.
Putnam Management places all orders for the purchase and
sale of portfolio investments for the Fund and buys and sells
investments for the Fund through a substantial number of brokers
and dealers. In so doing, Putnam Management uses its best
efforts to obtain for the Fund the most favorable price and
execution available, except to the extent it may be permitted to
pay higher brokerage commissions as described below. In seeking
the most favorable price and execution, Putnam Management, having
in mind the Fund's best interests, considers all factors it deems
relevant, including, by way of illustration, price, the size of
the transaction, the nature of the market for the security or
other investment, the amount of the commission, the timing of the
transaction taking into account market prices and trends, the
reputation, experience and financial stability of the
broker-dealer involved and the quality of service rendered by the
broker-dealer in other transactions.
As permitted by Section 28(e) of the 1934 Act, and by the
Management Contract, Putnam Management may cause the Fund to pay
a broker-dealer which provides "brokerage and research services"
(as defined in the 1934 Act) to Putnam Management an amount of
disclosed commission for effecting securities transactions on
stock exchanges and other transactions for the Fund on an agency
basis in excess of the commission which another broker-dealer
would have charged for effecting that transaction. Putnam
Management's authority to cause the Fund to pay any such greater
commissions is also subject to such policies as the Trustees may
adopt from time to time. Putnam Management does not currently
intend to cause the Fund to make such payments. It is the
position of the staff of the Securities and Exchange Commission
that Section 28(e) does not apply to the payment of such greater
commissions in "principal" transactions. Accordingly Putnam
Management will use its best effort to obtain the most favorable
price and execution available with respect to such transactions,
as described above.
The Management Contract provides that commissions, fees,
brokerage or similar payments received by Putnam Management or an
affiliate in connection with the purchase and sale of portfolio
investments of the Fund, less any direct expenses approved by the
Trustees, shall be recaptured by the Fund through a reduction of
the fee payable by the Fund under the Management Contract.
Putnam Management seeks to recapture for the Fund soliciting
dealer fees on the tender of the Fund's portfolio securities in
tender or exchange offers. Any such fees which may be recaptured
are likely to be minor in amount.
Consistent with the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. and subject to seeking
the most favorable price and execution available and such other
policies as the Trustees may determine, Putnam Management may
consider sales of shares of the Fund (and, if permitted by law,
of the other Putnam funds) as a factor in the selection of
broker-dealers to execute portfolio transactions for the Fund.
PRINCIPAL UNDERWRITER
Putnam Mutual Funds is the principal underwriter of shares
of the Fund and the other continuously offered Putnam funds.
Putnam Mutual Funds is not obligated to sell any specific amount
of shares of the Fund and will purchase shares for resale only
against orders for shares. SEE "FUND CHARGES AND EXPENSES" IN
PART I OF THIS STATEMENT FOR INFORMATION ON SALES CHARGES AND
OTHER PAYMENTS RECEIVED BY PUTNAM MUTUAL FUNDS.
INVESTOR SERVICING AGENT AND CUSTODIAN
Putnam Investor Services, a division of Putnam Fiduciary
Trust Company ("PFTC"), is the Fund's investor servicing agent
(transfer, plan and dividend disbursing agent), for which it
receives fees which are paid monthly by the Fund as an expense of
all its shareholders. The fee paid to Putnam Investor Services
is determined by the Trustees taking into account the number of
shareholder accounts and transactions. Putnam Investor Services
earned the DALBAR Quality Tested Service Seal in 1990, 1991 and
1992. Over 10,000 tests of 38 separate shareholders service
components demonstrated that Putnam Investor Services exceeded
the industry standard in all categories.
PFTC is the custodian of the Fund's assets. In carrying
out its duties under its custodian contract, PFTC may employ one
or more subcustodians whose responsibilities will include
safeguarding and controlling the Fund's cash and securities,
handling the receipt and delivery of securities and collecting
interest and dividends on the Fund's investments. PFTC and any
subcustodians employed by it have a lien on the securities of the
Fund (to the extent permitted by the Fund's investment
restrictions) to secure charges and any advances made by such
subcustodians at the end of any day for the purpose of paying for
securities purchased by the Fund. The Fund expects that such
advances will exist only in unusual circumstances. Neither PFTC
nor any subcustodian determines the investment policies of the
Fund or decides which securities the Fund will buy or sell. PFTC
pays the fees and other charges of any subcustodians employed by
it. The Fund may from time to time pay custodial expenses in
full or in part through the placement by Putnam Management of the
Fund's portfolio transactions with the subcustodians or with a
third-party broker having an agreement with the subcustodians.
The Fund pays PFTC an annual fee based on the Fund's assets,
securities transactions and securities holdings and reimburses
PFTC for certain out-of-pocket expenses incurred by it or any
subcustodian employed by it in performing custodial services.
SEE "FUND CHARGES AND EXPENSES" IN PART I OF THIS
STATEMENT FOR INFORMATION ON FEES AND REIMBURSEMENTS FOR INVESTOR
SERVICING AND CUSTODY RECEIVED BY PFTC. THE FEES MAY BE REDUCED
BY CREDITS ALLOWED BY PFTC.
DETERMINATION OF NET ASSET VALUE
The Fund determines net asset value per share of each
class of shares once each day the New York Stock Exchange (the
"Exchange") is open. Currently, the Exchange is closed
Saturdays, Sundays and the following holidays: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, the Fourth of July,
Labor Day, Thanksgiving and Christmas. The Fund determines net
asset value as of the close of regular trading on the Exchange.
However, equity options held by the Fund are priced as of the
close of trading at 4:10 p.m., and futures contracts on U.S.
Government securities and index options held by the Fund are
priced as of their close of trading at 4:15 p.m.
Securities for which market quotations are readily
available are valued at prices which, in the opinion of the
Trustees or Putnam Management, most nearly represent the market
values of such securities. Currently, such prices are determined
using the last reported sale price or, if no sales are reported
(as in the case of some securities traded over-the-counter), the
last reported bid price, except that certain U.S. Government
securities are stated at the mean between the last reported bid
and asked prices. Short-term investments having remaining
maturities of 60 days or less are stated at amortized cost, which
approximates market value. All other securities and assets are
valued at their fair value following procedures approved by the
Trustees. Liabilities are deducted from the total, and the
resulting amount is divided by the number of shares of the class
outstanding.
Reliable market quotations are not considered to be
readily available for long-term corporate bonds and notes,
certain preferred stocks, tax-exempt securities, or certain
foreign securities. These investments are stated at fair value
on the basis of valuations furnished by pricing services approved
by the Trustees, which determine valuations for normal,
institutional-size trading units of such securities using methods
based on market transactions for comparable securities and
various relationships between securities which are generally
recognized by institutional traders.
If any securities held by a Fund are restricted as to
resale, Putnam Management determines their fair value following
procedures approved by the Trustees. The fair value of such
securities is generally determined as the amount which the Fund
could reasonably expect to realize from an orderly disposition of
such securities over a reasonable period of time. The valuation
procedures applied in any specific instance are likely to vary
from case to case. However, consideration is generally given to
the financial position of the issuer and other fundamental
analytical data relating to the investment and to the nature of
the restrictions on disposition of the securities (including any
registration expenses that might be borne by the Fund in
connection with such disposition). In addition, specific factors
are also generally considered, such as the cost of the
investment, the market value of any unrestricted securities of
the same class (both at the time of purchase and at the time of
valuation), the size of the holding, the prices of any recent
transactions or offers with respect to such securities and any
available analysts' reports regarding the issuer.
Generally, trading in certain securities (such as foreign
securities) is substantially completed each day at various times
prior to the close of the Exchange. The values of these
securities used in determining the net asset value of the Fund's
shares are computed as of such times. Also, because of the
amount of time required to collect and process trading
information as to large numbers of securities issues, the values
of certain securities (such as convertible bonds, U.S. Government
securities, and tax-exempt securities) are determined based on
market quotations collected earlier in the day at the latest
practicable time prior to the close of the Exchange.
Occasionally, events affecting the value of such securities may
occur between such times and the close of the Exchange which will
not be reflected in the computation of the Fund's net asset
value. If events materially affecting the value of such
securities occur during such period, then these securities will
be valued at their fair value following procedures approved by
the Trustees.
Money market funds generally value their portfolio
securities at amortized cost according to Rule 2a-7 under the
Investment Company Act of 1940.
HOW TO BUY SHARES
General
The Prospectus contains a general description of how
investors may buy shares of the Fund and states whether the Fund
offers more than one class of shares. This Statement contains
additional information which may be of interest to investors.
Class A shares are sold with a sales charge payable at the
time of purchase (except for Class A shares of money market
funds). As used in this Statement and unless the context
requires otherwise, the term "Class A shares" includes shares of
Funds that offer only one class of shares. The Prospectus
contains a table of applicable sales charges. For information
about how to purchase Class A shares of a Putnam fund at net
asset value through an employer's defined contribution plan,
please consult your employer. Certain purchases of Class A
shares may be exempt from a sales charge or may be subject to a
contingent deferred sales charge. See "General--Sales without
sales charges or contingent deferred sales charges", "Additional
Information About Class A Shares", and "Contingent Deferred Sales
Charges--Class A shares".
Class B shares are sold subject to a contingent deferred
sales charge payable upon redemption within a specified period
after purchase. The Prospectus contains a table of applicable
contingent deferred sales charges.
Class Y shares, which are available only to employer-
sponsored defined contribution plans initially investing at least
$250 million in a combination of Putnam funds and other
investments managed by Putnam Management or its affiliates, are
not subject to sales charges or contingent deferred sales
charges.
Certain purchase programs described below are not
available to defined contribution plans. Consult your employer
for information on how to purchase shares through your plan.
The Fund is currently making a continuous offering of its
shares. The Fund receives the entire net asset value of shares
sold. The Fund will accept unconditional orders for shares to be
executed at the public offering price based on the net asset
value per share next determined after the order is placed. In
the case of Class A shares, the public offering price is the net
asset value plus the applicable sales charge, if any. No sales
charge is included in the public offering price of other classes
of shares. In the case of orders for purchase of shares placed
through dealers, the public offering price will be based on the
net asset value determined on the day the order is placed, but
only if the dealer receives the order before the close of regular
trading on the Exchange. If the dealer receives the order after
the close of the Exchange, the price will be based on the net
asset value next determined. If funds for the purchase of shares
are sent directly to Putnam Investor Services, they will be
invested at the public offering price based on the net asset
value next determined after receipt. Payment for shares of the
Fund must be in U.S. dollars; if made by check, the check must be
drawn on a U.S. bank.
Initial and subsequent purchases must satisfy the minimums
stated in the Prospectus, except that (i) individual investments
under certain employee benefit plans or Tax Qualified Retirement
Plans may be lower, (ii) persons who are already shareholders may
make additional purchases of $50 or more by sending funds
directly to Putnam Investor Services (see "Your Investing
Account" below), and (iii) for investors participating in
systematic investment plans and military allotment plans, the
initial and subsequent purchases must be $25 or more.
Information about these plans is available from investment
dealers or from Putnam Mutual Funds.
As a convenience to investors, shares may be purchased
through a systematic investment plan. Preauthorized monthly bank
drafts for a fixed amount (at least $25) are used to purchase
Fund shares at the applicable public offering price next
determined after Putnam Mutual Funds receives the proceeds from
the draft (normally the 20th of each month, or the next business
day thereafter). Further information and application forms are
available from investment dealers or from Putnam Mutual Funds.
Except as described below, distributions to be reinvested
are reinvested without a sales charge in shares of the same class
as of the ex-dividend date using the net asset value determined
on that date, and are credited to a shareholder's account on the
payment date. Distributions for Putnam Tax Exempt Income Fund,
Putnam Arizona Tax Exempt Income Fund, Putnam California Tax
Exempt Income Fund, Putnam Municipal Income Fund, Putnam Florida
Tax Exempt Income Fund, Putnam Massachusetts Tax Exempt Income
Fund II, Putnam Michigan Tax Exempt Income Fund II, Putnam
Minnesota Tax Exempt Income Fund II, Putnam New Jersey Tax Exempt
Income Fund, Putnam New York Tax Exempt Income Fund, Putnam New
York Tax Exempt Opportunities Fund, Putnam Ohio Tax Exempt Income
Fund II, Putnam Pennsylvania Tax Exempt Income Fund and Putnam
Texas Tax Exempt Income Fund are reinvested without a sales
charge as of the next day following the period for which
distributions are paid using the net asset value determined on
that date, and are credited to a shareholder's account on the
payment date. Distributions for Putnam Tax-Free Income Trust and
Putnam Corporate Asset Trust are reinvested without a sales
charge as of the last day of the period for which distributions
are paid using the net asset value determined on that date, and
are credited to a shareholder's account on the payment date.
Dividends for Putnam money market funds are credited to a
shareholder's account on the payment date.
PAYMENT IN SECURITIES. In addition to cash, the Fund may
accept securities as payment for Fund shares at the applicable
net asset value. Generally, the Fund will only consider
accepting securities to increase its holdings in a portfolio
security, or if Putnam Management determines that the offered
securities are a suitable investment for the Fund and in a
sufficient amount for efficient management.
While no minimum has been established, it is expected that
the Fund would not accept securities with a value of less than
$100,000 per issue as payment for shares. The Fund may reject in
whole or in part any or all offers to pay for purchases of Fund
shares with securities, may require partial payment in cash for
such purchases to provide funds for applicable sales charges, and
may discontinue accepting securities as payment for Fund shares
at any time without notice. The Fund will value accepted
securities in the manner described in the section "Determination
of Net Asset Value" for valuing shares of the Fund. The Fund
will only accept securities which are delivered in proper form.
The Fund will not accept options or restricted securities as
payment for shares. The acceptance of securities by the Fund in
exchange for Fund shares must comply with applicable regulations
of certain states. In addition, Putnam Global Governmental
Income Trust may accept only investment grade bonds with prices
regularly stated in publications generally accepted by investors,
such as the London Financial Times and the Association of
International Bond Dealers manual, or securities listed on the
New York or American Stock Exchanges or with NASDAQ, and Putnam
Diversified Income Trust may accept only bonds with prices
regularly stated in publications generally accepted by investors.
For federal income tax purposes, a purchase of Fund shares with
securities will be treated as a sale or exchange of such
securities on which the investor will realize a taxable gain or
loss. The processing of a purchase of Fund shares with
securities involves certain delays while the Fund considers the
suitability of such securities and while other requirements are
satisfied. For information regarding procedures for payment in
securities, contact Putnam Mutual Funds. Investors should not
send securities to the Fund except when authorized to do so and
in accordance with specific instructions received from Putnam
Mutual Funds.
SALES WITHOUT SALES CHARGES OR CONTINGENT DEFERRED SALES
CHARGES. The Fund may sell shares without a sales charge or
contingent deferred sales charge to:
(i) current and retired Trustees of the Fund; officers of
the Fund; directors and current and retired U.S. full-time
employees of Putnam Management, Putnam Mutual Funds, their
parent corporations and certain corporate affiliates;
family members of and employee benefit plans for the
foregoing; and partnerships, trusts or other entities in
which any of the foregoing has a substantial interest;
(ii) employee benefit plans, for the repurchase of shares
in connection with repayment of plan loans made to plan
participants (if the sum loaned was obtained by redeeming
shares of a Putnam fund sold with a sales charge) (not
offered by tax-exempt funds);
(iii) clients of administrators of tax-qualified employee
benefit plans which have entered into agreements with
Putnam Mutual Funds (not offered by tax-exempt funds);
(iv) registered representatives and other employees of
broker-dealers having sales agreements with Putnam Mutual
Funds; employees of financial institutions having sales
agreements with Putnam Mutual Funds or otherwise having an
arrangement with any such broker-dealer or financial
institution with respect to sales of Fund shares; and
their spouses and children under age 21 (Putnam Mutual
Funds is regarded as the dealer of record for all such
accounts);
(v) investors meeting certain requirements who sold shares
of certain Putnam closed-end funds pursuant to a tender
offer by such closed-end fund;
(vi) a trust department of any financial institution
purchasing shares of the Fund in its capacity as trustee
of any trust, if the value of the shares of the Fund and
other Putnam funds purchased or held by all such trusts
exceeds $1 million in the aggregate; and
(vii) "wrap accounts" maintained for clients of broker-
dealers, financial institutions or financial planners who
have entered into agreements with Putnam Mutual Funds with
respect to such accounts.
In addition, the Fund may issue its shares at net asset
value or more in connection with the acquisition of substantially
all of the securities owned by other investment companies or
personal holding companies.
PAYMENTS TO DEALERS. Putnam Mutual Funds may, at its
expense, pay concessions in addition to the payments disclosed in
the Prospectus to dealers which satisfy certain criteria
established from time to time by Putnam Mutual Funds relating to
increasing net sales of shares of the Putnam funds over prior
periods, and certain other factors.
ADDITIONAL INFORMATION ABOUT CLASS A SHARES
The underwriter's commission is the sales charge shown in
the Prospectus less any applicable dealer discount. The dealer
discount is the same for all dealers, except that Putnam Mutual
Funds retains the entire sales charge on any retail sales made by
it. Putnam Mutual Funds will give dealers ten days' notice of
any changes in the dealer discount.
Putnam Mutual Funds offers several plans by which an
investor may obtain reduced sales charges on purchases of Class A
shares. The variations in sales charges reflect the varying
efforts required to sell shares to separate categories of
purchasers. These plans may be altered or discontinued at any
time.
COMBINED PURCHASE PRIVILEGE. The following persons may
qualify for the sales charge reductions or eliminations shown in
the Prospectus by combining into a single transaction the
purchase of Class A shares with other purchases of any class of
shares:
(i) an individual, or a "company" as defined in Section
2(a)(8) of the Investment Company Act of 1940 (which
includes corporations which are corporate affiliates of
each other);
(ii) an individual, his or her spouse and their children
under twenty-one, purchasing for his, her or their own
account;
(iii) a trustee or other fiduciary purchasing for a single
trust estate or single fiduciary account (including a
pension, profit-sharing, or other employee benefit trust
created pursuant to a plan qualified under Section 401 of
the Internal Revenue Code);
(iv) tax-exempt organizations qualifying under Section
501(c)(3) of the Internal Revenue Code (not including
403(b) plans); and
(v) employee benefit plans of a single employer or of
affiliated employers, other than 403(b) plans.
A combined purchase currently may also include shares of
any class of other continuously offered Putnam funds (other than
money market funds) purchased at the same time through a single
investment dealer, if the dealer places the order for such shares
directly with Putnam Mutual Funds.
CUMULATIVE QUANTITY DISCOUNT (RIGHT OF ACCUMULATION). A
purchaser of Class A shares may qualify for a cumulative quantity
discount by combining a current purchase (or combined purchases
as described above) with certain other shares of any class of
Putnam funds already owned. The applicable sales charge is based
on the total of:
(i) the investor's current purchase; and
(ii) the maximum public offering price (at the close of
business on the previous day) of:
(a) all shares held by the investor in all of the
Putnam funds (except money market funds); and
(b) any shares of money market funds acquired by
exchange from other Putnam funds; and
(iii) the maximum public offering price of all shares
described in paragraph (ii) owned by another shareholder
eligible to participate with the investor in a "combined
purchase" (see above).
To qualify for the combined purchase privilege or to
obtain the cumulative quantity discount on a purchase through an
investment dealer, when each purchase is made the investor or
dealer must provide Putnam Mutual Funds with sufficient
information to verify that the purchase qualifies for the
privilege or discount. The shareholder must furnish this
information to Putnam Investor Services when making direct cash
investments.
STATEMENT OF INTENTION. Investors may also obtain the
reduced sales charges for Class A shares shown in the Prospectus
for investments of a particular amount by means of a written
Statement of Intention, which expresses the investor's intention
to invest that amount (including certain "credits," as described
below) within a period of 13 months in shares of any class of the
Fund or any other continuously offered Putnam fund (excluding
money market funds). Each purchase of Class A shares under a
Statement of Intention will be made at the public offering price
applicable at the time of such purchase to a single transaction
of the total dollar amount indicated in the Statement. A
Statement of Intention may include purchases of shares made not
more than 90 days prior to the date that an investor signs a
Statement; however, the 13-month period during which the
Statement is in effect will begin on the date of the earliest
purchase to be included.
An investor may receive a credit toward the amount
indicated in the Statement equal to the maximum public offering
price as of the close of business on the previous day of all
shares he or she owns on the date of the Statement which are
eligible for purchase under a Statement (plus any shares of money
market funds acquired by exchange of such eligible shares).
Investors do not receive credit for shares purchased by the
reinvestment of distributions. Investors qualifying for the
"combined purchase privilege" (see above) may purchase shares
under a single Statement of Intention.
The Statement of Intention is not a binding obligation
upon the investor to purchase the full amount indicated. The
minimum initial investment under a Statement of Intention is 5%
of such amount, and must be invested immediately. Class A shares
purchased with the first 5% of such amount will be held in escrow
to secure payment of the higher sales charge applicable to the
shares actually purchased if the full amount indicated is not
purchased. When the full amount indicated has been purchased,
the escrow will be released. If an investor desires to redeem
escrowed shares before the full amount has been purchased, the
shares will be released from escrow only if the investor pays the
sales charge that, without regard to the Statement of Intention,
would apply to the total investment made to date.
To the extent that an investor purchases more than the
dollar amount indicated on the Statement of Intention and
qualifies for a further reduced sales charge, the sales charge
will be adjusted for the entire amount purchased at the end of
the 13-month period, upon recovery from the investor's dealer of
its portion of the sales charge adjustment. Once received from
the dealer, which may take a period of time or may never occur,
the sales charge adjustment will be used to purchase additional
shares at the then current offering price applicable to the
actual amount of the aggregate purchases. These additional
shares will not be considered as part of the total investment for
the purpose of determining the applicable sales charge pursuant
to the Statement of Intention. No sales charge adjustment will
be made unless and until the investor's dealer returns any excess
commissions previously received.
To the extent that an investor purchases less than the
dollar amount indicated on the Statement of Intention within the
13-month period, the sales charge will be adjusted upward for the
entire amount purchased at the end of the 13-month period. This
adjustment will be made by redeeming shares from the account to
cover the additional sales charge, the proceeds of which will be
paid to the investor's dealer and Putnam Mutual Funds in
accordance with the Prospectus. If the account exceeds an amount
that would otherwise qualify for a reduced sales charge, that
reduced sales charge will be applied.
Statements of Intention are not available for certain
employee benefit plans.
Statement of Intention forms may be obtained from Putnam
Mutual Funds or from investment dealers. Interested investors
should read the Statement of Intention carefully.
REDUCED SALES CHARGE FOR GROUP PURCHASES. Members of
qualified groups may purchase Class A shares of the Fund at a
group sales charge rate of 4.5% of the public offering price
(4.71% of the net amount invested). The dealer discount on such
sales is 3.75% of the offering price.
To receive the group rate, group members must purchase
Class A shares through a single investment dealer designated by
the group. The designated dealer must transmit each member's
initial purchase to Putnam Mutual Funds, together with payment
and completed application forms. After the initial purchase, a
member may send funds for the purchase of Class A shares directly
to Putnam Investor Services. Purchases of Class A shares are
made at the public offering price based on the net asset value
next determined after Putnam Mutual Funds or Putnam Investor
Services receives payment for the shares. The minimum investment
requirements described above apply to purchases by any group
member. Only Class A shares are included in calculating the
purchased amount.
Qualified groups include the employees of a corporation or
a sole proprietorship, members and employees of a partnership or
association, or other organized groups of persons (the members of
which may include other qualified groups) provided that: (i) the
group has at least 25 members of which at least 10 members
participate in the initial purchase; (ii) the group has been in
existence for at least six months; (iii) the group has some
purpose in addition to the purchase of investment company shares
at a reduced sales charge; (iv) the group's sole organizational
nexus or connection is not that the members are credit card
holders of a company, policy holders of an insurance company,
customers of a bank or broker-dealer, clients of an investment
adviser or security holders of a company; (v) the group agrees to
provide its designated investment dealer access to the group's
membership by means of written communication or direct
presentation to the membership at a meeting on not less
frequently than an annual basis; (vi) the group or its investment
dealer will provide annual certification in form satisfactory to
Putnam Investor Services that the group then has at least 25
members and that at least ten members participated in group
purchases during the immediately preceding 12 calendar months;
and (vii) the group or its investment dealer will provide
periodic certification in form satisfactory to Putnam Investor
Services as to the eligibility of the purchasing members of the
group.
Members of a qualified group include: (i) any group which
meets the requirements stated above and which is a constituent
member of a qualified group; (ii) any individual purchasing for
his or her own account who is carried on the records of the group
or on the records of any constituent member of the group as being
a good standing employee, partner, member or person of like
status of the group or constituent member; or (iii) any fiduciary
purchasing shares for the account of a member of a qualified
group or a member's beneficiary. For example, a qualified group
could consist of a trade association which would have as its
members individuals, sole proprietors, partnerships and
corporations. The members of the group would then consist of the
individuals, the sole proprietors and their employees, the
members of the partnerships and their employees, and the
corporations and their employees, as well as the trustees of
employee benefit trusts acquiring Class A shares for the benefit
of any of the foregoing.
A member of a qualified group may, depending upon the
value of Class A shares of the Fund owned or proposed to be
purchased by the member, be entitled to purchase Class A shares
of the Fund at non-group sales charge rates shown in the
Prospectus which may be lower than the group sales charge rate,
if the member qualifies as a person entitled to reduced non-group
sales charges. Such a group member will be entitled to purchase
at the lower rate if, at the time of purchase, the member or his
or her investment dealer furnishes sufficient information for
Putnam Mutual Funds or Putnam Investor Services to verify that
the purchase qualifies for the lower rate.
Interested groups should contact their investment dealer
or Putnam Mutual Funds. The Fund reserves the right to revise
the terms of or to suspend or discontinue group sales at any
time.
EMPLOYEE BENEFIT PLANS; INDIVIDUAL ACCOUNT PLANS. The
term "employee benefit plan" means any plan or arrangement,
whether or not tax-qualified, which provides for the purchase of
Class A shares. The term "affiliated employer" means employers
who are affiliated with each other within the meaning of Section
2(a)(3)(C) of the Investment Company Act of 1940. The term
"individual account plan" means any employee benefit plan whereby
(i) Class A shares are purchased through payroll deductions or
otherwise by a fiduciary or other person for the account of
participants who are employees (or their spouses) of an employer,
or of affiliated employers, and (ii) a separate Investing Account
is maintained in the name of such fiduciary or other person for
the account of each participant in the plan.
The table of sales charges in the Prospectus applies to
sales to employee benefit plans, except that the Fund may sell
Class A shares at net asset value to employee benefit plans,
including individual account plans, of employers or of affiliated
employers which have at least 750 employees to whom such plan is
made available, in connection with a payroll deduction system of
plan funding (or other system acceptable to Putnam Investor
Services) by which contributions or account information for plan
participation are transmitted to Putnam Investor Services by
methods acceptable to Putnam Investor Services. The Fund may
also sell Class A shares at net asset value to employee benefit
plans of employers or of affiliated employers which have at least
750 employees, if such plans are qualified under Section 401 of
the Internal Revenue Code.
Additional information about employee benefit plans and
individual account plans is available from investment dealers or
from Putnam Mutual Funds.
CONTINGENT DEFERRED SALES CHARGES
CLASS A SHARES. Class A shares purchased at net asset
value by shareholders investing $1 million or more, including
purchases pursuant to any Combined Purchase Privilege, Right of
Accumulation or Statement of Intention, are subject to a
contingent deferred sales charge ("CDSC") of 1.00% or 0.50%,
respectively, if redeemed within the first or second year after
purchase. The Class A CDSC is imposed on the lower of the cost
and the current net asset value of the shares redeemed. The CDSC
does not apply to shares sold without a sales charge through
participant-directed qualified retirement plans and shares
purchased by certain investors investing $1 million or more that
have made arrangements with Putnam Mutual Funds and whose dealer
of record waived the commission described in the next paragraph.
Except as stated below, Putnam Mutual Funds pays investment
dealers of record commissions on sales of Class A shares of $1
million or more based on an investor's cumulative purchases of
such shares, including purchases pursuant to any Combined
Purchase Privilege, Right of Accumulation or Statement of
Intention, during consecutive one-year periods beginning with the
date of the initial purchase at net asset value. Such
commissions are paid at the rate of 1.00% of the amount under $3
million, 0.50% of the next $47 million and 0.25% thereafter. On
sales at net asset value to a participant-directed qualified
retirement plan initially investing less than $20 million in
Putnam funds and other investments managed by Putnam Management
or its affiliates (including a plan sponsored by an employer with
more than 750 employees), Putnam Mutual Funds pays commissions on
cumulative purchases during the life of the account at the rate
of 1.00% of the amount under $3 million and 0.50% thereafter. On
sales at net asset value to all other participant-directed
qualified retirement plans, Putnam Mutual Funds pays commissions
on the initial investment and on subsequent net quarterly sales
(gross sales minus gross redemptions during the quarter) at the
rate of 0.15%. Money market fund shares are excluded from all
commission calculations, except for determining the amount
initially invested by a participant-directed qualified retirement
plan. Commissions on sales at net asset value to such plans are
subject to Putnam Mutual Funds' right to reclaim such commissions
if the shares are redeemed within two years.
Different CDSC and commission rates may apply to shares purchased
before April 1, 1994.
CLASS B SHARES. Investors who set up a Systematic
Withdrawal Plan (SWP) for a Class B share account (see "Plans
Available To Shareholders -- Automatic Cash Withdrawal Plan") may
withdraw through the SWP up to 12% of the net asset value of the
account (calculated as set forth below) each year without
incurring any CDSC. Shares not subject to a CDSC (such as shares
representing reinvestment of distributions) will be redeemed
first and will count toward the 12% limitation. If there are
insufficient shares not subject to a CDSC, shares subject to the
lowest CDSC liability will be redeemed next until the 12% limit
is reached. The 12% figure is calculated on a pro rata basis at
the time of the first payment made pursuant to a SWP and
recalculated thereafter on a pro rata basis at the time of each
SWP payment. Therefore, shareholders who have chosen a SWP based
on a percentage of the net asset value of their account of up to
12% will be able to receive SWP payments without incurring a
CDSC. However, shareholders who have chosen a specific dollar
amount (for example, $100 per month from a fund that pays income
distributions monthly) for their periodic SWP payment should be
aware that the amount of that payment not subject to a CDSC may
vary over time depending on the net asset value of their account.
For example, if the net asset value of the account is $10,000 at
the time of payment, the shareholder will receive $100 free of
the CDSC (12% of $10,000 divided by 12 monthly payments).
However, if at the time of the next payment the net asset value
of the account has fallen to $9,400, the shareholder will receive
$94 free of any CDSC (12% of $9,400 divided by 12 monthly
payments) and $6 subject to the lowest applicable CDSC. This SWP
privilege may be revised or terminated at any time.
ALL SHARES. No CDSC is imposed on shares of any class
subject to a CDSC ("CDSC Shares") to the extent that the CDSC
Shares redeemed (i) are no longer subject to the holding period
therefor, (ii) resulted from reinvestment of distributions on
CDSC Shares, or (iii) were exchanged for shares of another Putnam
fund, provided that the shares acquired in such exchange or
subsequent exchanges (including shares of a Putnam money market
fund) will continue to remain subject to the CDSC, if applicable,
until the applicable holding period expires. In determining
whether the CDSC applies to each redemption of CDSC Shares, CDSC
Shares no longer subject to a CDSC and CDSC Shares representing
reinvestment of distributions are redeemed first.
The Fund will waive any CDSC on redemptions, in the case
of individual or Uniform Transfers to Minors Act accounts, in
case of death or disability or for the purpose of paying benefits
pursuant to tax-qualified retirement plans. Such payments
currently include, without limitation, (1) distributions from an
IRA due to death or disability, (2) a return of excess
contributions to an IRA or 401(k) plan, and (3) distributions
from retirement plans qualified under section 401(a) or section
403(b)(7) (a "403(b) plan") of the Internal Revenue Code of 1986,
as amended (the "Code"), due to death, disability, retirement or
separation from service. The Fund will also waive any CDSC in
the case of the death of one joint tenant. These waivers may be
changed at any time. Additional waivers may apply to IRA
accounts opened prior to February 1, 1994.
DISTRIBUTION PLAN
If the Fund or a class of shares of the Fund has adopted a
Distribution Plan, the Prospectus describes the principal
features of the Plan. This Statement contains additional
information which may be of interest to investors.
Continuance of a Plan is subject to annual approval by a
vote of the Trustees, including a majority of the Trustees who
are not interested persons of the Fund and who have no direct or
indirect interest in the Plan or related arrangements (the
"Qualified Trustees"), cast in person at a meeting called for
that purpose. All material amendments to a Plan must be likewise
approved by the Trustees and the Qualified Trustees. No Plan may
be amended in order to increase materially the costs which the
Fund may bear for distribution pursuant to such Plan without also
being approved by a majority of the outstanding voting securities
of the Fund or the relevant class of the Fund, as the case may
be. A Plan terminates automatically in the event of its
assignment and may be terminated without penalty, at any time, by
a vote of a majority of the Qualified Trustees or by a vote of a
majority of the outstanding voting securities of the Fund or the
relevant class of the Fund, as the case may be.
If Plan payments are made to reimburse Putnam Mutual Funds
for payments to dealers based on the average net asset value of
Fund shares attributable to shareholders for whom the dealers are
designated as the dealer of record, "average net asset value"
attributable to a shareholder account means the product of (i)
the Fund's average daily share balance of the account and (ii)
the Fund's average daily net asset value per share (or the
average daily net asset value per share of the class, if
applicable). For administrative reasons, Putnam Mutual Funds may
enter into agreements with certain dealers providing for the
calculation of "average net asset value" on the basis of assets
of the accounts of the dealer's customers on an established day
in each quarter.
INVESTOR SERVICES
SHAREHOLDER INFORMATION
Each time shareholders buy or sell shares, they will
receive a statement confirming the transaction and listing their
current share balance. (Under certain investment plans, a
statement may only be sent quarterly.) Shareholders will receive
a statement confirming reinvestment of distributions in
additional Fund shares (or in shares of other Putnam funds for
Dividends Plus accounts) promptly following the quarter in which
the reinvestment occurs. To help shareholders take full
advantage of their Putnam investment, they will receive a Welcome
Kit and a periodic publication covering many topics of interest
to investors. The Fund also sends annual and semiannual reports
that keep shareholders informed about its portfolio and
performance, and year-end tax information to simplify their
recordkeeping. Easy-to-read, free booklets on special subjects
such as the Exchange Privilege and IRAs are available from Putnam
Investor Services. Shareholders may call Putnam Investor
Services toll-free weekdays at 1-800-225-1581 between 8:30 a.m.
and 7:00 p.m. Boston time for more information, including account
balances.
YOUR INVESTING ACCOUNT
The following information provides more detail concerning
the operation of a Putnam Investing Account. For further
information or assistance, investors should consult Putnam
Investor Services. Shareholders who purchase shares through a
defined contribution plan should note that not all of the
services or features described below may be available to them,
and they should contact their employer for details.
A shareholder may reinvest a recent cash distribution
without a front-end sales charge or without the reinvested shares
being subject to a CDSC, as the case may be, by delivering to
Putnam Investor Services the uncashed distribution check,
endorsed to the order of the Fund. Putnam Investor Services must
receive the properly endorsed check within 30 days after the date
of the check. Upon written notice to shareholders, the Fund may
permit shareholders who receive cash distributions to reinvest
amounts representing returns of capital without a sales charge or
without being subject to the CDSC.
The Investing Account also provides a way to accumulate
shares of the Fund. In most cases, after an initial investment
of $500, a shareholder may send checks to Putnam Investor
Services for $50 or more, made payable to the Fund, to purchase
additional shares at the applicable public offering price next
determined after Putnam Investor Services receives the check.
For Putnam Corporate Asset Trust, the minimum initial investment
is $25,000 and the minimum subsequent investment is $5,000.
Checks must be drawn on a U.S. bank and must be payable in U.S.
dollars.
Putnam Investor Services acts as the shareholder's agent
whenever it receives instructions to carry out a transaction on
the shareholder's account. Upon receipt of instructions that
shares are to be purchased for a shareholder's account, shares
will be purchased through the investment dealer designated by the
shareholder. Shareholders may change investment dealers at any
time by written notice to Putnam Investor Services, provided the
new dealer has a sales agreement with Putnam Mutual Funds.
Shares credited to an account are transferable upon
written instructions in good order to Putnam Investor Services
and may be sold to the Fund as described under "How to buy
shares, sell shares and exchange shares" in the Prospectus.
Money market funds and certain other funds will not issue share
certificates. A shareholder may send any certificates which have
been previously issued to Putnam Investor Services for
safekeeping at no charge to the shareholder.
Putnam Mutual Funds, at its expense, may provide certain
additional reports and administrative material to qualifying
institutional investors with fiduciary responsibilities to assist
these investors in discharging their responsibilities.
Institutions seeking further information about this service
should contact Putnam Mutual Funds, which may modify or terminate
this service at any time.
Putnam Investor Services may make special services
available to shareholders with investments exceeding $1,000,000.
Contact Putnam Investor Services for details.
The Fund pays Putnam Investor Services' fees for
maintaining Investing Accounts.
REINSTATEMENT PRIVILEGE
CLASS A SHARES
An investor who has sold shares to the Fund may reinvest
(within 90 days) the proceeds of such sale in shares of the Fund,
or may be able to reinvest (within 90 days) the proceeds in
shares of the other continuously offered Putnam funds (through
the Exchange Privilege described in the Prospectus and below).
Any such reinvestment would be at the net asset value of the
shares of the fund(s) the investor selects, next determined after
Putnam Mutual Funds receives a Reinstatement Authorization and
will not be subject to any sales charge, including a contingent
deferred sales charge.
CLASS B SHARES
An investor who has sold Class B shares to the Fund may
reinvest (within 90 days) the proceeds of such sale in Class B
shares of the Fund, or may be able to reinvest (within 90 days)
the proceeds in Class B shares of other Putnam funds (through the
Exchange Privilege described in the Prospectus and below). Upon
such reinvestment, the investor would receive Class B shares at
the net asset value next determined after Putnam Mutual Funds
receives a Reinstatement Authorization subject to the applicable
contingent deferred sales charge calculated for this purpose
using the date of the original purchase.
ALL SHARES
Exercise of the Reinstatement Privilege does not alter the
federal income tax treatment of any capital gains realized on a
sale of Fund shares, but to the extent that any shares are sold
at a loss and the proceeds are reinvested in shares of the Fund,
some or all of the loss may be disallowed as a deduction.
Consult your tax adviser.
Investors who desire to exercise this Privilege should
contact their investment dealer or Putnam Investor Services.
EXCHANGE PRIVILEGE
Except as otherwise set forth in this section, by calling
Putnam Investor Services, investors may exchange shares valued up
to $500,000 between accounts with identical registrations,
provided that no certificates are outstanding for such shares and
no address change has been made within the preceding 15 days.
During periods of unusual market changes and shareholder
activity, shareholders may experience delays in contacting Putnam
Investor Services by telephone to exercise the Telephone Exchange
Privilege.
Putnam Investor Services also makes exchanges promptly
after receiving a properly completed Exchange Authorization Form
and, if issued, share certificates. If the shareholder is a
corporation, partnership, agent, or surviving joint owner, Putnam
Investor Services will require additional documentation of a
customary nature. Because an exchange of shares involves the
redemption of Fund shares and reinvestment of the proceeds in
shares of another Putnam fund, completion of an exchange may be
delayed under unusual circumstances if the Fund were to suspend
redemptions or postpone payment for the Fund shares being
exchanged, in accordance with federal securities laws. Exchange
Authorization Forms and prospectuses of the other Putnam funds
are available from Putnam Mutual Funds or investment dealers
having sales contracts with Putnam Mutual Funds. The prospectus
of each fund describes its investment objective(s) and policies,
and shareholders should obtain a prospectus and consider these
objectives and policies carefully before requesting an exchange.
Shares of certain Putnam funds are not available to residents of
all states. The Fund reserves the right to change or suspend the
Exchange Privilege at any time. Shareholders would be notified
of any change or suspension. Additional information is available
from Putnam Investor Services.
Shares of the Fund must be held at least 15 days by the
shareholder desiring an exchange. There is no holding period if
the shareholder acquired the shares to be exchanged through
reinvestment of distributions, transfer from another shareholder,
prior exchange or certain employer-sponsored defined contribution
plans. In all cases, the shares to be exchanged must be
registered on the records of the Fund in the name of the
shareholder desiring the exchange.
Shareholders of other Putnam funds may also exchange their
shares at net asset value for shares of the Fund, as set forth in
the current prospectus of each fund.
For federal income tax purposes, an exchange is a sale on
which the investor generally will realize a capital gain or loss
depending on whether the net asset value at the time of the
exchange is more or less than the investor's cost. The Exchange
Privilege may be revised or terminated at any time. Shareholders
would be notified of any such change or suspension.
DIVIDENDS PLUS
Shareholders may invest the Fund's distributions of net
investment income or distributions combining net investment
income and short-term capital gains in shares of the same class
of another continuously offered Putnam fund (the "receiving
fund") using the net asset value per share of the receiving fund
determined on the date the Fund's distribution is payable. No
sales charge or contingent deferred sales charge will apply to
the purchased shares unless the Fund is a money market fund. The
prospectus of each fund describes its investment objective(s) and
policies, and shareholders should obtain a prospectus and
consider these objective(s) and policies carefully before
investing their distributions in the receiving fund. Shares of
certain Putnam funds are not available to residents of all
states.
The minimum account size requirement for the receiving
fund will not apply if the current value of your account in this
Fund is more than $5,000.
Shareholders of other Putnam funds (except for money
market funds, whose shareholders must pay a sales charge or
become subject to a contingent deferred sales charge) may also
use their distributions to purchase shares of the Fund at net
asset value.
For federal tax purposes, distributions from the Fund
which are reinvested in another fund are treated as paid by the
Fund to the shareholder and invested by the shareholder in the
receiving fund and thus, to the extent comprised of taxable
income and deemed paid to a taxable shareholder, are taxable.
The Dividends PLUS program may be revised or terminated at
any time.
PLANS AVAILABLE TO SHAREHOLDERS
The Plans described below are fully voluntary and may be
terminated at any time without the imposition by the Fund or
Putnam Investor Services of any penalty. All Plans provide for
automatic reinvestment of all distributions in additional shares
of the Fund at net asset value. The Fund, Putnam Mutual Funds or
Putnam Investor Services may modify or cease offering these Plans
at any time.
AUTOMATIC CASH WITHDRAWAL PLAN. An investor who owns or
buys shares of the Fund valued at $10,000 or more at the current
public offering price may open a Withdrawal Plan and have a
designated sum of money ($50 or more) paid monthly, quarterly,
semi-annually or annually to the investor or another person.
(Payments from the Fund can be combined with payments from other
Putnam funds into a single check through a Designated Payment
Plan.) Shares are deposited in a Plan account, and all
distributions are reinvested in additional shares of the Fund at
net asset value (except where the Plan is utilized in connection
with a charitable remainder trust). Shares in a Plan account are
then redeemed at net asset value to make each withdrawal payment.
Payment will be made to any person the investor designates;
however, if shares are registered in the name of a trustee or
other fiduciary, payment will be made only to the fiduciary,
except in the case of a profit-sharing or pension plan where
payment will be made to a designee. As withdrawal payments may
include a return of principal, they cannot be considered a
guaranteed annuity or actual yield of income to the investor.
The redemption of shares in connection with a Withdrawal Plan
generally will result in a gain or loss for tax purposes. Some
or all of the losses realized upon redemption may be disallowed
pursuant to the so-called wash sale rules if shares of the same
fund from which shares were redeemed are purchased (including
through the reinvestment of fund distributions) within a period
beginning 30 days before, and ending 30 days after, such
redemption. In such a case, the basis of the replacement shares
will be increased to reflect the disallowed loss. Continued
withdrawals in excess of income will reduce and possibly exhaust
invested principal, especially in the event of a market decline.
The maintenance of a Withdrawal Plan concurrently with purchases
of additional shares of the Fund would be disadvantageous to the
investor because of the sales charge payable on such purchases.
For this reason, the minimum investment accepted while a
Withdrawal Plan is in effect is $1,000, and an investor may not
maintain a Plan for the accumulation of shares of the Fund (other
than through reinvestment of distributions) and a Withdrawal Plan
at the same time. The cost of administering these Plans for the
benefit of those shareholders participating in them is borne by
the Fund as an expense of all shareholders. The Fund, Putnam
Mutual Funds or Putnam Investor Services may terminate or change
the terms of the Withdrawal Plan at any time. A Withdrawal Plan
will be terminated if communications mailed to the shareholder
are returned as undeliverable.
Investors should consider carefully with their own
financial advisers whether the Plan and the specified amounts to
be withdrawn are appropriate in their circumstances. The Fund
and Putnam Investor Services make no recommendations or
representations in this regard.
TAX QUALIFIED RETIREMENT PLANS; 403(B) AND SEP PLANS.
(NOT OFFERED BY FUNDS INVESTING PRIMARILY IN TAX-EXEMPT
SECURITIES.) Investors may purchase shares of the Fund through
the following Tax Qualified Retirement Plans, available to
qualified individuals or organizations:
Standard and variable profit-sharing (including 401(k))
and money purchase pension plans; and
Individual Retirement Account Plans (IRAs).
Each of these Plans has been qualified as a prototype plan
by the Internal Revenue Service. Putnam Investor Services will
furnish services under each plan at a specified annual cost.
Putnam Fiduciary Trust Company serves as trustee under each of
these Plans.
Forms and further information on these Plans are available
from investment dealers or from Putnam Mutual Funds. In
addition, specialized professional plan administration services
are available on an optional basis; contact Putnam Defined
Contribution Plan Services at 1-800-225-2465, extension 8600.
A 403(b) Retirement Plan is available for employees of
public school systems and organizations which meet the
requirements of Section 501(c)(3) of the Internal Revenue Code.
Forms and further information on the 403(b) Plan are also
available from investment dealers or from Putnam Mutual Funds.
Shares of the Fund may also be used in simplified employee
pension (SEP) plans. For further information on the Putnam
prototype SEP plan, contact an investment dealer or Putnam Mutual
Funds.
Consultation with a competent financial and tax adviser
regarding these Plans and consideration of the suitability of
Fund shares as an investment under the Employee Retirement Income
Security Act of 1974 or otherwise is recommended.
SIGNATURE GUARANTEES
Redemption requests for shares having a net asset value of
$100,000 or more must be signed by the registered owners or their
legal representatives and must be guaranteed by a bank,
broker/dealer, municipal securities dealer or broker, government
securities dealer or broker, credit union, national securities
exchange, registered securities association, clearing agency,
savings association or trust company, provided such institution
is acceptable under and conforms with Putnam Fiduciary Trust
Company's signature guarantee procedures. A copy of such
procedures is available upon request. If you want your
redemption proceeds sent to an address other than your address as
it appears on Putnam's records, you must provide a signature
guarantee. Putnam Investor Services usually requires additional
documentation for the sale of shares by a corporation,
partnership, agent or fiduciary, or a surviving joint owner.
Contact Putnam Investor Services for details.
SUSPENSION OF REDEMPTIONS
The Fund may not suspend shareholders' right of
redemption, or postpone payment for more than seven days, unless
the New York Stock Exchange is closed for other than customary
weekends or holidays, or if permitted by the rules of the
Securities and Exchange Commission during periods when trading on
the Exchange is restricted or during any emergency which makes it
impracticable for the Fund to dispose of its securities or to
determine fairly the value of its net assets, or during any other
period permitted by order of the Commission for protection of
investors.
SHAREHOLDER LIABILITY
Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of
the Fund. However, the Agreement and Declaration of Trust
disclaims shareholder liability for acts or obligations of the
Fund and requires that notice of such disclaimer be given in each
agreement, obligation, or instrument entered into or executed by
the Fund or the Trustees. The Agreement and Declaration of Trust
provides for indemnification out of Fund property for all loss
and expense of any shareholder held personally liable for the
obligations of the Fund. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is
limited to circumstances in which the Fund would be unable to
meet its obligations. The likelihood of such circumstances is
remote.
STANDARD PERFORMANCE MEASURES
Yield and total return data for the Fund may from time to
time be presented in Part I of this Statement and in
advertisements. In the case of funds with more than one class of
shares, all performance information is calculated separately for
each class. The data is calculated as follows.
Total return for one-, five- and ten-year periods (or for
such shorter periods as the Fund has been in operation or shares
of the relevant class have been outstanding) is determined by
calculating the actual dollar amount of investment return on a
$1,000 investment in the Fund made at the beginning of the
period, at the maximum public offering price for Class A shares
and net asset value for other classes of shares, and then
calculating the annual compounded rate of return which would
produce that amount. Total return for a period of one year is
equal to the actual return of the Fund during that period. Total
return calculations assume deduction of the Fund's maximum sales
charge or contingent deferred sales charge, if applicable, and
reinvestment of all Fund distributions at net asset value on
their respective reinvestment dates.
The Fund's yield is presented for a specified thirty-day
period (the "base period"). Yield is based on the amount
determined by (i) calculating the aggregate amount of dividends
and interest earned by the Fund during the base period less
expenses accrued for that period, and (ii) dividing that amount
by the product of (A) the average daily number of shares of the
Fund outstanding during the base period and entitled to receive
dividends and (B) the per share maximum public offering price for
Class A shares and net asset value for other classes of shares on
the last day of the base period. The result is annualized on a
compounding basis to determine the yield. For this calculation,
interest earned on debt obligations held by the Fund is generally
calculated using the yield to maturity (or first expected call
date) of such obligations based on their market values (or, in
the case of receivables-backed securities such as GNMA's, based
on cost). Dividends on equity securities are accrued daily at
their stated dividend rates.
If the Fund is a money market fund, yield is computed by
determining the percentage net change, excluding capital changes,
in the value of an investment in one share over the seven-day
period for which yield is presented (the "base period"), and
multiplying the net change by 365/7 (or approximately 52 weeks).
Effective yield represents a compounding of the yield by adding 1
to the number representing the percentage change in value of the
investment during the base period, raising that sum to a power
equal to 365/7, and subtracting 1 from the result.
If the Fund is a tax-exempt fund, the tax-equivalent yield
during the base period may be presented for shareholders in one
or more stated tax brackets. Tax-equivalent yield is calculated
by adjusting the tax-exempt yield by a factor designed to show
the approximate yield that a taxable investment would have to
earn to produce an after-tax yield equal, for that shareholder,
to the tax-exempt yield. The tax-equivalent yield will differ
for shareholders in other tax brackets.
At times, Putnam Management may reduce its compensation or
assume expenses of the Fund in order to reduce the Fund's
expenses. The per share amount of any such fee reduction or
assumption of expenses during the Fund's past ten fiscal years
(or for the life of the Fund, if shorter) is reflected in the
table in the section entitled "Financial history" in the
Prospectus. Any such fee reduction or assumption of expenses
would increase the Fund's yield and total return during the
period of the fee reduction or assumption of expenses.
All data are based on past performance and do not predict
future results.
COMPARISON OF PORTFOLIO PERFORMANCE
Independent statistical agencies measure the Fund's
investment performance and publish comparative information
showing how the Fund, and other investment companies, performed
in specified time periods. Three agencies whose reports are
commonly used for such comparisons are set forth below. From
time to time, the Fund may distribute these comparisons to its
shareholders or to potential investors. THE AGENCIES LISTED
BELOW MEASURE PERFORMANCE BASED ON THEIR OWN CRITERIA RATHER THAN
ON THE STANDARDIZED PERFORMANCE MEASURES DESCRIBED IN THE
PRECEDING SECTION.
LIPPER ANALYTICAL SERVICES, INC. distributes mutual fund
rankings monthly. The rankings are based on total return
performance calculated by Lipper, reflecting generally
changes in net asset value adjusted for reinvestment of
capital gains and income dividends. They do not reflect
deduction of any sales charges. Lipper rankings cover a
variety of performance periods, for example year-to-date,
1-year, 5-year, and 10-year performance. Lipper
classifies mutual funds by investment objective and asset
category.
MORNINGSTAR, INC. distributes mutual fund ratings twice a
month. The ratings are divided into five groups:
highest, above average, neutral, below average and lowest.
They represent a fund's historical risk/reward ratio
relative to other funds with similar objectives. The
performance factor is a weighted-average assessment of the
Fund's 3-year, 5-year, and 10-year total return
performance (if available) reflecting deduction of
expenses and sales charges. Performance is adjusted using
quantitative techniques to reflect the risk profile of the
fund. The ratings are derived from a purely quantitative
system that does not utilize the subjective criteria
customarily employed by rating agencies such as Standard &
Poor's Corporation and Moody's Investor Service, Inc.
CDA/WIESENBERGER'S MANAGEMENT RESULTS publishes mutual
fund rankings and is distributed monthly. The rankings
are based entirely on total return calculated by
Weisenberger for periods such as year-to-date, 1-year,
3-year, 5-year and 10-year. Mutual funds are ranked in
general categories (e.g., international bond,
international equity, municipal bond, and maximum capital
gain). Weisenberger rankings do not reflect deduction of
sales charges or fees.
Independent publications may also evaluate the Fund's
performance. Certain of those publications are listed below, at
the request of Putnam Mutual Funds, which bears full
responsibility for their use and the descriptions appearing
below. From time to time the Fund may distribute evaluations by
or excerpts from these publications to its shareholders or to
potential investors. The following illustrates the types of
information provided by these publications.
BUSINESS WEEK publishes mutual fund rankings in its
Investment Figures of the Week column. The rankings are
based on 4-week and 52-week total return reflecting
changes in net asset value and the reinvestment of all
distributions. They do not reflect deduction of any sales
charges. Funds are not categorized; they compete in a
large universe of over 2000 funds. The source for
rankings is data generated by Morningstar, Inc.
INVESTOR'S BUSINESS DAILY publishes mutual fund rankings
on a daily basis. The rankings are depicted as the top 25
funds in a given category. The categories are based
loosely on the type of fund, e.g., growth funds, balanced
funds, U.S. government funds, GNMA funds, growth and
income funds, corporate bond funds, etc. Performance
periods for sector equity funds can vary from 4 weeks to
39 weeks; performance periods for other fund groups vary
from 1 year to 3 years. Total return performance reflects
changes in net asset value and reinvestment of dividends
and capital gains. The rankings are based strictly on
total return. They do not reflect deduction of any sales
charges. Performance grades are conferred from A+ to E.
An A+ rating means that the fund has performed within the
top 5% of a general universe of over 2000 funds; an A
rating denotes the top 10%; an A- is given to the top 15%,
etc.
BARRON'S periodically publishes mutual fund rankings. The
rankings are based on total return performance provided by
Lipper Analytical Services. The Lipper total return data
reflects changes in net asset value and reinvestment of
distributions, but does not reflect deduction of any sales
charges. The performance periods vary from short-term
intervals (current quarter or year-to-date, for example)
to long-term periods (five-year or ten-year performance,
for example). Barron's classifies the funds using the
Lipper mutual fund categories, such as Capital
Appreciation Funds, Growth Funds, U.S. Government Funds,
Equity Income Funds, Global Funds, etc. Occasionally,
Barron's modifies the Lipper information by ranking the
funds in asset classes. "Large funds" may be those with
assets in excess of $25 million; "small funds" may be
those with less than $25 million in assets.
THE WALL STREET JOURNAL publishes its Mutual Fund
Scorecard on a daily basis. Each Scorecard is a ranking
of the top-15 funds in a given Lipper Analytical Services
category. Lipper provides the rankings based on its total
return data reflecting changes in net asset value and
reinvestment of distributions and not reflecting any sales
charges. The Scorecard portrays 4-week, year-to-date,
one-year and 5-year performance; however, the ranking is
based on the one-year results. The rankings for any given
category appear approximately once per month.
FORTUNE magazine periodically publishes mutual fund
rankings that have been compiled for the magazine by
Morningstar, Inc. Funds are placed in stock or bond fund
categories (for example, aggressive growth stock funds,
growth stock funds, small company stock funds, junk bond
funds, Treasury bond funds, etc.), with the top-10 stock
funds and the top-5 bond funds appearing in the rankings.
The rankings are based on 3-year annualized total return
reflecting changes in net asset value and reinvestment of
distributions and not reflecting sales charges.
Performance is adjusted using quantitative techniques to
reflect the risk profile of the fund.
MONEY magazine periodically publishes mutual fund rankings
on a database of funds tracked for performance by Lipper
Analytical Services. The funds are placed in 23 stock or
bond fund categories and analyzed for five-year risk
adjusted return. Total return reflects changes in net
asset value and reinvestment of all dividends and capital
gains distributions and does not reflect deduction of any
sales charges. Grades are conferred (from A to E): the
top 20% in each category receive an A, the next 20% a B,
etc. To be ranked, a fund must be at least one year old,
accept a minimum investment of $25,000 or less and have
had assets of at least $25 million as of a given date.
FINANCIAL WORLD publishes its monthly Independent
Appraisals of Mutual Funds, a survey of approximately 1000
mutual funds. Funds are categorized as to type, e.g.,
balanced funds, corporate bond funds, global bond funds,
growth and income funds, U.S. government bond funds, etc.
To compete, funds must be over one year old, have over $1
million in assets, require a maximum of $10,000 initial
investment, and should be available in at least 10 states
in the United States. The funds receive a composite past
performance rating, which weighs the intermediate- and
long-term past performance of each fund versus its
category, as well as taking into account its risk, reward
to risk, and fees. An A+ rated fund is one of the best,
while a D-rated fund is one of the worst. The source for
Financial World rating is Schabacker investment management
in Rockville, MD.
FORBES magazine periodically publishes mutual fund ratings
based on performance over at least two bull and bear
market cycles. The funds are categorized by type,
including stock and balanced funds, taxable bond funds,
municipal bond funds, etc. Data sources include Lipper
Analytical Services and CDA Investment Technologies. The
ratings are based strictly on performance at net asset
value over the given cycles. Funds performing in the top
5% receive an A+ rating; the top 15% receive an A rating;
and so on until the bottom 5% receive an F rating. Each
fund exhibits two ratings, one for performance in "up"
markets and another for performance in "down" markets.
KIPLINGER'S PERSONAL FINANCE MAGAZINE (formerly Changing
Times), periodically publishes rankings of mutual funds
based on one-, three- and five-year total return
performance reflecting changes in net asset value and
reinvestment of dividends and capital gains and not
reflecting deduction of any sales charges. Funds are
ranked by tenths: a rank of 1 means that a fund was among
the highest 10% in total return for the period; a rank of
10 denotes the bottom 10%. Funds compete in categories of
similar funds--aggressive growth funds, growth and income
funds, sector funds, corporate bond funds, global
governmental bond funds, mortgage-backed securities funds,
etc. Kiplinger's also provides a risk-adjusted grade in
both rising and falling markets. Funds are graded against
others with the same objective. The average weekly total
return over two years is calculated. Performance is
adjusted using quantitative techniques to reflect the risk
profile of the fund.
U.S. NEWS AND WORLD REPORT periodically publishes mutual
fund rankings based on an overall performance index (OPI)
devised by Kanon Bloch Carre & Co., a Boston research
firm. Over 2000 funds are tracked and divided into 10
equity, taxable bond and tax-free bond categories. Funds
compete within the 10 groups and three broad categories.
The OPI is a number from 0-100 that measures the relative
performance of funds at least three years old over the
last 1, 3, 5 and 10 years and the last six bear markets.
Total return reflects changes in net asset value and the
reinvestment of any dividends and capital gains
distributions and does not reflect deduction of any sales
charges. Results for the longer periods receive the most
weight.
THE 100 BEST MUTUAL FUNDS YOU CAN BUY (1992), authored by
Gordon K. Williamson. The author's list of funds is
divided into 12 equity and bond fund categories, and the
100 funds are determined by applying four criteria.
First, equity funds whose current management teams have
been in place for less than five years are eliminated.
(The standard for bond funds is three years.) Second, the
author excludes any fund that ranks in the bottom 20
percent of its category's risk level. Risk is determined
by analyzing how many months over the past three years the
fund has underperformed a bank CD or a U.S. Treasury bill.
Third, a fund must have demonstrated strong results for
current three-year and five-year performance. Fourth, the
fund must either possess, in Mr. Williamson's judgment,
"excellent" risk-adjusted return or "superior" return with
low levels of risk. Each of the 100 funds is ranked in
five categories: total return, risk/volatility,
management, current income and expenses. The rankings
follow a five-point system: zero designates "poor"; one
point means "fair"; two points denote "good"; three points
qualify as a "very good"; four points rank as "superior";
and five points mean "excellent."
In addition, Putnam Mutual Funds may distribute to
shareholders or prospective investors illustrations of the
benefits of reinvesting tax-exempt or tax-deferred distributions
over specified time periods, which may include comparisons to
fully taxable distributions. These illustrations use
hypothetical rates of tax-advantaged and taxable returns and are
not intended to indicate the past or future performance of any
fund.
DEFINITIONS
"Putnam Management" -- Putnam Investment Management,
Inc., the Fund's investment
manager.
"Putnam Mutual Funds" -- Putnam Mutual Funds Corp., the
Fund's principal underwriter.
"Putnam Fiduciary Trust -- Putnam Fiduciary Trust Company,
Company" the Fund's custodian.
"Putnam Investor Services" -- Putnam Investor Services, a
division of Putnam Fiduciary
Trust Company, the Fund's
investor servicing agent.
<PAGE>
PUTNAM NEW YORK TAX EXEMPT INCOME
TRUST
PUTNAM NEW YORK TAX EXEMPT MONEY MARKET FUND
FORM N-1A
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Index to Financial Statements and Supporting
Schedules:
(1) Incorporated by reference to Post-effective
Amendment No. 15 to the Putnam New York Tax
Exempt Income Fund's Registration Statement,
File No. 2-83909.
Incorporated by reference to Post-Effective
Amendment No. 8 to the Putnam New York Tax
Exempt Money Market Fund's Registration
Statement, File No. 33-17344
- -------------------
(a) Incorporated by reference into Parts A and
B.
(b) Included in Part A.
(b) Exhibits:
1. Agreement and Declaration of Trust, as
amended and restated November 9, 1992, for
Putnam New York Tax Exempt Income Fund --
Incorporated by reference to Post-Effective
Amendment No. 13 to the Registrant's
Registration Statement.
Agreement and Declaration of Trust, as
amended and restated July 13, 1992, for
Putnam New York Tax Exempt Money Market Fund
-- Incorporated by reference to Post-
Effective Amendment No. 6 to the Registrant's
Registration Statement.
2. By-Laws, as amended through September 9, 1993
for Putnam New York Tax Exempt Income Fund
and Putnam New York Tax Exempt Money Market
Fund -- Incorporated by reference to Post-
Effective Amendment No. 15 to the
Registrant's Registration Statement.
3. Not applicable.
4a. Class A Specimen share certificate for Putnam
New York Tax Exempt Income Fund --
Incorporated by reference to Post-Effective
Amendment No. 13 to the Registrant's
Registration Statement.
Class B Specimen share certificate
for Putnam New York Tax Exempt Income Fund --
Incorporated by reference to Post-Effective
Amendment No. 13 to the Registrant's
Registration Statement.
4b . Portions of Agreement and Declaration of
Trust relating to Shareholders' Rights for Putnam
New York Tax Exempt Income Fund -- Incorporated
by reference to Post-Effective Amendment No. 15 to
the Registrant's Registration Statement.
Portions of Agreement and Declaration of
Trust relating to Shareholders' Rights for
Putnam New York Tax Exempt Money Market Fund
-- Incorporated by reference to Post-
Effective Amendment No. 8 to the Registrant's
Registration Statement.
4c . Portions of By-Laws Relating to
Shareholders' Rights for Putnam New York Tax Exempt
Income Fund -- Incorporated by reference to
Post-Effective Amendment No. 15 to the Registrant's
Registration Statement.
Portions of By-Laws Relating to Shareholders'
Rights for Putnam New York Tax Exempt
Money Market Fund -- Incorporated by
reference to Post-Effective Amendment No. 8
to the Registrant's Registration
Statement.
5. Copy of Management Contract dated July 11,
1991 for Putnam New York Tax Exempt Income
Fund -- Incorporated by reference to Post-
Effective Amendment No. 12 to the
Registrant's Registration Statement.
Copy of Management Contract dated July 9,
1992 for Putnam New York Tax Exempt Money
Market Fund -- Incorporated by reference to
Post-Effective Amendment No. 6 to the
Registrant's Registration Statement.
Form of Management Contract for Putnam New
York Intermediate Tax Exempt Fund dated ,
1994 -- Exhibit 1.
6a. Copy of Distributor's Contract dated January
1, 1993 for Putnam New York Tax Exempt Income
Fund -- Incorporated by reference to Post-
Effective Amendment No. 13 to the
Registrant's Registration Statement.
Copy of Distributor's Contract dated
September 9, 1988 for Putnam New York Tax
Exempt Money Market Fund -- Incorporated by
reference to Post-Effective Amendment No. 2
to the Registrant's Registration Statement.
Form of Distributor's Contract dated ,
1994 for Putnam New York Intermediate Tax
Exempt Fund -- Exhibit 2
6b. Copy of Specimen Dealer Sales Contract for
Putnam New York Tax Income Fund and for
Putnam New York Tax Exempt Money Market Fund
-- Incorporated by reference to Post-
Effective Amendments No. 15 and No. 8,
respectively, to the Registrants'
Registration Statement.
6c. Specimen Financial Institution Sales Contract
for Putnam New York Tax Exempt Income Fund
and Putnam New York Tax Exempt Money Market
Fund -- Incorporated by reference to Post-
Effective Amendments No. 15 and No. 8,
respectively, to the Registrants'
Registration Statement.
7. Not applicable.
8. Copy of Custodian Agreement with Putnam
Fiduciary Trust Company dated May 3, 1991, as
amended July 13, 1992 for Putnam New York Tax
Exempt Income Fund and Putnam New York Tax
Exempt Money Market Fund -- Incorporated
by reference to Post-Effective Amendments No.
15 and No. 8, respectively, to the
Registrants' Registration Statement.
9. Copy of Investor Servicing Agreement dated
June 3, 1991 for Putnam New York Tax Exempt
Income Fund -- Incorporated by reference to
Post-Effective Amendment No. 12 to the
Registrant's Registration Statement.
Copy of Investor Servicing Agreement dated
June 3, 1991 for Putnam New York Tax Exempt
Income Fund -- Incorporated by reference to
Post-Effective Amendment No. 5 to the
Registrant's Registration Statement.
10. Opinion of Ropes & Gray, including consent
for Putnam New York Tax Exempt Income Fund --
Incorporated by reference to Pre-Effective
Amendment No. 1 to the Registrant's
Registration Statement.
Opinion of Ropes & Gray, including consent
for Putnam New York Tax Exempt Money Market
Fund -- Incorporated by reference to Pre-
Effective Amendment No. 8 to the Registrant's
Registration Statement.
11. Not applicable.
12. Not applicable.
13. Investment Letter from Putnam Investment
Management, Inc. to the Class A shares of
Putnam New York Tax Exempt Income Fund --
Incorporated by reference to the Registrant's
Pre-Effective Amendment No. 1 to the
Registrant's Registration Statement.
Investment Letter from Putnam Investment
Management, Inc. to the Class B shares of
Putnam New York Tax Exempt Income Fund --
Incorporated by reference to Post-Effective
Amendment No. 13 to the Registrant's
Registration Statement.
Investment Letter from The Putnam Management
Company, Inc. to Putnam New York Tax Exempt
Money Market Fund -- Incorporated by
reference to the Registrant's Initial
Registration Statement.
14. Not applicable.
15a. Copy of Class A Distribution Plan dated
January 1, 1993 for Putnam New York Tax
Exempt Income Fund -- Incorporated by
reference to Post-Effective Amendment No. 13
to the Registrant's Registration Statement.
Copy of Class B Distribution Plan dated
January 1, 1993 for Putnam New York Tax
Exempt Income Fund -- Incorporated by
reference to Post-Effective Amendment No. 13
to the Registrant's Registration Statement.
Copy of Distribution Plan, as adopted
September 11, 1987, and as amended January 1,
1990, for Putnam New York Tax Exempt Money
Market Fund -- Incorporated by reference to
Post-Effective Amendment No. 3 to the
Registrant's Registration Statement.
Form of Class A Distribution Plan and
Agreement for Putnam New York Intermediate
Tax Exempt Fund -- Exhibit 3.
Form of Class A Distribution Plan and
Agreement for Putnam New York Intermediate
Tax Exempt Fund -- Exhibit 4.
15b. Copy of Specimen Dealer Service Agreement for
Putnam New York Tax Exempt Money Market Fund
-- Incorporated by reference to Post-
Effective Amendment No. 5 to the Registrant's
Registration Statement.
15c. Copy of Specimen Financial Institution
Service Agreement for Putnam New York Tax
Exempt Money Market Fund -- Incorporated by
reference to Post-Effective Amendment No.
to the Registrant's Registration Statement.
16. Schedules for computation of performance
quotations for Putnam New York Tax Exempt
Income Fund -- Incorporated by reference
to Post-Effective Amendment No. 15 to the
Registrant's Registration Statement.
Schedules for computation of performance
quotations for Putnam New York Tax Exempt
Money Market Fund -- Incorporated by
reference to Post-Effective Amendment No. 8
to the Registrant's Registration
Statement.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH
REGISTRANT
It is expected that, as of the effective date of
this Registration Statement, Putnam Investments, Inc. will own
all of the outstanding shares of Putnam New York Intermediate Tax
Exempt Fund. Also, as of February 28, 1994, Putnam Investments,
Inc. owned 98.8% of the outstanding shares of Putnam Capital
Growth Fund, 97.1% of the outstanding shares of Putnam Asset
Allocation: Conservative Portfolio, 91.3% of the outstanding
shares of Putnam Capital Appreciation Fund, 82.6% of the
outstanding shares of Putnam Asset Allocation: Growth Portfolio,
75.4% of the outstanding shares of Putnam Growth Fund, 72.7% of
the outstanding shares of Putnam Research Analysts Fund, 60.1% of
the outstanding shares of Putnam Overseas Growth Fund and 46.1%
of the outstanding shares of the Putnam Asset Allocation:
Balanced Portfolio, and therefore may be deemed to control these
Funds.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
As of January 31, 1994 the number of shares of
beneficial interest of the Registrants held of record were as
follows:
Number of
Record Holders
---------------
Putnam New York Tax Exempt Income Fund
- Class A shares 53,528
Putnam New York Tax Exempt Income Fund
- Class B shares 5,558
Putnam New York Tax Exempt Money Market Fund 2,983
ITEM 27. INDEMNIFICATION
The information required by this item is incorporated
by reference from Putnam New York Tax Exempt Income Fund's
initial Registration Statement on Form N-1A under the Investment
Company Act of 1940 (File No. 811-3741).
The information required by this item is incorporated
by reference from Putnam New York Tax Exempt Money Market Fund's
initial Registration Statement on Form N-1A under the Investment
Company Act of 1940 (File No. 811-5335).
<PAGE>
<PAGE>
<PAGE>
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Except as set forth below, the directors and officers
of the Registrant's investment adviser have been engaged during
the past two fiscal years in no business, vocation or employment
of a substantial nature other than as directors or officers of
the investment adviser or certain of its corporate affiliates.
Certain officers of the investment adviser serve as officers of
some or all of the Putnam funds. The address of the investment
adviser, its corporate affiliates and the Putnam Funds is One
Post Office Square, Boston, Massachusetts 02109.
NAME NON-PUTNAM BUSINESS AND OTHER
CONNECTIONS
Christopher J. Ainley Prior to March, 1992, Vice President,
Vice President J.P. Morgan Investment Management,
522 Fifth Avenue, New York, NY 10021
Gail S. Attridge Prior to November, 1993, International
Vice President Analyst, Keystone Custodian Funds,
200 Berkley Street, Boston, MA 02116
Dolores Snyder Bamford Prior to June, 1992, Research
Assistant Vice President Associate, Fidelity Investments, 82
Devonshire St., Boston, MA 02109
Charles L. Beach Prior to May, 1992, Senior Analyst,
Assistant Vice President Dean Witter Investment Banking,
One Financial Center,
Boston, MA 02110
Edward P. Bousa Prior to October, 1992, Vice President
Senior Vice President and Portfolio Manager, Fidelity
Investments, 82 Devonshire St.,
Boston, MA 02109
Kathleen M. Brant Prior to June, 1992, Global Bond
Vice President Trader, Fidelity Investments,
82 Devonshire St., Boston, MA 02109
Leslie J. Burke Prior to February, 1992, Research
Assistant Vice President Associate, Fidelity Investments, 82
Devonshire St., Boston, MA 02109
Peter Carman Prior to August, 1993, Chief
Senior Managing Director Investment Officer, Chairman, U.S.
Equity Investment Policy Committee,
Member of Board of Directors,
Sanford C. Bernstein & Co., Inc.,
767 Fifth Avenue, New York, NY 10153
Anna Coppola Prior to May, 1993, Associate,
Assistant Vice President Heidrick & Struggles, One Post
Office Square, Boston, MA 02109
Kathleen Crews Prior to February, 1993, Assistant
Assistant Vice President Vice President, Alliance Capital
Management, L.P., 1345 Avenue of
the Americas, New York, NY 10105
York, NY
Kenneth L. Daly Prior to September, 1993, Vice
Senior Vice President President, Fidelity Investments,
82 Devonshire St., Boston, MA 02109
Richard B. England Prior to December, 1992, Investment
Vice President Officer, Aetna Equity Investors,
151 Farmington Avenue, Hartford,
CT, 06156
Joseph F. Feeney, Jr. Prior to June, 1992, Assistant
Assistant Vice President Vice President, Bank of Boston,
100 Federal St., Boston, MA 02110
Jonathan H. Francis Prior to March, 1993, President,
Assistant Vice President J.H. Francis & Co., N. Pheasant
Lane, Westport, CT 06880
Judy P. Frodigh Prior to June, 1992, Manager, Human
Vice President Resources, Massachusetts Financial
Services, Inc., 500 Boylston St.,
Boston, MA 02110
James F. Giblin Prior to April, 1993, Managing
Senior Vice President Director, CIGNA Corp. Investments,
Inc., 900 Cottage Grove Rd.
Bloomfield, CT 06152
Thomas C. Goggins Prior to June, 1993, Portfolio
Vice President Manager, Transamerica Investment
Services, 1150 South Olive Street,
Los Angeles, CA 90015
Corey A. Griffin Prior to June, 1992, Vice President,
Assistant Vice President Coldwell Banker Commercial Real
Estate
Services, 70-80 Lincoln St.,
Boston,
MA 02111
<PAGE>
Daniel J. Grim Prior to May 1993, Consultant,
Vice President Connie
Lee, 2445 M Street N.W.,
Washington, D.C. 20037;
Chief Operating Officer, Boardwalk,
Inc., Minocqua, WI 54548
Billy P. Han Prior to December, 1992, Vice
Assistant Vice President President, Scudder, Stevens & Clark,
Inc., 160 Federal Street, Boston, MA
02110
Stephon A. Jackson Prior to December, 1992, nalyst,
Assistant Vice President Arco Investment Management Co.,
515 South Flower Street,
Los Angeles, CA 91030
David J. Jallits Prior to August, 1992, Vice President,
Vice President Citibank Corp., 55 Water Street,
New York, NY 10043
Jeffrey L. Knight Prior to March, 1993, Teacher,
Vice President Greater Newburyport Educational
Collaborative, Newburyport, MA 01950
Jeffrey J. Kobylarz Prior to May, 1993, Credit Analyst,
Vice President Dean Witter Reynolds, Inc.,
Two World Trade Center,
New York, NY 10048
Ami T. Kuan Prior to June, 1992, Equity Analyst,
Assistant Vice President Fidelity Investments, 82 Devonshire
St., Boston, MA 02109
Lawrence J. Lasser Director, Marsh & McLennan Companies,
President, Director Inc., 1221 Avenue of the Americas,
and Chief Executive New York, NY 10020
Officer Director, INROADS/Central New England,
Inc., 99 Bedford St., Boston,
MA 02111
Robert A. Madore Prior to October, 1992, Senior Vice
Vice President President and Portfolio Manager,
Fiduciary Captial Management, Inc.
51 Sherman Hill Rd., Woodbury,
CT 06798
Frederick S. Marius Prior to September, 1992, Associate
Assistant Vice President Attorney at Skadden Arps, One
Associate Counsel Beacon St., Boston, MA 02109
<PAGE>
Andrew S. Matteis Prior to March, 1993, Vice President,
Vice President Fitch Investors Service, One
State Street Plaza, New York
NY 10004
Michael J. Mufson Prior to June, 1993, Senior Equity
Vice President Analyst, Stein Roe & Farnum,
One South Wacker Drive, Chicago, Il
60606
Warren Naphtal Prior to January, 1994, Managing
Senior Vice President Director, Continental Bank, 231
So. Lasalle St., Chicago, IL 60697
Jeffrey W. Netols Prior to February, 1993, Portfolio
Senior Vice President Analyst, Associated Bank,
200 N. Adams, Greenbay, WI 54307
Brian O'Keefe Prior to December, 1993, Vice
Vice President President - Foreign Exchange
Trader, Bank of Boston, 100 Federal
Street, Boston, MA 02109
Pat G. Patel Prior to April, 1993, Regional
Assistant Vice President Manager, Zacks Investment Research,
155 N. Wacker Drive, Chicago,
IL 60606
George Putnam Chairman and Director, Putnam Mutual
Chairman and Director Funds Corp.
Director, The Boston Company, Inc.,
One Boston Place, Boston, MA 02108
Director, Boston Safe Deposit and
Trust Company, One Boston Place,
Boston, MA 02108
Director, Freeport-McMoRan, Inc., 200
Park Avenue, New York, NY 10166
Director, General Mills, Inc., 9200
Wayzata Boulevard, Minneapolis,
MN 55440
Director, Houghton Mifflin Company,
One Beacon Street, Boston, MA 02108
Director, Marsh & McLennan Companies,
Inc., 1221 Avenue of the Americas,
New York, NY 10020
Director, Rockefeller Group, Inc.,
1230 Avenue of the Americas,
New York, NY 10020
<PAGE>
Christopher A. Ray Prior to January, 1993, Vice President
Vice President and Portfolio Manager at Scudder,
Stevens & Clark, Inc., 160 Federal
Street, Boston, MA 02110
Charles A. Ruys de Perez Prior to August, 1992, Associate,
Vice President and Debevoise and Plimpton,
Senior Counsel 875 Third Ave., New York, NY 19022
Mark J. Siegel Prior to June, 1993, Vice President,
Vice President Salomon Brothers International,
Ltd., Victoria Plaza, 111 Buckingham
Palace Road, London SW1W 0SB,
England
Joanne Soja Prior to June, 1993, Managing
Senior Vice President Director/Portfolio Manager,
Chancellor Capital Management,
153 East 53rd Street, New York, NY
10002
Harlan R. Sonderling Prior to March, 1992, Vice President,
Vice President Mutual of America Life Insurance
Company, 666 Fifth Avenue, New
York, NY 10103
Douglas T. Terreson Prior to October, 1992, Investment
Vice President Analyst, Sunbank Capital Management,
200 South Orange Avenue, Orlando,
FL, 32802
Bonnie L. Troped Prior to May, 1993, Assistant Vice
Vice President President/Director of Corporate
Events, The Boston Company, One
Boston Place, Boston, MA 02108
F. Mark Turner Prior to November, 1992, Managing
Managing Director Director, Scudder, Stevens & Clark,
160 Federal St., Boston, MA 02110
Thomas M. Turpin Prior to March, 1993, Vice President
Senior Vice President The Boston Company, One Boston
Place, Boston, MA 02108
John D. Weber Prior to June, 1992, Associate,
Assistant Vice President Citicorp Venture Capital, Ltd.
399 Park Avenue, New York, NY 10043
<PAGE>
ITEM 29. PRINCIPAL UNDERWRITER
(a) Putnam Mutual Funds Corp. is the principal
underwriter for each of the following investment companies,
including the Registrant:
Putnam Adjustable Rate U.S. Government Fund, Putnam American
Government Income Fund, Putnam Arizona Tax Exempt Income Fund,
Putnam Asia Pacific Growth Fund, Putnam Asset Allocation Funds,
Putnam Balanced Government Fund, Putnam California Tax Exempt
Income Fund, Putnam California Tax Exempt Money Market Fund,
Putnam Capital Appreciation Fund, Putnam Capital Growth and
Income Fund, Putnam Capital Manager Trust, Putnam Convertible
Income-Growth Trust, Putnam Corporate Asset Trust, Putnam Daily
Dividend Trust, Putnam Diversified Income Trust, Putnam Dividend
Growth Fund, Putnam Energy-Resources Trust, Putnam Equity Income
Fund, Putnam Europe Growth Fund, Putnam Federal Income Trust,
Putnam Florida Tax Exempt Income Fund, The George Putnam Fund of
Boston, Putnam Global Governmental Income Trust, Putnam Global
Growth Fund, Putnam Growth Fund, The Putnam Fund for Growth and
Income, Putnam Health Sciences Trust, Putnam High Yield Trust,
Putnam High Yield Advantage Fund, Putnam Income Fund, Putnam
Investors Fund, Putnam Managed Income Trust, Putnam Massachusetts
Tax Exempt Income Fund II, Putnam Michigan Tax Exempt Income Fund
II, Putnam Minnesota Tax Exempt Income Fund II, Putnam Municipal
Income Fund, Putnam New Jersey Tax Exempt Income Fund, Putnam New
Opportunities Fund, Putnam New York Tax Exempt Income Fund,
Putnam New York Tax Exempt Money Market Fund, Putnam New York Tax
Exempt Opportunities Fund, Putnam Ohio Tax Exempt Income Fund II,
Putnam OTC Emerging Growth Fund, Putnam Overseas Growth Fund,
Putnam Pennsylvania Tax Exempt Income Fund, Putnam Research
Analyst Fund, Putnam Tax-Free Income Trust, Putnam Tax Exempt
Income Fund, Putnam Tax Exempt Money Market Fund, Putnam Texas
Tax Exempt Income Fund, Putnam U.S. Government Income Trust,
Putnam Utilities Growth and Income Fund, Putnam Vista Fund,
Putnam Voyager Fund
(b) The directors and officers of the Registrant's
principal underwriter are:<PAGE>
<TABLE>
<CAPTION>
POSITIONS AND OFFICES Positions and Offices
Name with Underwriter WITH REGISTRANT
<C> <C> <C>
Paulette C. Amisano Vice President None
Ronald J. Anwar Vice President None
Karen M. Apatow Assistant Vice President None
Steven E. Asher Senior Vice President None
Georgette M. Bacca Vice President None
Ira G. Baron Senior Vice President None
John L. Bartlett Senior Vice President None
Robert A. Benish Assistant Vice President None
John J. Bent Vice President None
James R. Besher Vice President None
Maureen L. Boisvert Vice President None
Keith R. Bouchard Vice President None
Leslee R. Bresnahan Vice President None
James D. Brockelman Vice President None
Kathleen T. Brogan Vice President None
Scott P. Brogan Vice President None
Gail Buckner Senior Vice President None
Martha B. Bunker Assistant Vice President None
Jon D. Burke Senior Vice President None
Robert W. Burke Senior Managing Director None
Richard P. Busher Vice President None
Ellen S. Callahan Assistant Vice President None
William A. Campagna Vice President None
Lauren M. Campbell Assistant Vice President None
Charles A. Carey Assistant Vice President None
Patricia A. Cartwright Assistant Vice President None
Christopher D. Caton Assistant Vice President None
Dana F. Clark Vice President None
James E. Clinton Assistant Vice President None
Kathleen M. Collman Managing Director None
Mark L. Coneeny Vice President None
Donald A. Connelly Senior Vice President None
Anna Coppola Assistant Vice President None
F. Nicholas Corvinus Senior Vice President None
Kenneth L. Daly Senior Vice President None
Nancy M. Days Assistant Vice President None
Daniel Delianedis Vice President None
Janice D. Delory Assistant Vice President None
J. Thomas Depres Senior Vice President None
Scott M. Donaldson Assistant Vice President None
Emily J. Durbin Assistant Vice President None
David B. Edlin Vice President None
James M. English Vice President None
Vincent Esposito Senior Vice President None
Susan H. Feldman Vice President None
Paul F. Fichera Vice President None
C. Nancy Fisher Senior Vice President None
Mitchell B. Fishman Assistant Vice President None
Joseph C. Fiumara Vice President None
Patricia C. Flaherty Senior Vice President None
Judy P. Frodigh Vice President None
Samuel F. Gagliardi Vice President None
Judy S. Gates Vice President None
Richard W. Gauger Assistant Vice President None
Joseph P. Gennaco Vice President None
Steven E. Gibson Managing Director None
Robert Goodman Managing Director None
Robert G. Greenly Vice President None
Daniel W. Greenwood Vice President None
Keith E. Gregg Vice President None
Thomas W. Halloran Vice President None
Marilyn M. Hausammann Senior Vice President None
Howard W. Hawkins, III Vice President None
Jill M. Hayes Vice President None
Paul P. Heffernan Vice President None
Susan M. Heimanson Vice President None
Katherine L. Hickney Vice President None
Bradley J. Hilsabeck Vice President None
Bess J.M. Hochstein Vice President None
Sherrie V. Holder-Watts Vice President None
Maureen A. Holmes Assistant Vice President None
William J. Hurley Senior Vice President None
Gregory E. Hyde Vice President None
Dwight D. Jacobsen Vice President None
Douglas B. Jamieson Director & Senior Managing Director None
Kevin M. Joyce Senior Vice President None
James J. Kilbane Vice President None
Deborah H. Kirk Senior Vice President None
Jill A. Koontz Assistant Vice President None
Howard H. Kreutzberg Senior Vice President None
Christopher W. LaPierre Assistant Vice President None
Mary E. Ledwith Vice President None
Edward V. Lewandowski, Sr. Vice President None
Edward V. Lewandowski, Jr. Vice President None
Ann-Marie Linehan Vice President None
Rufino R. Lomba Assistant Vice President None
Philip J. Lussier Managing Director None
Ann Malatos Assistant Vice President None
Renee L. Maloof Assistant Vice President None
Frederick S. Marius Assistant Vice President None
Karen E. Marotta Assistant Vice President None
Kathleen M. McAnulty Assistant Vice President None
Anne B. McCarthy Assistant Vice President None
Marla J. McDougall Assistant Vice President None
Walter S. McFarland Vice President None
Greg J. McMillan Assistant Vice President None
Robert E. McMurtrie Vice President None
Claye A. Metelmann Assistant Vice President None
J. Chris Meyer Senior Vice President None
Ronald K. Mills Vice President None
Mitchell L. Moret Vice President None
Donald E. Mullen Vice President None
Brendan R. Murray Vice President None
Robert Nadherny Vice President None
Alexander L. Nelson Managing Director None
Mary K. Nickerson Vice President None
John P. Nickodemus Vice President None
Michael C. Noonis Assistant Vice President None
Peter A. Nyhus Vice President None
Kristen P. O'Brien Vice President None
Donald O'Fee Vice President None
Edward J. O'Hara Assistant Vice President None
Lorie C. O'Malley Senior Vice President None
Philip G. Padgett, Jr. Vice President None
Richard N. Pallan Senior Managing Director None
Scott A. Papes Vice President None
Cynthia O. Parr Vice President None
John D. Pataccoli Vice President None
Joseph Phoenix Vice President None
Jeffrey E. Place Vice President None
Keith Plapinger Vice President None
Douglas H. Powell Vice President None
George Putnam Director Chairman & President
Douglas F. Rowe Vice President None
Robert B. Rowe Vice President None
Kevin A. Rowell Vice President None
Thomas C. Rowley Vice President None
Charles Ruys de Perez Vice President None
Laurie A. Ryan Assistant Vice President None
Catherine A. Saunders Vice President None
Robbin L. Saunders Assistant Vice President None
Karl W. Saur Vice President None
Christine A. Scordato Vice President None
Kathleen G. Sharpless Senior Vice President None
John F. Sharry Senior Vice President None
John B. Shamburg Vice President None
Vincent P. Sheehan Vice President None
William N. Shiebler Director, Chief Executive Vice President
Officer and President
Daniel S. Shore Vice President None
Gordon H. Silver Senior Managing Director None
Nicholas T. Stanojev Vice President None
Matthew S. Stein Assistant Vice President None
Moira A. Sullivan Vice President None
Janet C. Sweeney Vice President None
Edward M. Syring, Jr. Vice President None
James S. Tambone Senior Vice President None
B. Iris Tanner Assistant Vice President None
Louis Tasiopoulos Senior Vice President None
David S. Taylor Vice President None
John R. Telling Vice President None
Richard B. Tibbetts Senior Vice President None
Patrice M. Tirado Vice President None
Janet E. Tosi-Barry Assistant Vice President None
Bonnie L. Troped Vice President None
Larry R. Unger Vice President None
Douglas J. Vander Linde Vice President None
John F. Wallin Senior Vice President None
Edward F. Whalen Vice President None
Robert J. Wheeler Senior Vice President None
John B. White Vice President None
Kirk E. Williamson Vice President None
Leigh T. Williamson Vice President None
Benjamin Woloshin Vice President None
William H. Woolverton Senior Vice President and Clerk None
Timothy R. Young Vice President None
Ronald J. Zucker Senior Vice President None
</TABLE>
<PAGE>
The principal business address of each person listed above is One
Post Office Square, Boston, MA 02109, except for:
Mr. Anwar 25-49 86th Street, Jackson Heights, NY 11369
Mr. Bartlett, 1946 Westholme Avenue, Los Angeles, CA 90025
Mr. Besher, 8141 S. 77th East Ave., Tulsa, OK 74133
Mr. Bouchard, 18 Brice Rd., Annapolis, MD 21401
Mr. Brogan, 1601-Q Bridge Mill Road, Marietta, GA 30067
Ms. Buckner, 235 Walton Street, Englewood, NJ 07631
Mr. Burke, 2333 Stormcroft Court, Westlake Village, CA 91361
Mr. Busher, 12005 Ridge Knoll Drive, Fairfax, VA 22033
Mr. Connelly, 4634 Mirada Way, Sarasota, FL 34238
Mr. Corvinus, 208 Water St., Newburyport, MA 01950
Mr. Edlin, 7 River Road, 305 Palmer Point, Cos Cob, CT 06807
Mr. English, 1184 Pintail Circle, Boulder, CO 80303
Mr. Goodman, 14 Clover Place, Cos Cob, CT 06807
Mr. Halloran, 19449 Misty Lake Drive, Strongsville, OH 44136
Mr. Hyde, 3305 Sulky, Marietta, GA 30067
Mr. Jacobsen, 3 Sylvan Court, Pompton Plains, NJ 07444
Ms. Kirk, 124 Rivermist Dr., Buffalo, NY 14202
Mr. Lewandowski, 805 Darrell Road, Hillsborough, CA 94010
Mr. Lewandowski, Jr., 2120 The Strand, Manhattan Beach, CA 90266
Mr. McFarland, P.O. Box 4189, Chesterfield, MO 63006
Mr. McMurtrie, 14529 Glastonbury, Detroit, MI 48223
Mr. Moret, 4519 Lawn Avenue, Western Springs, IL 60558
Mr. Murray, 528 Plum Street, Syracuse, NY 13024
Mr. Nadherny, 9714 Marmount Drive, Seattle, WA 98117
Mr. Nickodemus, 1232 B Louden St., Cincinnati, OH 45202
Mr. Nyhus, 7203 Oak Pointe Curve, Bloomington, MN 55438
Mr. O'Fee, 1012 Vista Del Mar Drive, Delray Beach, FL 33483
Mr. Padgett, Jr., 7709 Charleston Drive, Bethesda, MD 20817
Mr. Papes, 1127 Olive Lake Drive, St. Louis, MO 63132
Mr. Pataccoli, 125 41st Street, Manhattan Beach, Ca 90266
Mr. Phoenix, 1426 Asbury Avenue, Hubbard Woods, IL 60093
Mr. Place, 4211 Loch Highland Parkway, Roswell, GA 30075
Mr. Powell, 2823 34th Avenue West, Seattle, WA 98199
Mr. D. Rowe 2309 Woodmont Circle, Heath, TX 75087
Mr. R. Rowe, 109 Shore Drive, Longwood, FL 32779
Mr. Rowell, 3535 East Coast Highway, Corona Del Mar, CA 92625
Mr. Rowley, 10061 S. Wood, Chicago, IL 60643
Ms. Saunders, 6400 Christie Avenue, Emeryville, CA 94608
Mr. Shamburg, 10603 N. 100th Street, Scottsdale, AZ 85260
Mr. Sheehan, Parkway Center, 1150 Galapago, Denver, CO 80204
Mr. Shore, 1100 Charlotte, Austin, TX 78203
Mr. B. Sullivan, 777 Pinoake Road, Mt. Lebanon, PA 15243
Ms. M. Sullivan, 493 Zinfandel Lane, St. Helena, CA 94574
Ms. Sweeney, 8 Surf Street, Marblehead, MA 01945
Mr. Syring, 7540 Mandarian Dr., Boca Raton, FL 33433
Mr. Telling, 329 Belt Avenue, St. Louis, MO 63112
Mr. Unger, 212 E. Broadway, Suite 903, New York, NY 10002
Mr. Vessels, 7 Riverview Drive, Norwalk, CT 06850
Mr. Williamson, 32 Kramer Place, Mandeville, LA 70448
Mr. White, 23 Wellington St., Arlington, MA 02174
Mr. Woloshin, 730 North Bundy Drive, Los Angeles, CA 90049
<PAGE>
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
Persons maintaining physical possession of accounts,
books and other documents required to be maintained by Section
31(a) of the Investment Company Act of 1940 and the Rules
promulgated thereunder include Registrant's Clerk, Beverly
Marcus; Registrants' investment adviser, Putnam Investment
Management, Inc.; Registrants' principal underwriter, Putnam
Mutual Funds Corp.; Registrants' custodian, Putnam Fiduciary
Trust Company ("PFTC"); and Registrants' transfer and dividend
disbursing agent, Putnam Investor Services, a division of PFTC.
The address of the Clerk, investment adviser, principal
underwriter, custodian and transfer and dividend disbursing agent
is One Post Office Square, Boston, Massachusetts 02109.
ITEM 31. MANAGEMENT SERVICES
None.
ITEM 32. UNDERTAKINGS
The Registrant undertakes to furnish to each person to
whom a prospectus of the Registrant is delivered a copy of the
Registrant's latest annual report to shareholders, upon request
and without charge.
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the
Prospectus and Statement of Additional Information constituting
part of these Post-Effective Amendments to the Registration
Statements on Form N-1A (File Nos. 2-83909 and 33-17344),
respectively, of our report for Putnam New York Tax Exempt Income
Fund dated January 12, 1994, and our report for Putnam New York
Tax Exempt Money Market Fund dated January 12, 1994, on our
audits of the financial statements and financial highlights of
Putnam New York Tax Exempt Income Fund and Putnam New York Tax
Exempt Money Market Fund which report is included in the Annual
Report for Putnam New York Tax Exempt Income Fund and Putnam New
York Tax Exempt Money Market Fund to shareholders for the year
ended November 30, 1993.
We also consent to the references to our firm under the
captions "Financial highlights" in the Prospectus and
"Independent Accountants and Financial Statements" in the
Statement of Additional Information.
COOPERS & LYBRAND
Boston, Massachusetts
March 30, 1994<PAGE>
NOTICE
A copy of the Agreements and Declarations of Trust of
Putnam New York Tax Exempt Income Fund and Putnam New York Tax
Exempt Money Market Fund are on file with the Secretary of State
of The Commonwealth of Massachusetts and notice is hereby given
that this instrument is executed on behalf of each Registrant by
an officer of each Registrant as an officer and not individually
and the obligations of or arising out of this instrument are not
binding upon any of the Trustees, officers or shareholders
individually but are binding only upon the assets and property of
the Registrants.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940, the Registrants
have duly caused this Amendment to their Registration Statements
to be signed on their behalf by the undersigned, thereunto duly
authorized, in the City of Boston, and The Commonwealth of
Massachusetts, on the 1st day of April , 1994.
PUTNAM NEW YORK TAX EXEMPT INCOME FUND
PUTNAM NEW YORK TAX EXEMPT MONEY MARKET
FUND
By: Gordon H. Silver, Vice President
Pursuant to the requirements of the Securities Act of
1933, this Amendment to the Registration Statements of Putnam New
York Tax Exempt Income Fund and Putnam New York Tax Exempt Money
Market Fund have been signed below by the following persons in
the capacities and on the dates indicated.
SIGNATURE TITLE
George Putnam President and Chairman of the Board;
Principal Executive Officer; Trustee
William F. Pounds Vice Chairman; Trustee
John D. Hughes Vice President; Treasurer and
Principal Financial Officer
Paul G. Bucuvalas Assistant Treasurer and Principal
Accounting Officer
Jameson Adkins Baxter Trustee
Hans H. Estin Trustee
John A. Hill Trustee
Elizabeth T. Kennan Trustee
Lawrence J. Lasser Trustee
Robert E. Patterson Trustee
Donald S. Perkins Trustee
George Putnam, III Trustee
A.J.C. Smith Trustee
W. Nicholas Thorndike Trustee
By: Gordon H. Silver,
as Attorney-in-Fact
April 1 , 1994
PUTNAM NEW YORK TAX EXEMPT INCOME TRUST --
PUTNAM NEW YORK INTERMEDIATE TAX EXEMPT FUND
MANAGEMENT CONTRACT
Management Contract dated as of between PUTNAM NEW
YORK TAX EXEMPT INCOME TRUST, a Massachusetts business trust (the
"Trust"), and PUTNAM INVESTMENT MANAGEMENT, INC., a Delaware
corporation (the "Manager").
WITNESSETH:
Whereas the Trust desires to retain the professional
services of the Manager for the management of PUTNAM NEW YORK
INTERMEDIATE TAX EXEMPT FUND, a series of the Trust (the "Fund").
That in consideration of the mutual covenants herein
contained, it is agreed as follows:
1. SERVICES TO BE RENDERED BY MANAGER TO FUND.
(a) The Manager, at its expense, will furnish continuously
an investment program for the Fund, will determine what
investments shall be purchased, held, sold or exchanged by the
Fund and what portion, if any, of the assets of the Fund shall be
held uninvested and shall, on behalf of the Fund, make changes in
the Fund's investments. Subject always to the control of the
Trustees of the Trust and except for the functions carried out by
the officers and personnel referred to in Section 1(d), the
Manager will also manage, supervise and conduct the other affairs
and business of the Fund and matters incidental thereto. In the
performance of its duties, the Manager will comply with the
provisions of the Agreement and Declaration of Trust and By-Laws
of the Trust and the Fund's stated investment objectives,
policies and restrictions, and will use its best efforts to
safeguard and promote the welfare of the Fund and to comply with
other policies which the Trustees may from time to time determine
and shall exercise the same care and diligence expected of the
Trustees.
(b) The Manager, at its expense, except as such expense is
paid by the Fund as provided in Section 1(d), will furnish (1)
all necessary investment and management facilities, including
salaries of personnel, required for it to execute its duties
faithfully; (2) suitable office space for the Fund; and (3)
administrative facilities, including bookkeeping, clerical
personnel and equipment necessary for the efficient conduct of
the affairs of the Fund, including determination of the Fund's
net asset value, but excluding shareholder accounting services.
Except as otherwise provided in Section 1(d), the Manager will
pay the compensation, if any, of the officers of the Fund.
(c) The Manager, at its expense, shall place all orders for
the purchase and sale of portfolio investments for the Fund's
account with brokers or dealers selected by the Manager. In the
selection of such brokers or dealers and the placing of such
orders, the Manager shall use its best efforts to obtain for the
Fund the most favorable price and execution available, except to
the extent it may be permitted to pay higher brokerage
commissions for brokerage and research services as described
below. In using its best efforts to obtain for the Fund the most
favorable price and execution available, the Manager, bearing in
mind the Fund's best interests at all times, shall consider all
factors it deems relevant, including by way of illustration,
price, the size of the transaction, the nature of the market for
the security, the amount of the commission, the timing of the
transaction taking into account market prices and trends, the
reputation, experience and financial stability of the broker or
dealer involved and the quality of service rendered by the broker
or dealer in other transactions. Subject to such policies as the
Trustees of the Fund may determine, the Manager shall not be
deemed to have acted unlawfully or to have breached any duty
created by this Contract or otherwise solely by reason of its
having caused the Fund to pay a broker or dealer that provides
brokerage and research services to the Manager an amount of
commission for effecting a portfolio investment transaction in
excess of the amount of commission another broker or dealer would
have charged for effecting that transaction, if the Manager
determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of
either that particular transaction or the Manager's overall
responsibilities with respect to the Fund and to other clients of
the Manager as to which the Manager exercises investment
discretion. The Manager agrees that in connection with purchases
or sales of portfolio investments for the Fund's account, neither
the Manager nor any officer, director, employee or agent of the
Manager shall act as a principal or receive any commission other
than as provided in Section 3.
(d) The Fund will pay or reimburse the Manager for the
compensation in whole or in part of such officers of the Fund and
persons assisting them as may be determined from time to time by
the Trustees of the Fund. The Fund will also pay or reimburse
the Manager for all or part of the cost of suitable office space,
utilities, support services and equipment attributable to such
officers and persons, as may be determined in each case by the
Trustees of the Trust. The Fund will pay the fees, if any, of
the Trustees of the Trust.
(e) The Manager shall pay all expenses incurred in
connection with the organization of the Fund and the initial
public offering and sale of its shares of beneficial interest,
provided that upon the issuance and sale of such shares to the
public pursuant to the offering, and only in such event, the Fund
shall become liable for, and to the extent requested reimburse
the Manager for, registration fees payable to the Securities and
Exchange Commission and for an additional amount not exceeding
$125,000 as its agreed share of such expenses.
(f) The Manager shall not be obligated to pay any expenses
of or for the Fund not expressly assumed by the Manager pursuant
to this Section 1 other than as provided in Section 3.
2. OTHER AGREEMENTS, ETC.
It is understood that any of the shareholders, Trustees,
officers and employees of the Trust may be a shareholder,
director, officer or employee of, or be otherwise interested in,
the Manager, and in any person controlled by or under common
control with the Manager, and that the Manager and any person
controlled by or under common control with the Manager may have
an interest in the Fund. It is also understood that the Manager
and any person controlled by or under common control with the
Manager have and may have advisory, management, service or other
contracts with other organizations and persons, and may have
other interests and business.
3. COMPENSATION TO BE PAID BY THE FUND TO THE MANAGER.
The Fund will pay to the Manager as compensation for the
Manager's services rendered, for the facilities furnished and for
the expenses borne by the Manager pursuant to paragraphs (a),
(b), (c) and (e) of Section 1, a fee, computed and paid quarterly
at the annual rate of:
(a) 0.60% of the first $500 million of the average net
asset value of the Fund;
(b) 0.50% of the next $500 million of such average net
asset value;
(c) 0.45% of the next $500 million of such average net
asset value; and
(f) 0.40% of any excess over $1.5 billion of such average
net asset value.
<PAGE>
Such average net asset value shall be determined by taking an
average of all of the determinations of such net asset value
during such quarter at the close of business on each business day
during such quarter while this Contract is in effect. Such fee
shall be payable for each fiscal quarter within 30 days after the
close of such quarter and shall commence accruing as of the date
of the initial issuance of shares of the Fund to the public.
The fees payable by the Fund to the Manager pursuant to this
Section 3 shall be reduced by any commissions, fees, brokerage or
similar payments received by the Manager or any affiliated person
of the Manager in connection with the purchase and sale of
portfolio investments of the Fund, less any direct expenses
approved by the Trustees incurred by the Manager or any
affiliated person of the Manager in connection with obtaining
such payments.
In the event that expenses of the Fund for any fiscal year
should exceed the expense limitation on investment company
expenses imposed by any statute or regulatory authority of any
jurisdiction in which shares of the Fund are qualified for offer
or sale, the compensation due the Manager for such fiscal year
shall be reduced by the amount of excess by a reduction or refund
thereof. In the event that the expenses of the Fund exceed any
expense limitation which the Manager may, by written notice to
the Fund, voluntarily declare to be effective subject to such
terms and conditions as the Manager may prescribe in such notice,
the compensation due the Manager shall be reduced, and, if
necessary, the Manager shall assume expenses of the Fund to the
extent required by the terms and conditions of such expense
limitation.
If the Manager shall serve for less than the whole of a
quarter, the foregoing compensation shall be prorated.
4. ASSIGNMENT TERMINATES THIS CONTRACT; AMENDMENTS OF THIS
CONTRACT.
This Contract shall automatically terminate, without the
payment of any penalty, in the event of its assignment; and this
Contract shall not be amended unless such amendment be approved
at a meeting by the affirmative vote of a majority of the
outstanding shares of the Fund, and by the vote, cast in person
at a meeting called for the purpose of voting on such approval,
of a majority of the Trustees of the Trust who are not interested
persons of the Fund or of the Manager.
<PAGE>
5. EFFECTIVE PERIOD AND TERMINATION OF THIS CONTRACT.
This Contract shall become effective upon its execution, and
shall remain in full force and effect continuously thereafter
(unless terminated automatically as set forth in Section 4) until
terminated as follows:
(a) Either party hereto may at any time terminate this
Contract by not more than sixty days' nor less than thirty days'
written notice delivered or mailed by registered mail, postage
prepaid, to the other party, or
(b) If (i) the Trustees of the Fund or the shareholders by
the affirmative vote of a majority of the outstanding shares of
the Fund, and (ii) a majority of the Trustees of the Trust who
are not interested persons of the Trust or of the Manager, by
vote cast in person at a meeting called for the purpose of voting
on such approval, do not specifically approve at least annually
the continuance of this Contract, then this Contract shall
automatically terminate at the close of business on January 31,
1996 or the expiration of one year from the effective date of the
last such continuance, whichever is later.
Action by the Fund under (a) above may be taken either (i)
by vote of a majority of its Trustees, or (ii) by the affirmative
vote of a majority of the outstanding shares of the Fund.
Termination of this Contract pursuant to this Section 5 will
be without the payment of any penalty.
6. CERTAIN DEFINITIONS.
For the purposes of this Contract, the "affirmative vote of
a majority of the outstanding shares of the Fund" means the
affirmative vote, at a duly called and held meeting of
shareholders of the Fund, (a) of the holders of 67% or more of
the shares of the Fund present (in person or by proxy) and
entitled to vote at such meeting, if the holders of more than 50%
of the outstanding shares of the Fund entitled to vote at such
meeting are present in person or by proxy, or (b) of the holders
of more than 50% of the outstanding shares of the Fund entitled
to vote at such meeting, whichever is less.
For the purposes of this Contract, the terms "affiliated
person", "control", "interested person" and "assignment" shall
have their respective meanings defined in the Investment Company
Act of 1940 and the Rules and Regulations thereunder (the "1940
Act"), subject, however, to such exemptions as may be granted by
the Securities and Exchange Commission under said Act; the term
"specifically approve at least annually" shall be construed in a
manner consistent with the 1940 Act, and the Rules and
Regulations thereunder; and the term "brokerage and research
services" shall have the meaning given in the Securities Exchange
Act of 1934 and the Rules and Regulations thereunder.
7. NON-LIABILITY OF MANAGER.
In the absence of willful misfeasance, bad faith or gross
negligence on the part of the Manager, or reckless disregard of
its obligations and duties hereunder, the Manager shall not be
subject to any liability to the Fund or to any shareholder of the
Fund, for any act or omission in the course of, or connected
with, rendering services hereunder.
8. LIMITATION OF LIABILITY OF THE TRUSTEES, OFFICERS, AND
SHAREHOLDERS.
A copy of the Agreement and Declaration of Trust of the
Trust is on file with the Secretary of State of The Commonwealth
of Massachusetts, and notice is hereby given that this instrument
is executed on behalf of the Trustees of the Trust as Trustees
and not individually and that the obligations of or arising out
of this instrument are not binding upon any of the Trustees,
officers or shareholders individually but are binding only upon
the assets and property of the Trust.
IN WITNESS WHEREOF, PUTNAM NEW YORK TAX EXEMPT INCOME TRUST
and PUTNAM INVESTMENT MANAGEMENT, INC. have each caused this
instrument to be signed in duplicate in its behalf by its
President or a Vice President thereunto duly authorized, all as
of the day and year first above written.
PUTNAM NEW YORK TAX EXEMPT INCOME TRUST
By: --------------------------------
PUTNAM INVESTMENT MANAGEMENT, INC.
By: --------------------------------
PUTNAM NEW YORK TAX EXEMPT INCOME TRUST --
PUTNAM NEW YORK INTERMEDIATE TAX EXEMPT FUND
DISTRIBUTOR'S CONTRACT
Distributor's Contract dated , by and between
PUTNAM NEW YORK TAX EXEMPT INCOME TRUST, a Massachusetts business
trust (the "Fund"), and PUTNAM MUTUAL FUNDS CORP., a
Massachusetts corporation ("Putnam").
WHEREAS, the Trust and Putnam desire to provide for the
distribution by Putnam of Class A shares and Class B shares of
Putnam New York Intermediate Tax Exempt Fund, a series of the
Trust (the "Fund");
NOW, THEREFORE, in consideration of the mutual agreements
contained in the Terms and Conditions of Distributor's Contract
attached to and forming a part of this Contract (the "Terms and
Conditions"), the Trust hereby appoints Putnam as a distributor
of Class A shares and Class B shares of the Fund, and Putnam
hereby accepts such appointment, all as set forth in the Terms
and Conditions.
A copy of the Agreement and Declaration of Trust of the
Trust is on file with the Secretary of State of The Commonwealth
of Massachusetts and notice is hereby given that this instrument
is executed on behalf of the Trustees of the Trust as Trustees
and not individually, and that the obligations of or arising out
of this instrument are not binding upon any of the Trustees or
shareholders individually but are binding only upon the assets
and property of the Trust.
IN WITNESS WHEREOF, PUTNAM NEW YORK TAX EXEMPT INCOME
TRUST and PUTNAM MUTUAL FUNDS CORP. have each caused this
Distributor's Contract to be signed in duplicate in its behalf,
all as of the day and year first above written.
PUTNAM NEW YORK TAX EXEMPT
INCOME TRUST
By: ------------------------------
PUTNAM MUTUAL FUNDS CORP.
By: ------------------------------
<PAGE>
TERMS AND CONDITIONS
OF
DISTRIBUTOR'S CONTRACT
1. RESERVATION OF RIGHT NOT TO SELL. The Fund reserves the
right to refuse at any time or times to sell any of its shares of
beneficial interest ("shares") hereunder for any reason deemed
adequate by it.
2. FEE WITH RESPECT TO CLASS A SHARES. Except as otherwise
provided in Section 4 below, Putnam shall not be entitled to
receive any compensation from the Fund for its services in
connection with the distribution of Class A shares, except to the
extent that the Fund may from time to time agree to reimburse
Putnam for specific expenses pursuant to a Distribution Plan and
Agreement from time to time in effect between the Fund and Putnam
with respect to the Class A shares of the Fund and except that
Putnam may receive a contingent deferred sales charge upon the
redemption of Class A shares, determined in the manner set forth
in the then current Prospectus or Statement of Additional
Information of the Fund.
3. FEE WITH RESPECT TO CLASS B SHARES. For the services
provided and expenses incurred by Putnam as a distributor of
Class B shares of the Fund, which shall include the payment by
Putnam to investment dealers of commissions on the sale of Class
B shares of the Fund and dealer service fees as set forth in the
then current Prospectus or Statement of Additional Information of
the Fund, Putnam shall receive from the Fund:
(a) a distribution fee payable in such amounts and upon such
terms and conditions as is provided under a Distribution Plan and
Agreement from time to time in effect between the Fund and Putnam
with respect to Class B shares of the Fund; and
(b) a contingent deferred sales charge upon the redemption
of Class B shares, determined in the manner set forth in the then
current Prospectus or Statement of Additional Information of the
Fund.
4. SALES OF SHARES TO PUTNAM AND SALES BY PUTNAM. Putnam will
have the right, as principal, to sell Class A shares of the Fund
to investment dealers against orders therefor at the public
offering price less a discount determined by Putnam, which
discount shall not exceed the amount of the sales charge referred
to below. Putnam will have the right, as principal, to sell
Class B shares of the Fund to investment dealers against orders
therefor at net asset value.
Putnam will also have the right, as principal, to purchase
shares from the Fund at their net asset value and to sell such
shares to the public against orders therefor at the public
offering price (in the case of Class A shares) or at net asset
value (in the case of Class B shares). Upon receipt of an order
to purchase Fund shares from a bank or dealer with whom Putnam
has a Sales Contract, Putnam will promptly purchase shares from
the Fund to fill such order. Upon receipt of registration
instructions in proper form and payment for such shares, Putnam
will transmit such instructions to the Fund or its agent for
registration of the shares purchased.
Putnam will also have the right, as agent for the Fund, to
sell Class A shares at the public offering price or Class B
shares at net asset value to such persons and upon such
conditions as the Trustees or Directors of the Fund may from time
to time determine.
Putnam will also have the right, as principal, to sell
Class A shares at their net asset value or Class B shares at
their net asset value and not subject to a contingent deferred
sales charge to such persons as may be approved by the Trustees
or Directors of the Trust, all such sales to comply with the
provisions of the Investment Company Act of 1940 and the Rules
and Regulations of the Securities and Exchange Commission
promulgated thereunder.
The public offering price of Class A shares shall be the
net asset value of Class A shares then in effect, plus any
applicable sales charge determined in the manner set forth in the
then current Prospectus and Statement of Additional Information
of the Fund or as permitted by the Investment Company Act of 1940
and the Rules and Regulations of the Securities and Exchange
Commission promulgated thereunder. In no event shall the public
offering price exceed 1000/915ths of such net asset value, and in
no event shall any applicable sales charge exceed 8 1/2% of the
public offering price. The net asset value of Class A shares and
Class B shares shall be determined in the manner provided in the
Agreement and Declaration of Trust of the Trust as then amended
and when determined shall be applicable to transactions as
provided for in the then current Prospectus and Statement of
Additional Information.
On every sale the Fund shall receive the applicable net
asset value of the shares. Putnam shall have the right to retain
the sales charge on Class A shares less any applicable dealer
discount. Putnam will reimburse the Fund for any increased issue
tax paid on account of the sales charge.
5. SALES OF SHARES BY THE FUND. The Fund reserves the right to
issue shares at any time directly to its shareholders as a stock
dividend or stock split and to sell shares to its shareholders or
to other persons approved by Putnam at not less than net asset
value.
6. REPURCHASE OF SHARES. Putnam will act as agent for the Fund
in connection with the repurchase of shares by the Fund upon the
terms and conditions set forth in the then current Prospectus and
Statement of Additional Information of the Fund.
7. BASIS OF PURCHASES AND SALES OF SHARES. Putnam will use its
best efforts to place shares sold by it on an investment basis.
Putnam does not agree to sell any specific number of shares.
Shares will be sold by Putnam only against orders therefor.
Putnam will not purchase shares from anyone other than the Fund
except in accordance with Section 6, and will not take "long" or
"short" positions in shares contrary to the Agreement and
Declaration of Trust of the Trust.
8. RULES OF NASD, ETC. Putnam will conform to the Rules of Fair
Practice of the National Association of Securities Dealers, Inc.
and the sale of securities laws of any jurisdiction in which it
sells, directly or indirectly, any shares. Putnam also agrees to
furnish to the Fund sufficient copies of any agreements or plans
it intends to use in connection with any sales of shares in
adequate time for the Fund to file and clear them with the proper
authorities before they are put in use, and not to use them until
so filed and cleared.
9. PUTNAM INDEPENDENT CONTRACTOR. Putnam shall be an
independent contractor and neither Putnam nor any of its officers
or employees as such is or shall be an employee of the Fund.
Putnam is responsible for its own conduct and the employment,
control and conduct of its agents and employees and for injury to
such agents or employees or to others through its agents or
employees. Putnam assumes full responsibility for its agents and
employees under applicable statutes and agrees to pay all
employer taxes thereunder.
Putnam will maintain at its own expense insurance against
public liability in such an amount as the Trustees of the Trust
may from time to time reasonably request.
10. EXPENSES. Putnam will pay all
expenses of qualifying shares of the Fund for sale under the so-
called "Blue Sky" laws of any state (except expenses of any
action by the Fund relating to the Trust's Agreement and
Declaration of Trust or other matters in which the Fund has a
direct concern), and expenses of preparing, printing and
distributing advertising and sales literature (apart from
expenses of registering shares under the Securities Act of 1933,
as amended, and the Investment Company Act of 1940, as amended,
and the preparation and printing of Prospectuses and Statements
of Additional Information and reports as required by said Acts
and the direct expenses of the issue of shares, except that
Putnam will pay the cost of the preparation and printing of
Prospectuses and Statements of Additional Information and
shareholders' reports used by it and by others in the sale of
Fund shares to the extent such cost is not paid by others).
11. INDEMNIFICATION OF FUND. Putnam
agrees to indemnify and hold harmless the Fund and each person
who has been, is, or may hereafter be a Trustee of the Fund
against expenses reasonably incurred by any of them in connection
with any claim or in connection with any action, suit or
proceeding to which any of them may be a party, which arises out
of or is alleged to arise out of any misrepresentation or
omission to state a material fact, or out of any alleged
misrepresentation or omission to state a material fact, on the
part of Putnam or any agent or employee of Putnam or any other
person for whose acts Putnam is responsible or is alleged to be
responsible unless such misrepresentation or omission was made in
reliance upon written information furnished by the Fund. Putnam
also agrees likewise to indemnify and hold harmless the Fund and
each such person in connection with any claim or in connection
with any action, suit or proceeding which arises out of or is
alleged to arise out of Putnam's failure to exercise reasonable
care and diligence with respect to its services rendered in
connection with investment, reinvestment, automatic withdrawal
and other plans for shares. The term "expenses" includes amounts
paid in satisfaction of judgments or in settlements which are
made with Putnam's consent. The foregoing rights of
indemnification shall be in addition to any other rights to which
the Fund or a Trustee may be entitled as a matter of law.
12. ASSIGNMENT TERMINATES THIS
CONTRACT; AMENDMENTS OF THIS CONTRACT. This Contract shall
automatically terminate, without the payment of any penalty, in
the event of its assignment. This Contract may be amended only
if such amendment be approved either by action of the Trustees of
the Trust or at a meeting of the shareholders of the Fund by the
affirmative vote of a majority of the outstanding shares of the
Fund, and by a majority of the Trustees of the Trust who are not
interested persons of the Trust or of Putnam by vote cast in
person at a meeting called for the purpose of voting on such
approval.
13. EFFECTIVE PERIOD AND TERMINATION
OF THIS CONTRACT. This Contract shall take effect upon the date
first above written and shall remain in full force and effect
continuously (unless terminated automatically as set forth in
Section 12) until terminated:
(a) Either by the Fund or Putnam by not more
than sixty (60) days' nor less than ten (10) days'
written notice delivered or mailed by registered
mail, postage prepaid, to the other party; or
(b) If the continuance of this Contract after
January 31, 1994 is not specifically approved at
least annually by the Trustees of the Trust or the
shareholders of the Fund by the affirmative vote of a
majority of the outstanding shares of the Fund, and
by a majority of the Trustees of the Trust who are
not interested persons of the Trust or of Putnam by
vote cast in person at a meeting called for the
purpose of voting on such approval.
Action by the Fund under (a) above may be taken either (i) by
vote of its Trustees or (ii) by the affirmative vote of a
majority of the outstanding shares of the Fund. The requirement
under (b) above that continuance of this Contract be
"specifically approved at least annually" shall be construed in a
manner consistent with the Investment Company Act of 1940 and the
Rules and Regulations thereunder.
Termination of this Contract pursuant to this Section 13
shall be without the payment of any penalty.
14. CERTAIN DEFINITIONS. For the purposes of this Contract,
the "affirmative vote of a majority of the outstanding shares of
the Fund" means the affirmative vote, at a duly called and held
meeting of shareholders of the Fund, (a) of the holders of 67% or
more of the shares of the Fund present (in person or by proxy)
and entitled to vote at such meeting, if the holders of more than
50% of the outstanding shares of the Fund entitled to vote at
such meeting are present in person or by proxy, or (b) of the
holders of more than 50% of the outstanding shares of the Fund
entitled to vote at such meeting, whichever is less.
For the purposes of this Contract, the terms "interested
person" and "assignment" shall have the meanings defined in the
Investment Company Act of 1940, subject however, to such
exemptions as may be granted by the Securities and Exchange
Commission under said Act.
PUTNAM NEW YORK TAX EXEMPT INCOME TRUST --
PUTNAM NEW YORK INTERMEDIATE TAX EXEMPT FUND
CLASS A DISTRIBUTION PLAN AND AGREEMENT
(As adopted , 1994)
This Plan and Agreement (the "Plan") constitutes the
Distribution Plan for the Class A shares of Putnam New York
Intermediate Tax Exempt Fund (the "Fund"), a series of Putnam New
York Tax Exempt Income Trust, a Massachusetts business trust (the
"Trust"), adopted pursuant to the provisions of Rule 12b-1 under
the Investment Company Act of 1940 (the "Act") and the related
agreement between the Trust and Putnam Mutual Funds Corp.
("PMF"), the principal underwriter of the Fund's shares. During
the effective term of this Plan, the Trust may make payments to
PMF upon the terms and conditions hereinafter set forth:
SECTION 1. The Fund may make payments to PMF, in the form
of fees or reimbursements, to compensate PMF for services
provided and expenses incurred by it for purposes of promoting
the sale of Class A shares of the Fund, reducing redemptions of
Class A shares, or maintaining or improving services provided to
Class A shareholders by PMF and investment dealers. The amount
of such payments and the purposes for which they are made shall
be determined by the Qualified Trustees (as defined below).
Payments under this Plan shall not exceed in any fiscal year the
annual rate of 0.35% of the average net asset value of the Class
A shares of the Fund, as determined at the close of each business
day during the year. A majority of the Qualified Trustees may,
at any time and from time to time, reduce the amount of such
payments, or may suspend the operation of the Plan for such
period or periods of time as they may determine.
SECTION 2. This Plan shall not take effect until:
(a) it has been approved by a vote of a majority of
the outstanding Class A shares of the Fund; and
(b) it has been approved, together with any related
agreements, by votes of the majority (or whatever greater
percentage may, from time to time, be required by Section
12(b) of the Act or the rules and regulations thereunder) of
both (i) the Trustees of the Trust, and (ii) the Qualified
Trustees of the Trust, cast in person at a meeting called
for the purpose of voting on this Plan or such agreement.
SECTION 3. This Plan shall continue in effect for a period
of more than one year after it takes effect only so long as such
continuance is specifically approved at least annually in the
manner provided for approval of this Plan in Section 2(b).
<PAGE>
SECTION 4. PMF shall provide to the Trustees of the Trust,
and the Trustees shall review, at least quarterly, a written
report of the amounts so expended and the purposes for which such
expenditures were made.
SECTION 5. This Plan may be terminated at any time by vote
of a majority of the Qualified Trustees, or by vote of a majority
of the outstanding Class A shares of the Fund.
SECTION 6. All agreements with any person relating to
implementation of this Plan shall be in writing, and any
agreement related to this Plan shall provide:
(a) that such agreement may be terminated at any time,
without payment of any penalty, by vote of a majority of the
Qualified Trustees or by vote of a majority of the
outstanding Class A shares of the Trust, on not more than 60
days' written notice to any other party to the agreement;
and
(b) that such agreement shall terminate automatically
in the event of its assignment.
SECTION 7. This Plan may not be amended to increase
materially the amount of distribution expenses permitted pursuant
to Section 1 hereof without the approval of a majority of the
outstanding Class A shares of the Fund, and all material
amendments to this Plan shall be approved in the manner provided
for approval of this Plan in Section 2(b).
SECTION 8. As used in this Plan, (a) the term "Qualified
Trustees" shall mean those Trustees of the Trust who are not
interested persons of the Trust, and have no direct or indirect
financial interest in the operation of this Plan or any
agreements related to it, (b) the term "majority of the
outstanding Class A shares of the Fund" means the affirmative
vote, at a duly called and held meeting of Class A shareholders
of the Fund, (i) of the holders of 67% or more of the Class A
shares of the Fund present (in person or by proxy) and entitled
to vote at such meeting, if the holders of more than 50% of the
outstanding Class A shares of the Fund entitled to vote at such
meeting are present in person or by proxy, or (ii) of the holders
of more than 50% of the outstanding Class A shares of the Fund
entitled to vote at such meeting, whichever is less, and (c) the
terms "assignment" and "interested person" shall have the
respective meanings specified in the Act and the rules and
regulations thereunder, subject to such exemptions as may be
granted by the Securities and Exchange Commission.
<PAGE>
SECTION 9. A copy of the Agreement and Declaration of Trust
of the Trust is on file with the Secretary of State of The
Commonwealth of Massachusetts and notice is hereby given that
this instrument is executed on behalf of the Trustees of the
Trust as Trustees and not individually, and that the obligations
of or arising out of this instrument are not binding upon any of
the Trustees, officers or shareholders individually but are
binding only upon the assets and property of the Fund.
Executed as of , 1994.
PUTNAM MUTUAL FUNDS CORP. PUTNAM NEW YORK TAX EXEMPT
INCOME TRUST
By: ---------------------- By: ------------------------
PUTNAM NEW YORK TAX EXEMPT INCOME TRUST --
PUTNAM NEW YORK INTERMEDIATE TAX EXEMPT FUND
CLASS B
DISTRIBUTION PLAN AND AGREEMENT
(As adopted , 1994)
This Plan and Agreement (the "Plan") constitutes the
Distribution Plan for the Class B shares of Putnam New York
Intermediate Tax Exempt Fund (the "Fund"), a series of Putnam New
York Tax Exempt Income Trust, a Massachusetts business trust (the
"Trust"), adopted pursuant to the provisions of Rule 12b-1 under
the Investment Company Act of 1940 (the "Act") and the related
agreement between the Trust and Putnam Mutual Funds Corp.
("PMF"). During the effective term of this Plan, the Fund may
incur expenses primarily intended to result in the sale of its
Class B shares upon the terms and conditions hereinafter set
forth:
SECTION 1. The Fund shall pay to PMF a monthly fee at the
annual rate of up to 1.00% of the average net asset value of the
Class B shares of the Trust, as determined at the close of each
business day during the month, to compensate PMF for services
provided and expenses incurred by it in connection with the
offering of the Fund's Class B shares, which may include, without
limitation, the payment by PMF to investment dealers of
commissions on the sale of Class B shares, as set forth in the
then current Prospectus or Statement of Additional Information of
the Fund and the payment of a service fee of up to 0.25% of such
net asset value for the purposes of maintaining or improving
services provided to shareholders by PMF and investment dealers.
Such fees shall be payable for each month within 15 days after
the close of such month. A majority of the Qualified Trustees,
as defined below, may, from time to time, reduce the amount of
such payments, or may suspend the operation of the Plan for such
period or periods of time as they may determine.
SECTION 2. This Plan shall not take effect until:
(a) it has been approved by a vote of a majority of
the outstanding Class B shares of the Fund;
(b) it has been approved, together with any related
agreements, by votes of the majority (or whatever
greater percentage may, from time to time, be
required by Section 12(b) of the Act or the rules
and regulations thereunder) of both (i) the
Trustees of the Trust, and (ii) the Qualified
Trustees of the Trust, cast in person at a meeting
called for the purpose of voting on this Plan or
such agreement; and
(c) the Fund has received the proceeds of the initial
public offering of its Class B shares.
SECTION 3. This Plan shall continue in effect for a period
of more than one year after it takes effect only so long as such
continuance is specifically approved at least annually in the
manner provided for approval of this Plan in Section 2(b).
SECTION 4. PMF shall provide to the Trustees of the Trust,
and the Trustees shall review, at least quarterly, a written
report of the amounts so expended and the purposes for which such
expenditures were made.
SECTION 5. This Plan may be terminated at any time by vote
of a majority of the Qualified Trustees or by vote of the
majority of the outstanding Class B shares of the Fund.
SECTION 6. All agreements with any person relating to
implementation of this Plan shall be in writing, and any
agreement related to this Plan shall provide:
(a) that such agreement may be terminated at any time,
without payment of any penalty, by vote of a
majority of the Qualified Trustees or by vote of a
majority of the outstanding Class B shares of the
Fund, on not more than 60 days' written notice to
any other party to the agreement; and
(b) that such agreement shall terminate automatically
in the event of its assignment.
SECTION 7. This Plan may not be amended to increase
materially the amount of distribution expenses permitted pursuant
to Section 1 hereof without the approval of a majority of the
outstanding Class B shares of the Fund and all material
amendments to this Plan shall be approved in the manner provided
for approval of this Plan in Section 2(b).
SECTION 8. As used in this Plan, (a) the term "Qualified
Trustees" shall mean those Trustees of the Trust who are not
interested persons of the Trust, and have no direct or indirect
financial interest in the operation of this Plan or any
agreements related to it, and (b) the term "majority of the
outstanding Class B shares of the Fund" means the affirmative
vote, at a duly called and held meeting of Class B shareholders
of the Fund, (i) of the holders of 67% or more of the Class B
shares of the Fund present (in person or by proxy) and entitled
to vote at such meeting, if the holders of more than 50% of the
outstanding Class B shares of the Fund entitled to vote at such
meeting are present in person or by proxy, or (ii) of the holders
of more than 50% of the outstanding Class B shares of the Fund
entitled to vote at such meeting, whichever is less, and (c) the
terms "assignment" and "interested person" shall have the
respective meanings specified in the Act and the rules and
regulations thereunder, subject to such exemptions as may be
granted by the Securities and Exchange Commission.
SECTION 9. A copy of the Agreement and Declaration of Trust
of the Trust is on file with the Secretary of State of The
Commonwealth of Massachusetts and notice is hereby given that
this instrument is executed on behalf of the Trustees of the
Trust as Trustees and not individually, and that the obligations
of or arising out of this instrument are not binding upon any of
the Trustees, officers or shareholders individually but are
binding only upon the assets and property of the Fund.
Executed as of , 1994.
PUTNAM MUTUAL FUNDS CORP. PUTNAM NEW YORK TAX EXEMPT
INCOME TRUST
By: -------------------------- By: ------------------------
