PUTNAM ARIZONA TAX EXEMPT INCOME FUND
(the "Arizona fund")
PUTNAM FLORIDA TAX EXEMPT INCOME FUND
(the "Florida fund")
PUTNAM MASSACHUSETTS TAX EXEMPT INCOME FUND
(the "Massachusetts fund")
PUTNAM MICHIGAN TAX EXEMPT INCOME FUND
(the "Michigan fund")
PUTNAM MINNESOTA TAX EXEMPT INCOME FUND
(the "Minnesota fund")
PUTNAM NEW JERSEY TAX EXEMPT INCOME FUND
(the "New Jersey fund")
PUTNAM OHIO TAX EXEMPT INCOME FUND
(the "Ohio fund")
PUTNAM PENNSYLVANIA TAX EXEMPT INCOME FUND
(the "Pennsylvania fund")
(each a "fund" and
collectively, the "funds")
FORM N-1A
PART B
STATEMENT OF ADDITIONAL INFORMATION ("SAI")
September 30, 1996
This SAI is not a prospectus and is only authorized for
distribution when accompanied or preceded by the prospectus of
the funds dated September 30, 1996, as revised from time to time.
This SAI contains information which may be useful to investors
but which is not included in the prospectus. If a fund has more
than one form of current prospectus, each reference to the
prospectus in this SAI shall include all of that fund's
prospectuses, unless otherwise noted. The SAI should be read
together with the applicable prospectus. Investors may obtain a
free copy of the applicable prospectus from Putnam Investor
Services, Mailing address: P.O. Box 41203, Providence, RI 02940-
1203.
Part I of this SAI contains specific information about each
fund. Part II includes information about the funds and the other
Putnam funds.
<PAGE>
Table of Contents
Part I Page
TAX-EXEMPT SECURITIES. . . . . . . . . . . . . . . . . . . . . . . . . .I-3
INVESTMENT RESTRICTIONS. . . . . . . . . . . . . . . . . . . . . . . . .I-5
PROPOSED RESTRICTIONS. . . . . . . . . . . . . . . . . . . . . . . . . I-11
CHARGES AND EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . I-15
TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-39
EQUIVALENT YIELDS: TAX-EXEMPT VERSUS TAXABLE SECURITIES . . . . . . . I-42
ADDITIONAL OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . . I-51
INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS . . . . . . . . . . . I-51
Part II
MISCELLANEOUS INVESTMENT PRACTICES . . . . . . . . . . . . . . . . . . II-1
TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .II-29
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .II-35
DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . . . . . .II-44
HOW TO BUY SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . .II-46
DISTRIBUTION PLANS . . . . . . . . . . . . . . . . . . . . . . . . . .II-59
INVESTOR SERVICES. . . . . . . . . . . . . . . . . . . . . . . . . . .II-60
SIGNATURE GUARANTEES . . . . . . . . . . . . . . . . . . . . . . . . .II-66
SUSPENSION OF REDEMPTIONS. . . . . . . . . . . . . . . . . . . . . . .II-66
SHAREHOLDER LIABILITY. . . . . . . . . . . . . . . . . . . . . . . . .II-66
STANDARD PERFORMANCE MEASURES. . . . . . . . . . . . . . . . . . . . .II-67
COMPARISON OF PORTFOLIO PERFORMANCE. . . . . . . . . . . . . . . . . .II-68
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .II-73
<PAGE>
SAI
PART I
TAX-EXEMPT SECURITIES
General description. As used in the prospectus and in this
SAI, the term "tax-exempt securities" includes obligations of a
state and its political subdivisions (for example, counties,
cities, towns, villages, districts and authorities) and their
agencies, instrumentalities or other governmental units, the
interest from which is, in the opinion of bond counsel, exempt
from federal income tax and (except for Florida, which has no
personal income tax) personal or gross income tax of the
relevant state. Such obligations are issued to obtain funds for
various public purposes, including the construction of a wide
range of public facilities, such as airports, bridges, highways,
housing, hospitals, mass transportation, schools, streets and
water and sewer works. Other public purposes for which tax-
exempt securities may be issued include the refunding of
outstanding obligations or the payment of general operating
expenses.
Short-term tax-exempt securities are generally issued by state
and local governments and public authorities as interim financing
in anticipation of tax collections, revenue receipts, or bond
sales to finance such public purposes.
In addition, certain types of "private activity" bonds may be
issued by public authorities to finance such projects as
privately operated housing facilities and certain local
facilities for water supply, gas, electricity or sewage or solid
waste disposal, student loans, or the obtaining of funds to lend
to public or private institutions for the construction of
facilities such as educational, hospital and housing facilities.
Such obligations are included within the term tax-exempt
securities if the interest paid thereon is, in the opinion of
bond counsel, exempt from federal income tax and (except for the
Florida fund) personal or gross income tax of the relevant state
(such interest may, however, be subject to federal alternative
minimum tax). Other types of private activity bonds, the
proceeds of which are used for the construction, repair or
improvement of, or to obtain equipment for, privately operated
industrial or commercial facilities, may constitute tax-exempt
securities, although the current federal tax laws place
substantial limitations on the size of such issues.
Stand-by commitments. When a fund purchases tax-exempt
securities, it has the authority to acquire stand-by commitments
from banks and broker-dealers with respect to those tax-exempt
securities. A stand-by commitment may be considered a security
independent of the tax-exempt security to which it relates. The
amount payable by a bank or dealer during the time a stand-by
commitment is exercisable, absent unusual circumstances, would be
substantially the same as the market value of the underlying
tax-exempt security to a third party at any time. Each fund
expects that stand-by commitments generally will be available
without the payment of direct or indirect consideration. None of
the funds expect to assign any value to stand-by commitments.
Yields. The yields on tax-exempt securities depend on a variety
of factors, including general money market conditions, effective
marginal tax rates, the financial condition of the issuer,
general conditions of the tax-exempt security market, the size of
a particular offering, the maturity of the obligation and the
rating of the issue. The ratings of Moody's Investors Service,
Inc. and Standard & Poor's represent their opinions as to the
quality of the tax-exempt securities which they undertake to
rate. It should be emphasized, however, that ratings are general
and are not absolute standards of quality. Consequently, tax-
exempt securities with the same maturity and interest rate but
with different ratings may have the same yield. Yield
disparities may occur for reasons not directly related to the
investment quality of particular issues or the general movement
of interest rates, due to such factors as changes in the overall
demand or supply of various types of tax-exempt securities or
changes in the investment objectives of investors. Subsequent to
purchase by a fund, an issue of tax-exempt securities or other
investments may cease to be rated or its rating may be reduced
below the minimum rating required for purchase by a fund.
Neither event will require the elimination of an investment from
a fund's portfolio, but Putnam Management will consider such an
event in its determination of whether a fund should continue to
hold an investment in its portfolio.
"Moral obligation" bonds. None of the funds currently intends to
invest in so-called "moral obligation" bonds, where payment is
backed by a moral commitment of an entity other than the issuer,
unless the credit of the issuer itself, without regard to the
"moral obligation," meets the investment criteria established for
investments by the fund.
Additional risks. Securities in which each fund may invest,
including tax-exempt securities, are subject to the provisions of
bankruptcy, insolvency and other laws affecting the rights and
remedies of creditors, such as the federal Bankruptcy Code
(including special provisions related to municipalities and other
public entities), and to laws, if any, which may be enacted by
<PAGE>
Congress or the appropriate state legislature extending the time
for payment of principal or interest, or both, or imposing other
constraints upon enforcement of such obligations. There is also
the possibility that as a result of litigation or other
conditions the power, ability or willingness of issuers to meet
their obligations for the payment of interest and principal on
their tax-exempt securities may be materially affected.
From time to time, proposals have been introduced before Congress
for the purpose of restricting or eliminating the federal income
tax exemption for interest on debt obligations issued by states
and their political subdivisions. Federal tax laws limit the
types and amounts of tax-exempt bonds issuable for certain
purposes, especially industrial development bonds and private
activity bonds. Such limits may affect the future supply and
yields of these types of tax-exempt securities. Further proposals
limiting the issuance of tax-exempt bonds may well be introduced
in the future. If it appeared that the availability of tax-
exempt securities for investment by a fund and the value of that
fund's portfolio could be materially affected by such changes in
law, the Trustees of that fund would reevaluate its investment
objective and policies and consider changes in the structure of
that fund or its dissolution.
INVESTMENT RESTRICTIONS
As fundamental investment restrictions, which may not be changed
without a vote of a majority of the outstanding voting
securities, a fund may not and will not:
(1) Borrow money in excess of 10% of the value (taken at the
lower of cost or current value) of its total assets (not
including the amount borrowed) at the time the borrowing is made,
and then only from banks as a temporary measure to facilitate the
meeting of redemption requests (not for leverage) which might
otherwise require the untimely disposition of portfolio
investments or for extraordinary or emergency purposes. Such
borrowings will be repaid before any additional investments are
purchased.
(2) (All funds except Arizona and New Jersey funds) Pledge,
hypothecate, mortgage or otherwise encumber its assets in excess
of 15% of its total assets (taken at current value) in connection
with borrowings permitted by restriction 1 above.
(3) (Arizona fund only) Pledge, hypothecate, mortgage or
otherwise encumber its assets in excess of 15% of its total
assets (taken at the lower of cost or current value) in
connection with borrowings permitted by restriction 1 above.
<PAGE>
(4) (New Jersey fund only) Pledge, hypothecate, mortgage or
otherwise encumber its assets in excess of 15% of its total
assets (taken at current value) and then only to secure
borrowings permitted by restriction 1 above. (The deposit of
underlying securities and other assets in escrow and collateral
arrangements with respect to margin for financial futures
contracts, options on such contracts and on securities indices
are not deemed to be pledges or other encumbrances.)
(5) (Massachusetts, Michigan, Minnesota and Ohio funds only)
Purchase securities on margin, except such short-term credits as
may be necessary for the clearance of purchases and sales of
securities, and except that it may make margin payments in
connection with options on financial futures contracts and on
futures contracts.
(6) (Florida, New Jersey and Pennsylvania funds only) Purchase
securities on margin, except such short-term credits as may be
necessary for the clearance of purchases and sales of securities,
and except that it may make margin payments in connection with
futures contracts and related options.
(7) (Arizona fund only) Purchase securities on margin, except
such short-term credits as may be necessary for the clearance of
purchases and sales of securities, and except that it may make
margin payments in connection with futures contracts and options.
(8) Make short sales of securities or maintain a short sale
position for the account of the fund unless at all times when a
short position is open it owns an equal amount of such securities
or owns securities which, without payment of any further
consideration, are convertible into or exchangeable for
securities of the same issue as, and equal in amount to, the
securities sold short.
(9) Underwrite securities issued by other persons except to the
extent that, in connection with the disposition of its portfolio
investments, it may be deemed to be an underwriter under certain
federal securities laws.
(10) (Massachusetts, Michigan, Minnesota, Ohio and Pennsylvania
funds only) Purchase or sell real estate, although it may
purchase or sell securities which are secured by or represent
interests in real estate.
(11) (Arizona, Florida, and New Jersey funds only) Purchase or
sell real estate, although it may purchase securities of issuers
which deal in real estate, securities which are secured by
interests in real estate, and securities representing interests
in real estate, and it may acquire and dispose of real estate or
interests in real estate acquired through the exercise of its
rights as a holder of debt obligations secured by real estate or
interests therein.
(12) (Massachusetts, Michigan, Minnesota and Ohio funds only)
Purchase or sell commodities or commodity contracts, except that
a fund may write and purchase options on financial futures
contracts and buy and sell financial futures contracts.
(13) (Florida, New Jersey and Pennsylvania funds only) Purchase
or sell commodities or commodity contracts, except that a Fund
may write and purchase financial futures contracts and related
options.
(14) (Arizona fund only) Purchase or sell commodities or
commodity contracts, except that the Arizona fund may purchase
and sell financial futures contracts and related options.
(15) (All funds except Arizona fund) Make loans, except by
purchase of debt obligations in which a fund may invest
consistent with its investment policies, or by entering into
repurchase agreements with respect to not more than 25% of its
total assets (taken at current value).
(16) (Arizona fund only) Make loans, except by purchase of debt
obligations in which the Arizona fund may invest consistent with
its investment policies, or by entering into repurchase
agreements with respect to not more than 25% of its total assets
(taken at current value) or through the lending of its portfolio
securities with respect to not more than 25% of its assets.
(17) Invest in securities of any issuer if, to the knowledge of
the fund, officers and Trustees of the fund and officers and
directors of Putnam Management who beneficially own more than
0.5% of the shares or securities of that issuer together own more
than 5%.
(18) (Massachusetts, Michigan, Minnesota and Ohio funds only).
Invest in securities of any issuer if, immediately after such
investment, more than 5% of the total assets of a fund (taken at
current value) would be invested in the securities of such
issuer; provided that this limitation does not apply to
obligations issued or guaranteed as to interest and principal by
the U.S. government, its agencies or instrumentalities or to
tax-exempt securities.
<PAGE>
(19) (Pennsylvania fund only). With respect to 75% of its total
assets, invest in securities of any issuer if, immediately after
such investment, more than 5% of the total assets of the
Pennsylvania fund (taken at current value) would be invested in
the securities of such issuer; provided that this limitation does
not apply to obligations issued or guaranteed as to interest and
principal by the U.S. government or its agencies or
instrumentalities.
(20) (Arizona, Florida and New Jersey funds only). With respect
to 50% of its total assets, invest in securities of any issuer
if, immediately after such investment, more than 5% of the total
assets of the fund (taken at current value) would be invested in
the securities of such issuer; provided that this limitation does
not apply to obligations issued or guaranteed as to interest or
principal by the U.S. government or its agencies or
instrumentalities.
(21) Acquire more than 10% of the voting securities of any
issuer.
(22) (All funds except Arizona fund) Purchase securities (other
than securities of the U.S. government, its agencies or
instrumentalities and tax-exempt securities, except obligations
backed only by the assets and revenues of nongovernmental
issuers) if as a result of such purchase more than 25% of the
fund's total assets would be invested in any one industry.
(23) (Arizona fund only) Purchase securities (other than
securities of the U.S. government, its agencies or
instrumentalities or tax-exempt securities, except obligations
backed only by the assets and revenues of nongovernmental
issuers) if as a result of such purchase, more than 25% of the
Arizona fund's total assets would be invested in any one
industry.
(24) (New Jersey fund only). Invest in the securities of other
registered open-end investment companies, except as they may be
acquired as part of a merger or consolidation or acquisition of
assets.
(25) (All funds except Arizona fund) Purchase securities
restricted as to resale, if, as a result, such investments would
exceed 15% of the value of a fund's net assets, excluding
restricted securities that have been determined by the Trustees
of the fund (or the person designated by them to make such
determinations) to be readily marketable.
(26) (Arizona fund only) Purchase securities the disposition of
which is restricted under federal securities law, if, as a
result, such investments would exceed 15% of the value of the
Arizona fund's current net assets, excluding restricted
securities that have been determined by the Trustees of the
Arizona fund (or the person designated by them to make such
determinations) to be readily marketable.
(27) (Massachusetts, Michigan, Minnesota, Ohio and Pennsylvania
funds only) Buy or sell oil, gas or other mineral leases, rights
or royalty contracts.
(28) (Florida fund only) Buy or sell oil, gas or other mineral
leases, rights or royalty contracts, although it may purchase
securities which represent interests in, are secured by interests
in, or which are issued by issuers which deal in, such leases,
rights, or contracts, and it may acquire or dispose of such
leases, rights, or contracts acquired through the exercise of its
rights as a holder of debt obligations secured thereby.
(29) (New Jersey fund only) Buy or sell oil, gas or other mineral
leases, rights or royalty contracts, although it may purchase
securities of issuers which deal in, represent interests in, or
are secured by interests in such leases, rights, or contracts,
and it may acquire or dispose of such leases, rights, or
contracts acquired through the exercise of its rights as a holder
of debt obligations secured thereby.
(30) Make investments for the purpose of gaining control of a
company's management.
(31) Issue any class of securities which is senior to the
fund's shares of beneficial interest.
Although certain of the funds' fundamental investment
restrictions permit each fund to borrow money to a limited
extent, none of the funds currently intends to do so and none of
the funds did so last year.
The Investment Company Act of 1940 provides that a "vote of a
majority of the outstanding voting securities" of a fund means
the affirmative vote of the lesser of (1) more than 50% of the
outstanding fund shares, or (2) 67% or more of the shares present
at a meeting if more than 50% of the outstanding fund shares are
represented at the meeting in person or by proxy.
------------------
<PAGE>
It is contrary to a fund's present policy, which may be changed
without shareholder approval, to:
(1) (For Massachusetts, Michigan, Minnesota and Ohio funds only)
Invest in (a) securities which are not readily marketable, (b)
securities restricted as to resale and (c) repurchase agreements
maturing in more than seven days, if, as a result, more than 15%
of a fund's net assets (taken at current value) would be invested
in securities described in (a), (b) and (c) above.
(2) (For Arizona, Florida, New Jersey and Pennsylvania funds
only) Invest in (a) securities which are not readily marketable,
(b) securities restricted as to resale (excluding securities
determined by the Trustees of a fund to make such determinations)
to be readily marketable, and (c) repurchase agreements
maturing in more than seven days, if, as a result, more than 15%
of a fund's net assets (taken at current value) would be invested
in securities described in (a), (b) and (c) above.
(3) (All funds except Arizona fund). Invest in warrants (other
than warrants acquired by the fund as part of a unit or attached
to securities at the time of purchase).
(4) (All funds except Arizona and Florida funds) Invest in
securities of any issuer if the party responsible for payment,
together with any predecessors, has been in operation for less
than three consecutive years and, as a result of the investment,
the aggregate of such investments would exceed 5% of the value of
the fund's net assets; provided, however, that this restriction
shall not apply to any obligation of the United States or its
agencies or instrumentalities, or to any obligation for the
payment of which is pledged the faith, credit and taxing power of
any person authorized to issue tax-exempt securities.
(5) (Arizona fund only) Invest in securities of any issuer if the
party responsible for payment, together with any predecessors,
has been in operation for less than three consecutive years and,
as a result of the investment, the aggregate of such investments
would exceed 5% of the value of the Arizona fund's net assets;
provided, however, that this restriction shall not apply to any
obligation of the United States or its agencies or
instrumentalities, or to any general obligation for the payment
of which is pledged the faith, credit and taxing power of any
person authorized to issue tax-exempt securities.
(6) (Florida fund only) Invest in securities of any issuer if the
party responsible for payment, together with any predecessors,
has been in operation for less than three consecutive years and,
as a result of the investment, the aggregate of such investments
would exceed 5% of the value of the Florida fund's net assets;
provided, however, that this restriction shall not apply to any
obligation of the United States or its agencies or
instrumentalities, or to any obligation for the payment of which
is pledged the full faith, credit and taxing power of any person
authorized to issue tax-exempt securities.
(7) (All funds except New Jersey fund). Invest in the securities
of other registered open-end investment companies, except as they
may be acquired as part of a merger or consolidation or
acquisition of assets.
All percentage limitations on investments (other than pursuant to
non-fundamental restrictions (1 and 2) will apply at the time of
the making of an investment and shall not be considered violated
unless an excess or deficiency occurs or exists immediately after
and as a result of such investment.
PROPOSED RESTRICTIONS
At a meeting to be held on December 5, 1996, shareholders of
each fund are being asked to approve a number of changes to each
fund's fundamental investment restrictions, including the
elimination of certain of these restrictions. If these proposals
are approved at that meeting, each fund's fundamental and non-
fundamental investment restrictions will be as follows after that
date:
Fundamental restrictions
(1) Borrow money in excess of 10% of the value (taken at the
lower of cost or current value) of its total assets (not
including the amount borrowed) at the time the borrowing is made,
and then only from banks as a temporary measure to facilitate the
meeting of redemption requests (not for leverage) which might
otherwise require the untimely disposition of portfolio
investments or for extraordinary or emergency purposes. Such
borrowings will be repaid before any additional investments are
purchased.
(2) Underwrite securities issued by other persons except to the
extent that, in connection with the disposition of its portfolio
investments, it may be deemed to be an underwriter under certain
federal securities laws.
(3) Purchase or sell real estate, although it may purchase
securities of issuers which deal in real estate, securities which
are secured by interests in real estate, and securities which
represent interests in real estate, and it may acquire and
dispose of real estate or interests in real estate acquired
through the exercise of its rights as a holder of debt
obligations secured by real estate or interests therein.
<PAGE>
(4) Purchase or sell commodities or commodity contracts, except
that the fund may purchase and sell financial futures contracts
and options and may enter into foreign exchange contracts and
other financial transactions not involving physical commodities.
(5) Make loans, except by purchase of debt obligations in which
the fund may invest consistent with its investment policies, by
entering into repurchase agreements, or by lending its portfolio
securities.
(6) (Arizona, Florida and New Jersey funds only). With respect to
50% of its total assets, invest in securities of any issuer if,
immediately after such investment, more than 5% of the total
assets of the fund (taken at current value) would be invested in
the securities of such issuer; provided that this limitation does
not apply to obligations issued or guaranteed as to interest or
principal by the U.S. government or its agencies or
instrumentalities.
(7) (Massachusetts, Michigan, Minnesota, Ohio and Pennsylvania
funds only) With respect to 75% of its total assets, invest in
the securities of any issuer if, immediately after such
investment, more than 5% of the total assets of the fund (taken
at current value) would be invested in the securities of such
issuer; provided that this limitation does not apply to
obligations issued or guaranteed as to interest or principal by
the U.S. government or its agencies or instrumentalities.
(8) (Arizona, Florida and New Jersey funds only). With respect to
50% of its assets, acquire more than 10% of the outstanding
voting securities of any issuer.
(9) (Massachusetts, Michigan, Minnesota, Ohio and Pennsylvania
funds only). With respect to 75% of its total assets, acquire
more than 10% of the outstanding voting securities of any issuer.
(10) Purchase securities (other than securities of the U.S.
government, its agencies or instrumentalities or tax-exempt
securities, except obligations backed only by the assets and
revenues of non-governmental issuers) if as a result of such
purchase, more than 25% of the fund's total assets would be
invested in any one industry.
(11) Issue any class of securities which is senior to the fund's
shares of beneficial interest, except for permitted
borrowings.
<PAGE>
Non-fundamental restrictions
(1) (For Massachusetts, Michigan, Minnesota and Ohio funds only)
Invest in (a) securities which are not readily marketable, (b)
securities restricted as to resale and (c) repurchase agreements
maturing in more than seven days, if, as a result, more than 15%
of a fund's net assets (taken at current value) would be invested
in securities described in (a), (b) and (c) above.
(2) (For Arizona, Florida, New Jersey and Pennsylvania funds
only) Invest in (a) securities which are not readily marketable,
(b) securities restricted as to resale (excluding securities
determined by the Trustees of a fund to make such determinations)
to be readily marketable, and (c) repurchase agreements
maturing in more than seven days, if, as a result, more than 15%
of a fund's net assets (taken at current value) would be invested
in securities described in (a), (b) and (c) above.
(3) (All funds except Arizona fund) Invest in warrants (other
than warrants acquired by the fund as part of a unit or attached
to securities at the time of purchase).
(4) (All funds except Arizona and Florida funds) Invest in
securities of any issuer if the party responsible for payment,
together with any predecessors, has been in operation for less
than three consecutive years and, as a result of the investment,
the aggregate of such investments would exceed 5% of the value of
the fund's net assets; provided, however, that this restriction
shall not apply to any obligation of the United States or its
agencies or instrumentalities, or to any obligation for the
payment of which is pledged the faith, credit and taxing power of
any person authorized to issue tax-exempt securities.
(5) (Arizona fund only) Invest in securities of any issuer if the
party responsible for payment, together with any predecessors,
has been in operation for less than three consecutive years and,
as a result of the investment, the aggregate of such investments
would exceed 5% of the value of the Arizona fund's net assets;
provided, however, that this restriction shall not apply to any
obligation of the United States or its agencies or
instrumentalities, or to any general obligation for the payment
of which is pledged the faith, credit and taxing power of any
person authorized to issue tax-exempt securities.
(6) (Florida fund only) Invest in securities of any issuer if the
party responsible for payment, together with any predecessors,
has been in operation for less than three consecutive years and,
as a result of the investment, the aggregate of such investments
would exceed 5% of the value of the Florida fund's net assets;
provided, however, that this restriction shall not apply to any
obligation of the United States or its agencies or
instrumentalities, or to any obligation for the payment of which
is pledged the full faith, credit and taxing power of any person
authorized to issue tax-exempt securities.
(7) Invest in the securities of other registered open-end
investment companies, except as they may be acquired as part of a
merger or consolidation or acquisition of assets.
(8) Invest in securities of any issuer if, to the knowledge of
the fund, officers and Trustees of the fund and officers and
directors of Putnam Management who beneficially own more than
0.5% of the securities of that issuer together own more than 5%
of such securities.
(9) Purchase securities on margin, except such short-term credits
as may be necessary for the clearance of purchases and sales of
securities, and except that it may make margin payments in
connection with financial futures contracts or options.
(10) Make short sales of securities or maintain a short position
for the account of the fund unless at all times when a short
position is open it owns an equal amount of such securities or
owns securities which, without payment of any further
consideration, are convertible into or exchangeable for
securities of the same issue as, and in equal amount to, the
securities sold short.
(11) Pledge, hypothecate, mortgage or otherwise encumber its
assets in excess of 33 1/3% of its total assets (taken at cost)
in connection with permitted borrowings.
(12) Buy or sell oil, gas or other mineral leases, rights or
royalty contracts, although it may purchase securities which
represent interests in, are secured by interests in, or which are
issued by issuers which deal in, such leases, rights or
contracts, and it may acquire and dispose of such leases, rights
or contracts acquired through the exercise of its rights as a
holders of debt obligations secured thereby.
If shareholders do not ultimately approve some or all of the
proposed changes, this SAI will be revised accordingly.
-------------------
<PAGE>
CHARGES AND EXPENSES
Management fees
Under Management Contracts dated September 20, 1996, each fund pays a
quarterly fee to Putnam Management based on the average net assets of that
fund, as determined at the close of each business day during the quarter,
at the annual rate of 0.60% of the first $500 million, 0.50% of the next
$500 million, 0.45% of the next $500 million, 0.40% of the next $5 billion,
0.375% of the next $5 billion, 0.355% of the next $5 billion, 0.340% of the
next $5 billion and 0.330% thereafter. For the past three fiscal years,
pursuant to management contracts in effect prior to September 20, 1996
(dated set forth as below), the funds incurred the following fees:
Fiscal Management
year fee paid
------ ----------------
Arizona fund 1996 $943,091
1995+ $683,508
1994 $952,651
Florida fund 1996 $1,860,534
1995++ $1,686,928
1994 $1,921,362
Massachusetts fund 1996 $1,885,492
1995 $1,638,366
1994 $1,549,215
Michigan fund 1996 $990,338
1995 $858,323
1994 $782,934
Minnesota fund 1996 $742,566
1995 $643,810
1994 $589,840
New Jersey fund 1996 $1,824,907
1995++ $1,588,880
1994 $1,702,343
Ohio fund 1996 $1,379,995
1995 $1,286,605
1994 $1,206,826
Pennsylvania fund 1996 $1,426,014
1995+++ $323,968
1995 $1,155,995
+ for fiscal period 9/1/94 - 5/31/95
++ for fiscal period 7/1/94 - 5/31/95
+++ for fiscal period 3/1/95 - 5/31/95
Prior Prior
Fund name Contract date Rates
Arizona fund 3/5/92 0.60% of the first $500 million
0.50% of the next $500 million
0.45% of the next $500 million and
0.40% thereafter
Florida fund 12/5/91 0.60% of the first $500 million
0.50% of the next $500 million
0.45% of the next $500 million and
0.40% thereafter
Massachusetts fund 7/11/91 0.60% of the first $500 million
0.50% of the next $500 million
0.45% of the next $500 million and
0.40% thereafter
Michigan fund 7/11/91 0.60% of the first $500 million
0.50% of the next $500 million
0.45% of the next $500 million and
0.40% thereafter
Minnesota fund 7/11/91 0.60% of the first $500 million
0.50% of the next $500 million
0.45% of the next $500 million and
0.40% thereafter
New Jersey fund 6/6/91 0.60% of the first $500 million
0.50% of the next $500 million
0.45% of the next $500 million and
0.40% thereafter
Ohio fund 7/11/91 0.60% of the first $500 million
0.50% of the next $500 million
0.45% of the next $500 million and
0.40% thereafter
Pennsylvania fund 7/11/91 0.60% of the first $500 million
0.50% of the next $500 million
0.45% of the next $500 million and
0.40% thereafter
<PAGE>
Brokerage commissions
The following table shows brokerage commissions paid during the fiscal
periods indicated.
Fiscal Brokerage
year commissions
------ ------------
Arizona fund 1996 $8,892
1995+ $16,040
1994 $0
Florida fund 1996 $10,049
1995++ $29,166
1994 $34,899
Massachusetts fund 1996 $11,986
1995 $27,290
1994 $9,696
Michigan fund 1996 $5,967
1995 $5,208
1994 $0
Minnesota fund 1996 $4,667
1995 $9,645
1994 $1,095
New Jersey fund 1996 $18,629
1995++ $41,937
1994 $9,708
Ohio fund 1996 $6,578
1995 $13,759
1994 $6,063
Pennsylvania fund 1996 $9,269
1995+++ $2,119
1995 $2,612
+ for fiscal period 9/1/94 - 5/31/95
++ for fiscal period 7/1/94 - 5/31/95
+++ for fiscal period 3/1/95 - 5/31/95
<PAGE>
The following table shows transactions placed with brokers and dealers
during the most recent fiscal year to recognize research, statistical and
quotation services Putnam Management considered to be particularly useful
to it and its affiliates.
Dollar
value Percent of
of these total Amount of
transactions transactions commissions
------------ ------------ -----------
Arizona fund $753,670 0.72% $4,377
Florida fund $11,037,152 7.04% $48,817
Massachusetts fund $3,198,724 2.51% $17,313
Michigan fund $12,234,127 10.01% $54,562
Minnesota fund $1,550,388 2.17% $12,864
New Jersey fund $4,273,325 1.97% $13,409
Ohio fund $5,584,381 5.83% $27,985
Pennsylvania fund $2,731,725 2.51% $16,250
Administrative expense reimbursement
The funds reimbursed Putnam Management in the following amounts for
administrative services during fiscal 1996, including the following amounts
for compensation of certain fund officers and contributions to the Putnam
Investments, Inc. Profit Sharing Retirement Plan for their benefit:
Portion of total
reimbursement for
compensation
Total and
reimbursement contributions
------------- ----------------
Arizona fund $7,808 $6,820
Florida fund $8,123 $7,095
Massachusetts fund $8,170 $7,136
Michigan fund $7,790 $6,804
Minnesota fund $7,786 $6,801
New Jersey fund $8,170 $7,136
Ohio fund $7,989 $6,978
Pennsylvania fund $8,046 $7,028
<PAGE>
Trustee fees
Each Trustee receives a fee for his or her services. Each
Trustee also receives fees for serving as Trustee of other Putnam
funds. The Trustees periodically review their fees to assure
that such fees continue to be appropriate in light of their
responsibilities as well as in relation to fees paid to trustees
of other mutual fund complexes. The Trustees meet monthly over a
two-day period, except in August. The Compensation Committee,
which consists solely of Trustees not affiliated with Putnam
Management and is responsible for recommending Trustee
compensation, estimates that Committee and Trustee meeting time
together with the appropriate preparation requires the equivalent
of at least three business days per Trustee meeting. The
following table shows the year each Trustee was first elected a
Trustee of the Putnam funds, the fees paid to each Trustee by
each fund for fiscal 1996 and the fees paid to each Trustee by
all of the Putnam funds during the calendar year 1995:
<PAGE>
<TABLE><CAPTION>
COMPENSATION TABLE
Aggregate compensation (1) from:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
All Putnam
Trustee/Year AZ FL MA MI MN NJ OH PA funds (2)
Jameson A. Baxter/1994 $773 $860 $867 $779 $761 $873 $825 $827 $150,854
Hans H. Estin/1972 $770 $857 $863 $776 $758 $869 $821 $824 150,854
John A. Hill/1985 $765 $850 $856 $770 $753 $862 $816 $818 149,854
Ronald J. Jackson/1996 (3) n/a n/a n/a n/a n/a n/a n/a n/a n/a
Elizabeth T. Kennan/1992 $770 $857 $863 $776 $758 $869 $821 $824 148,854
Lawrence J. Lasser/1992 $766 $852 $858 $772 $754 $863 $817 $819 150,854
Robert E. Patterson/1984 $792 $885 $893 $798 $780 $898 $848 $851 152,854
Donald S. Perkins/1982 $767 $853 $859 $773 $755 $865 $818 $820 150,854
William F. Pounds/1971 $781(4) $880(4) $889(4) $788(4) $767(4) $892(4) $839(4) $843(4) 149,854
George Putnam/1957 $770 $857 $863 $776 $758 $869 $821 $824 150,854
George Putnam, III/1984 $770 $857 $863 $776 $758 $869 $821 $824 150,854
Eli Shapiro/1995 (5) $792 $886 $893 $799 $780 $899 $848 $852 95,372
A.J.C. Smith/1986 $765 $850 $856 $771 $753 $862 $816 $818 149,854
W. Nicholas Thorndike/1992 $792 $885 $893 $779 $780 $899 $848 $852 152,854
(1) Includes an annual retainer and an attendance fee for each meeting attended.
(2) Reflects total payments received from all Putnam funds in the most recent calendar year. As of December 31,
1995, there were 99 funds in the Putnam family.
(3) Elected as Trustee in May 1996.
(4) Includes additional compensation for service as Vice Chairman of the Putnam funds.
(5) Elected as Trustee in April 1995.
</TABLE>
The Trustees have approved Retirement Guidelines for Trustees of
the Putnam funds. These Guidelines provide generally that a
Trustee who retires after reaching age 72 and who has at least 10
years of continuous service will be eligible to receive a
retirement benefit from each Putnam fund for which he or she
served as a Trustee. The amount and form of such benefit is
subject to determination annually by the Trustees and, unless
otherwise determined by the Trustees, will be an annual cash
benefit payable for life equal to one-half of the Trustee
retainer fees paid by each fund at the time of retirement.
Several retired Trustees are currently receiving benefits
pursuant to the Guidelines and it is anticipated that the current
Trustees will receive similar benefits upon their retirement. A
Trustee who retired in calendar 1995 and was eligible to receive
benefits under these Guidelines would have received an annual
benefit of $66,749, based upon the aggregate retainer fees paid
by the Putnam funds for such year. The Trustees reserve the
right to amend or terminate such Guidelines and the related
payments at any time, and may modify or waive the foregoing
eligibility requirements when deemed appropriate.
For additional information concerning the Trustees, see
"Management" in Part II of this SAI.
Share ownership
At August 31, 1996, the officers and Trustees of each fund as a
group owned less than 1% of the outstanding shares of each class
of each fund, and, except as noted below, to the knowledge of
each fund no person owned of record or beneficially 5% or more of
the shares of any class of that fund:
Shareholder name Percentage
Fund name Class and address owned (%)
- ----------- ----- -------------------- --------
Arizona fund A Merrill Lynch 5.50
4800 Dear Lake Dr. East
Jacksonville, FL 32246
B Merrill Lynch 6.00
4800 Dear Lake Dr. East
Jacksonville, FL 32246
MEdward D. Jones & Co.45.60
P.O. Box 2500
Maryland Heights, MO 63043
MDonaldson, Lufkin & Jenrette 28.00
P.O. 2052
Jersey City, NJ 07303
MG. Donald Haarer 12.40
354 Forest Highlands
Flagstaff, AZ 86001
Florida fund A Merrill Lynch 9.30
4800 Dear Lake Dr. East
Jacksonville, FL 32246
B Merrill Lynch 8.20
4800 Dear Lake Dr. East
Jacksonville, FL 32246
MRandy M. Poffo, Trustee 22.70
7650 Bayshore Drive
St. Petersburg, FL 33706
MRaymond James & Associates, Inc. 22.60
P.O. Box 12749
St. Petersburg, FL 33716
MEdward D. Jones & Co.14.90
P.O. Box 2500
Maryland Heights, MO 63043
MJohn R. McAllister 8.70
12372 Comorant Dr.
Jacksonville, FL 32223
MSylvia Maulitz 6.90
101 Clyde Morris Blvd.
Ormand Beach, FL 32174
M Paine Webber 5.00
1000 Harbor Blvd.
Weehawken, NJ 07087
Massachusetts M Smith Barney, Inc. 49.00
fund 333 W. 34th St.
New York, NY 10001
MNicholas J. Stasinos, TTE 7.10
22 Brewster St.
Plymouth, MA 02360
MDavid P. Matoes 6.20
332 Main St.
Wareham, MA 02571
<PAGE>
Michigan fund M Pauline B. Pickford, TTE 20.90
64 Pleasant St.
Oxford, MI 48837
MFrank R. Farkas 20.70
1832 ADA Ave
Muskegon, MI 49442
MEdward D. Jones & Co. 5.90
P.O. Box 2500
Maryland Heights, MO 63043
MEmory J. Anderson 11.80
1481 E. Jackson Rd.
St. Louis, MI 48880
MWheat First FBO 16.30
P.O. Box 6540
Glen Allen, VA 23058
Minnesota fund M Craig M. Larson 25.20
200 Chainview
Chanhassen, MN 55317
MKermit J. Swenson 13.90
7819 408th St.
Kenyon, MN 55946
MGertrude L. Palublicki6.40
576 E. 2nd St.
Winona, MN 55987
MEdward D. Jones & Co.18.20
P.O. Box 2500
Maryland Heights, MO 63043
New Jersey fund A Merrill Lynch 10.10
4800 Dear Lake Dr. East
Jacksonville, FL 32246
B Merrill Lynch 9.10
4800 Dear Lake Dr. East
Jacksonville, FL 32246
M Thomas Chiego 27.80
48 Huntley Rd.
Summit, NJ 55317
<PAGE>
M Jack Keshish 19.30
148 Lakeview Ave.
S. Plainfield, NJ 07080
MEdward J. Gibeny 9.00
25 Hickory Place
Chatham, NJ 07928
MKathleen Sisolak 6.70
198 Lakeview Drive Rd.
Basking Ridge, NJ 07920
M Allen Samuels 5.40
563 Stonewall Dr.
Smithville, NJ 08201
MChristine Vallet 5.00
40 Fieldcrest Way
Hazlet, NJ 07430
Ohio fund B Merrill Lynch 13.20
4800 Dear Lake Dr. East
Jacksonville, FL 32246
MDonaldson, Lufkin & Jenrette 31.30
P.O. 2052
Jersey City, NJ 07303
MPrudential Securities, Inc. 10.70
111 8th Ave.
New York, NY 10011
M NFSC FEBO 9.60
One New York Plaza
New York, NY 10292
MRick D. Gerdeman 6.80
816 Atalant Rd.
Lima, OH 45805
Pennsylvania fund A BHC Securities, Inc. 7.30
100 North 20th St.
Philadelphia, PA 19103
B Merrill Lynch 7.60
4800 Dear Lake Dr. East
Jacksonville, FL 32246
<PAGE>
M Paine Webber 15.40
1000 Harbor Blvd.
Weehawken, NJ 07087
M Nancy Wyndham 12.10
P.O. Box 831
Wenden Hall, PA 19357
MSharon L. Haller 9.60
610 Cambridge Ct.
Palmyra, PA 17078
MGerald M. Stuczynski, TTE 7.00
3008 Florida Ave.
Erie, PA 17078
MPatricia A. Fox 5.10
119 Haverford Dr.
Lafkin, PA 18702
MEdward D. Jones & Co.18.20
P.O. Box 2500
Maryland Heights, MO 63043
NFSC FEBO 10.00
One New York Plaza
New York, NY 10292
<PAGE>
Distribution fees
During fiscal 1996, the funds paid the following 12b-1 fees to
Putnam Mutual Funds:
Fund name Class A Class B Class M
- ---------- ------- ------- -------
Arizona fund $268,581 $195,822 $393
Florida fund $521,621 $419,027 $2,219
Massachusetts fund $515,338 $479,943 $2,855
Michigan fund $278,111 $220,327 $1,551
Minnesota fund $196,064 $216,102 $2,375
New Jersey fund $476,014 $564,213 $1,119
Ohio fund $384,848 $320,710 $900
Pennsylvania fund $364,644 $473,557 $527
Class A sales charges and contingent deferred sales charges
Putnam Mutual Funds received sales charges with respect to class
A shares in the following amounts during the periods indicated:
Sales charges
retained by Putnam Contingent
Total Mutual Funds deferred
front-end after sales
sales chargesdealer concessions charges
------------------------------- --------
Arizona fund
Fiscal year
1996 $363,781 $23,412 $10,000
1995+ $257,469 $15,552 $200
1994 $894,004 $59,472 $1,639
Florida fund
Fiscal year
1996 $603,590 $45,457 $8,800
1995++ $501,152 $39,037 $19,781
1994 $1,391,801 $80,999 $584
<PAGE>
Massachusetts fund
Fiscal year
1996 $866,435 $82,951 $1,562
1995 $783,963 $27,221 $680
1994 $1,740,049 $140,316 $10,092
Michigan fund
Fiscal year
1996 $507,284 $35,487 $0
1995 $419,491 $15,212 $0
1994 $935,249 $65,629 $0
Minnesota fund
Fiscal year
1996 $389,372 $25,681 $0
1995 $312,177 $18,588 $7
1994 $670,795 $41,915 $27
New Jersey fund
Fiscal year
1996 $725,211 $48,772 $1,048
1995++ $777,971 $48,327 $2,864
1994 $2,132,078 $123,856 $0
Ohio fund
Fiscal year
1996 $435,027 $33,619 $0
1995 $466,247 $30,918 $0
1994 $1,129,631 $73,168 $0
Pennsylvania fund
Fiscal year
1996 $816,256 52,102 $996
1995+++ $273,245 $18,254 $10,000
1995 $1,113,142 $71,739 $640
+ for fiscal period 9/1/94 - 5/31/95
++ for fiscal period 7/1/94 - 5/31/95
+++ for fiscal period 3/1/95 - 5/31/95
<PAGE>
Class B contingent deferred sales charges
Putnam Mutual Funds received contingent deferred sales charges
upon redemptions of class B shares in the following amounts
during the periods indicated:
Contingent deferred
sales charges
-------------------
Arizona fund
Fiscal year
1996 $100,749
1995+ $48,101
1994 $309,154
Florida fund
Fiscal year
1996 $131,967
1995++ $153,120
1994 $78,903
Massachusetts fund
Fiscal year
1996 $165,517
1995 $35,000
1994 $34,720
Michigan fund
Fiscal year
1996 $40,870
1995 $32,819
1994 $3,489
Minnesota fund
Fiscal year
1996 $33,959
1995 $20,926
1994 $4,372
<PAGE>
New Jersey fund
Fiscal year
1996 $146,756
1995++ $150,939
1994 $62,483
Ohio fund
Fiscal year
1996 $85,990
1995 $60,907
1994 $9,032
Pennsylvania fund
Fiscal year
1996 $105,045
1995+++ $18,160
1995 $2,473
+ for fiscal period 9/1/94 - 5/31/95
++ for fiscal period 7/1/94 - 5/31/95
+++ for fiscal period 3/1/95 - 5/31/95
<PAGE>
Class M shares
Putnam Mutual Funds received sales charges with respect to class
M shares in the following amounts during the periods indicated:
Sales charges
retained by Putnam
Mutual Funds
Total after
sales charges dealer concessions
------------- ------------------
Arizona fund
Fiscal year
1996 $5,471 $674
Florida fund
Fiscal year
1996 $7,950 $502
1995+ $0 $0
Massachusetts fund
Fiscal year
1996 $8,403 $865
1995 $692 $62
Michigan fund
Fiscal year
1996 $10,181 $1,078
1995 $0 $0
Minnesota fund
Fiscal year
1996 $4,671 $141
1995 $0 $0
New Jersey fund
Fiscal year
1996 $4,939 $419
1995+ $0 $0
<PAGE>
Ohio fund
Fiscal year
1996 $2,641 $259
1995 $0 $0
Pennsylvania fund
Fiscal year
1996 $4,286 $432
+ for fiscal period 7/1/94 - 5/31/95
Investor servicing and custody fees and expenses
During the 1996 fiscal year, each fund incurred the following
fees and out-of-pocket expenses for investor servicing and
custody services provided by Putnam Fiduciary Trust Company:
Arizona fund $192,766
Florida fund $312,233
Massachusetts fund $350,820
Michigan fund $212,118
Minnesota fund $177,771
New Jersey fund $340,358
Ohio fund $227,456
Pennsylvania fund $237,695
<PAGE>
INVESTMENT PERFORMANCE
Standard performance measures
(for periods ended May 31, 1996)
Arizona fund
Class A Class B Class M
Inception
date: 1/30/91 7/15/93 7/3/95
Annualized
total return
- -----------------------------------------------------------------
1 year -1.54% -2.30% n/a
5 years 5.80 n/a n/a
Life of
class 6.07 1.89 1.02%*
Yield
30-day
yield 4.62% 4.20% 4.39%
Tax-equivalent
yield** 8.10% 7.37% 7.70%
*Represents cumulative, rather than average annual, total return.
**Assumes the maximum combined 42.98% federal and state rate.
Results for investors subject to lower tax rates would not be as
advantageous.
<PAGE>
Florida fund
Class A Class B Class M
Inception
date: 8/24/90 1/4/93 5/1/95
Annualized
total return
- -----------------------------------------------------------------
1 year -1.80% -2.52% -0.62%
5 years 5.96 n/a n/a
Life of
class 6.59 3.57 2.43
Yield
30-day
yield 4.99% 4.58% 4.77%
Tax-equivalent
yield* 8.26% 7.58% 7.90%
*Assumes the maximum 39.60% federal rate. Results for investors
subject to lower tax rates would not be as advantageous.
<PAGE>
Massachusetts fund
Class A Class B Class M
Inception
date: 10/23/89 7/15/93 5/12/95
Annualized
total return
- -----------------------------------------------------------------
1 year -0.17% -0.83% 0.79%
5 years 6.87 n/a n/a
Life of
class 7.36 2.70 2.15
Yield
30-day
yield 5.32% 4.93% 5.12%
Tax-equivalent 10.01% 9.28% 9.63%
yield*
*Assumes the maximum combined 46.85% federal and state rate.
Results for investors subject to lower tax rates would not be as
advantageous.
<PAGE>
Michigan fund
Class A Class B Class M
Inception
date: 10/23/89 7/15/93 4/17/95
Annualized
total return
- -----------------------------------------------------------------
1 year -1.18% -1.86% 0.19%
5 years 6.08 n/a n/a
Life of
class 6.30 2.18 2.73
Yield
30-day
yield 5.04% 4.64% 4.83%
Tax-equivalent
yield* 8.73% 8.04% 8.37%
*Assumes the maximum combined 42.26% federal and state rate.
Results for investors subject to lower tax rates would not be as
advantageous.
<PAGE>
Minnesota fund
Class A Class B Class M
Inception
date: 10/23/89 7/15/93 4/3/95
Annualized
total return
- -----------------------------------------------------------------
1 year -1.78% -2.40% -0.51%
5 years 5.48 n/a n/a
Life of
class 5.97 2.26 2.07
Yield
30-day
yield 4.81% 4.40% 4.59%
Tax-equivalent
yield* 8.70% 7.96% 8.30%
*Assumes the maximum combined 44.73% federal and state rate.
Results for investors subject to lower tax rates would not be as
advantageous.
<PAGE>
New Jersey fund
Class A Class B Class M
Inception
date: 2/20/90 1/4/93 5/1/95
Annualized
total return
- -----------------------------------------------------------------
1 year -1.99% -2.62% -0.68%
5 years 5.77 n/a n/a
Life of
class 6.62 3.67 2.33
Yield
30-day
yield 5.06% 4.65% 4.84%
Tax-equivalent
yield* 8.95% 8.22% 8.56%
*Assumes the maximum combined 43.45% federal and state rate.
Results for investors subject to lower tax rates would not be as
advantageous.
<PAGE>
Ohio fund
Class A Class B Class M
Inception
date: 10/23/89 7/15/93 4/3/95
Annualized
total return
- -----------------------------------------------------------------
1 year -1.65% -2.26% -0.34%
5 years 5.85 n/a n/a
Life of
class 6.26 2.23 2.35
Yield
30-day
yield 4.71% 4.29% 4.49%
Tax-equivalent
yield* 8.43% 7.68% 8.04%
*Assumes the maximum combined 44.13% federal and state rate.
Results for investors subject to lower tax rates would not be as
advantageous.
<PAGE>
Pennsylvania fund
Class A Class B Class M
Inception
date: 7/21/89 7/15/93 7/3/95
Annualized
total return
- -----------------------------------------------------------------
1 year -1.09% -1.77% n/a
5 years 6.66 n/a n/a
Life of
class 6.90 2.71 1.24%*
Yield
30-day
yield 5.04% 4.63% 4.82%
Tax-equivalent
yield** 8.58% 7.89% 8.21%
*Represents cumulative, rather than average annual, total return.
**Assumes the maximum combined 41.29% federal and state rate.
Results for investors subject to lower tax rates would not be as
advantageous.
- -----------------------------------------------------------------
Data represent past performance and are not indicative of future
results. Total return and yield for class A and class M shares
reflect the deduction of the maximum sales charge of 4.75% and
3.25%, respectively. Total return for class B shares reflects
the deduction of the applicable contingent deferred sales charge
("CDSC"). The maximum class B CDSC is 5.00%. See "Standard
performance measures" in Part II of this SAI for information on
how performance is calculated. Past performance is no guarantee
of future results.
<PAGE>
TAXES
The prospectus describes generally the tax treatment of
distributions by the funds. This section of the SAI and the
section entitled "Taxes" in Part II of this SAI include
additional information concerning certain state and federal tax
consequences of an investment in a fund, respectively.
Prospective investors should be aware that an investment in a
state tax-exempt fund may not be suitable for persons who do not
receive income subject to income taxes of such state.
(Michigan and Minnesota funds only) That percentage of interest
on indebtedness incurred or continued to purchase or carry shares
of an investment company paying exempt-interest dividends, such
as the funds, that is equal to the percentage of the funds'
distributions from investment income and short-term capital gains
that is exempt from federal income tax, will not be deductible by
the investor for single business tax or Minnesota personal income
tax purposes. For Michigan personal income tax and Michigan
intangibles tax purposes, such interest deduction is wholly
disallowed.
To the extent that distributions are derived from interest on
Michigan tax-exempt securities, such distributions will be exempt
from Michigan personal income tax and excluded from the taxable
income base of the Michigan intangibles tax under the current
position of the Michigan Department of Treasury. Such
distributions, if received in connection with a shareholder's
business activity, may alternatively be subject to the Michigan
single business tax. For Michigan personal income tax,
intangibles tax and single business tax purposes, exempt-interest
dividends attributable to any investment other than Michigan tax-
exempt securities will be fully taxable as will dividends arising
from any source other than exempt-interest irrespective of the
investment to which any such dividend is attributable.
More specifically, Michigan law provides an exemption from both
the Michigan personal income tax and the Michigan single business
tax with respect to interest paid to the owner of tax-exempt
securities, and a corresponding exemption is provided under the
Michigan intangibles tax with respect to ownership of such
securities. The Michigan Department of Treasury, in a ruling
letter dated December 19, 1986 and published in April, 1987,
revised a previous administrative position that shareholders of
an investment company other than a "unit investment trust" are to
be treated as the owners of shares in the investment company and
not as the owners of a proportionate share of the company's
assets. This revised position was reaffirmed in a ruling
published in March, 1989. The Michigan fund is not a unit
investment trust, and accordingly shareholders will, in the view
of the Michigan Department of Treasury, be treated as the owners
of the fund's assets including the fund's tax-exempt securities.
The Department has not addressed the question of whether the
distinction between ownership of tax-exempt obligations and
ownership of mutual fund shares may be accorded significance in
connection with application of the single business tax to
investment company distributions representing interest on
obligations which are exempt from federal income tax and Michigan
tax.
New Jersey. Income distributions paid from a "qualified
investment fund" are exempt from the New Jersey Gross Income Tax
to the extent attributable to tax-exempt obligations specified by
New Jersey law. A "qualified investment fund" is any investment
company or trust, or series of such investment company or trust,
registered with the Securities and Exchange Commission which, for
the calendar year in which a distribution is paid, (i) has no
investments other than interest-bearing obligations, obligations
issued at a discount, and cash and cash items (including
receivables) and financial options, futures, forward contracts or
other similar financial instruments related to interest-bearing
obligations, obligations issued at a discount or bond indexes
related thereto, and (ii) has at least 80 percent of the
aggregate principal amount of all its investments (excluding
financial options, futures, forward contracts or other similar
financial instruments related to interest-bearing obligations,
obligations issued at a discount or bond indexes related thereto
to the extent such instruments are authorized under section
851(b) of the Internal Revenue Code, and cash and cash items,
which cash items include receivables), invested in obligations
issued by New Jersey or obligations that are free from state or
local taxation under New Jersey and federal laws, such as
obligations issued by the governments of Puerto Rico, Guam or the
Virgin Islands. Provided the fund qualifies as a "qualified
investment fund," interest income and gains realized by the fund
and distributed to shareholders will be exempt from the New
Jersey Gross Income Tax to the extent attributable to tax-exempt
obligations. Gains resulting from the redemption or sale of
shares of the New Jersey fund will also be exempt from the New
Jersey Gross Income Tax.
The New Jersey Gross Income Tax is not applicable to
corporations. For all corporations subject to the New Jersey
Corporation Business Tax, interest on tax-exempt obligations is
included in the net income tax base for purposes of computing the
corporate business tax. Furthermore, any gain upon the
redemption or sale of shares by a corporate shareholder is also
included in the net income tax base for purposes of computing the
Corporation Business Tax.
The New Jersey fund will notify shareholders by February 15 of
each calendar year as to the amounts of dividends and
distributions made with respect to the preceding calendar year
that are exempt from federal income taxes and New Jersey personal
income tax and the amounts, if any, which are subject to such
taxes. The New Jersey fund will also make appropriate
certification of its status to New Jersey tax authorities by that
date.
Pennsylvania. Distributions paid by the Pennsylvania fund which
are excludable as exempt income for federal tax purposes are not
subject to the Pennsylvania corporate net income tax. An
additional deduction from Pennsylvania taxable income is
permitted for the amount of distributions paid by the
Pennsylvania fund attributable to interest received by the
Pennsylvania fund from its investments in tax-exempt securities
and obligations of the United States, its territories and certain
of its agencies and instrumentalities to the extent included in
federal taxable income, but such a deduction is reduced by any
interest on indebtedness incurred to carry the securities and
other expenses incurred in the production of such interest
income, including expenses deducted on the federal income tax
return that would not have been allowed under the Internal
Revenue Code if the interest were exempt from federal income tax.
Distributions by the Pennsylvania fund attributable to most other
sources may be subject to the Pennsylvania corporate net income
tax. It is the current position of the Pennsylvania Department
of Revenue that fund shares are considered exempt assets (with a
pro rata exclusion based on the value of the Pennsylvania fund
attributable to its investments in tax-exempt securities and
obligations of the United States, its territories and certain of
its agencies and instrumentalities) for purposes of determining a
corporation's capital stock value subject to the Commonwealth's
capital stock or franchise tax.
EQUIVALENT YIELDS: TAX-EXEMPT VERSUS TAXABLE SECURITIES
The tables below show the effect of the tax status of each fund's
tax-exempt securities on the effective yield received by their
holders under the Internal Revenue Code of 1986, as amended (the
"Code"), and personal and gross income tax laws of the relevant
state, (except Florida, which has no personal income tax) in
effect for 1996. The tables give the approximate yield a taxable
security must earn at various income levels to produce after-tax
yields equivalent to those of the relevant tax-exempt securities
yielding from 4.0%, 6.0% and 8.0%.<PAGE>
Arizona fund
<TABLE><CAPTION>
<C> <C> <C> <C> <C> <C> <C>
1996
Taxable income* Combined
----------------------- Arizona and Tax-exempt yield
Federal
Single Joint Tax rate** 4.0% 6.0% 8.0%
- ----------------------------------------------------------------------------------------------------
Equivalent taxable yield
$0-10,000 $0-20,000 17.55% 4.85% 7.28% 9.70%
10,001-24,000 20,001-40,000 17.98% 4.88 7.31 9.75
24,001-25,000 40,001-50,000 30.52% 5.76 8.64 11.51
25,001-50,000 50,001-96,900 31.02% 5.80 8.70 11.60
50,001-58,150 31.74% 5.86 8.79 11.72
96,900-100,000 33.90% 6.05 9.08 12.10
58,151-121,300 100,001-147,700 34.59% 6.12 9.17 12.23
121,301-150,000 147,601-263,750 39.33% 6.59 9.89 13.19
150,001-263,750 39.58% 6.62 9.93 13.24
263,751 300,000 42.74% 6.99 10.48 13.97
over 263,750 over 300,000 42.98% 7.02 10.52 14.03
- ------------------------------------------------------------------------------------------------------
* This amount represents taxable income as defined in the Code. It is assumed that taxable income under Arizona law
is the same as taxable income as defined under the Code, however, Arizona taxable income is likely to differ due to
differences in exemptions, itemized deductions, and other items.
** For federal income tax purposes, these combined rates reflect the applicable marginal rates for 1996, including
indexing for inflation. These rates include the effect of deducting state taxes on your federal return.
<PAGE>
Florida fund
Taxable income*
1996 Tax-exempt yield
Combined Florida
Single Joint and Federal Tax
Rate** 4% 6% 8%
- -------------------------------------------------------------------------------------------------------
Equivalent taxable yield
$ 0 - 24,000 $ 0 - 40,100 15.00% 4.71% 7.06% 9.41%
24,001 - 58,150 40,101 - 96,900 28.00 5.56 8.33 11.11
58,150 - 121,300 96,901- 147,700 31.00 5.80 8.70 11.59
121,301- 263,750 147,701-263,750 36.00 6.25 9.38 12.50
over 263,751 over 263,751 39.60 6.62 9.93 13.25
- -------------------------------------------------------------------------------------------------------
* This amount represents taxable income as defined in the Code.
** These rates reflect only the federal income tax since Florida does not have a personal income tax.
<PAGE>
Massachusetts fund
1996
Combined
Massachusetts
Taxable income* and
Federal Tax-exempt yield
Tax
Single Joint Rate** 4% 6% 8%
- ----------------------------------------------------------------------------------------------
Equivalent taxable yield
$ 0 - 24,000 $ 0 - 40,100 25.20% 5.35% 8.02% 10.70%
24,001 - 58,150 40,001 - 96,900 36.64 6.31 9.47 12.63
58,151 - 121,300 96,901- 147,700 39.28 6.59 9.88 13.18
121,301 - 263,750 147,701-263,750 43.68 7.10 10.65 14.20
263,751 and over 263,751 and over 46.85 7.53 11.29 15.05
---------------------------------------------------------------------------------------------
* This amount represents taxable income as defined in the Code and Massachusetts income tax law. It is assumed that
taxable income as defined in the Code is the same as under the Massachusetts personal income tax law. However,
Massachusetts taxable income may differ due to differences in exemptions, itemized deductions, and other items.
** For federal tax purposes, these combined rates reflect the applicable marginal rates on taxable income in effect
for 1996. These combined rates include the effect of deducting state taxes on your federal return.
<PAGE>
Michigan fund
1996
Combined
Michigan Tax-exempt yield
Taxable income* and Federal
Tax
Single Joint Rate** 4% 6% 8%
------------------------------------------------------------------------------------------------
Equivalent taxable yield
$ 0 - 24,000 $0 - 39,000 18.74% 4.92% 7.38% 9.84%
24,001 - 58,150 39,001 - 94,250 31.17 5.81 8.72 11.62
58,151-121,300 94,251-143,600 34.04 6.06 9.10 12.13
121,301-263,750 143,601-263,750 38.82 6.54 9.81 13.08
over 263,750 over 263,750 42.26 6.93 10.39 13.85
------------------------------------------------------------------------------------------------
* This amount represents taxable income as defined in the Code.
It is assumed that taxable income as defined in the Code is the same as under the Michigan personal income tax
law, however, Michigan taxable income may differ due to differences in exemptions, itemized deductions, and other
items.
** For federal tax purposes, these combined rates reflect the applicable marginal rates on taxable income in effect
for 1996, including indexing for inflation. These combined rates include the effect of deducting state taxes on
your Federal return.
<PAGE>
Minnesota fund
1996
Combined
Minnesota
and Federal Tax-exempt yield
Taxable income* Tax
Single Joint Rate** 4% 6% 8%
-------------------------------------------------------------------------------------------
Equivalent taxable yield
$ 0 - 16,070 $0 - 23,490 20.10% 5.01% 7.51% 10.01%
16,071 - 24,000 23,491- 40,100 21.80 5.12 7.67 10.23
24,001 - 52,790 39,001- 93,340 33.76 6.04 9.06 12.08
52,791 - 58,150 90,761- 96,900 34.12 6.07 9.11 12.14
58,151 - 121,300 94,251-147,700 36.87 6.34 9.50 12.67
121,301 - 263,750 143,601-263,750 41.44 6.83 10.25 13.66
263,751 and over 263,751 and over 44.73 7.24 10.86 14.47
-------------------------------------------------------------------------------------------
* This amount represents taxable income as defined in the Code. It is assumed that taxable income as defined in the
Code is the same as under the Minnesota personal income tax law. However, Minnesota taxable income may differ due
to differences in exemptions, itemized deductions, and other items.
** For federal tax purposes, these combined rates reflect the applicable marginal rates on taxable income in effect
for 1996. These combined rates include the effect of deducting state taxes on your Federal return.
<PAGE>
New Jersey fund
1996
Combined
Taxable income* New Jersey Tax exempt yield:
----------------------- and
Federal
Single Joint Tax rate** 4% 6% 8%
------------------------------------------------------------------------------------------------------
Equivalent taxable yield
$ 0-20,000 0-20,000 16.19% 4.77% 7.16% 9.55%
20,001 - 24,000 20,001 - 40,100 16.49 4.79 7.18 9.58
24,001 - 35,000 40,001 - 50,000 29.26 5.65 8.48 11.31
50,001 - 70,000 29.76 5.70 8.54 11.39
35,001 - 40,000 70,001 - 80,000 30.52 5.76 8.64 11.51
40,001 - 58,150 80,001 - 96,900 31.98 5.88 8.82 11.76
58,151 - 75,000 96,901 - 147,700 34.81 6.14 9.20 12.27
75,001 - 121,300 35.40 6.19 9.29 12.38
147,701 - 150,000 39.54 6.62 9.92 13.23
121,301 - 263,750 150,001 - 263,750 40.08 6.68 10.01 13.35
over 263,750 over 263,750 43.45 7.07 10.61 14.15
-----------------------------------------------------------------------------------------------------
* This amount represents taxable income as defined in the Code. It is assumed that taxable income as defined in the
Code is the same as under the New Jersey State Personal Income Tax law, however, New Jersey taxable income may
differ due to differences in exemptions, itemized deductions, and other items.
** For federal tax purposes, these combined rates reflect the applicable marginal rates on taxable income in effect
for 1996, including indexing for inflation. These rates include the effect of deducting state taxes on your
Federal return.
*** The amount of taxable income of this bracket may be affected by the phase-out of personal exemptions and the
limitation on itemized deductions under the Code.
<PAGE>
Ohio fund
1996
Combined
Ohio
and Federal Tax-exempt yield
Taxable income* Tax ----------------------------------------------------------
Single Joint Rate ** 4% 6% 8%
------------------------------------------------------------------------------------------
Equivalent taxable yield
$ 0 - 5,000 0 - 5,000 15.63% 4.74% 7.11% 9.48%
5,001 - 10,000 5,001 - 10,000 16.26 4.78 7.17 9.55
10,001 - 15,000 10,001 - 15,000 17.53 4.85 7.28 9.70
15,001 - 20,000 15,001 - 20,000 18.16 4.89 7.33 9.77
20,001 - 24,000 20,001 - 39,000 18.79 4.93 7.39 9.85
24,001 - 40,000 31.21 5.81 8.72 11.63
39,001 - 40,000 18.79 4.93 7.39 9.85
40,001 - 40,100 19.42 4.96 7.45 9.93
40,001 - 58,150 40,101 - 80,000 31.74 5.86 8.79 11.72
80,001-96,900 32.28 5.91 8.86 11.81
58,151 - 80,000 34.59 6.12 9.17 12.23
80,001- 100,000 96,901-100,000 35.10 6.16 9.25 12.33
100,001- 121,300 100,001-147,700 35.76 6.23 9.34 12.45
121,301- 200,000 147,701-200,000 40.42 6.17 10.07 13.43
200,001- 263,750 200,001-263,750 40.80 6.76 10.14 13.51
over 263,750 over 263,750 44.13 7.16 10.74 14.32
----------------------------------------------------------------------------------------------------------------------
* This amount represents taxable income as defined in the Code. It is assumed that taxable income as
defined in the Code is the same as under the Ohio personal income tax law, however, Ohio taxable income may
differ due to differences in exemptions, itemized deductions, and other items.
** For federal tax purposes, these combined rates reflect the applicable marginal rates on taxable income in effect
for 1996, including indexing for inflation. These rates include the effect of deducting state taxes on your
Federal return.
Pennsylvania fund
1996
Combined marginal
Taxable income* Pennsylvania Tax-exempt yield:
------------------------ and ------------------------------------------------------
Federal tax
Single Joint Rate** 4% 6% 8%
- --------------------------------------------------------------------------------------------------
Equivalent taxable yield
$0-$24,000 $0-40,100 17.38% 4.84% 7.26% 9.68%
$23,351-$58,150 $40,101-$96,900 30.02 5.72 8.57 11.43
$56,551-$121,300 $96,901-$147,700 32.93 5.96 8.95 11.93
$117,951-$263,750 $147,701-$263,750 37.79 6.43 9.64 12.86
over $263,751 over $263,751 41.29 6.81 10.22 13.63
----------------------------------------------------------------------------------------------------------------------
* This amount represents taxable income as defined in the Code and the Pennsylvania income tax law. Pennsylvania
taxable income may differ due to differences in exemptions, itemized deductions, and other items.
** For federal income tax purposes these combined rates reflect the marginal rates on taxable income in effect for
1996. For Pennsylvania personal income tax purposes the combined rates reflect tax rates in expected to be in
effect for 1996. These combined rates reflect the effect of deducting state taxes on the Federal return.
- ----------------------------------------------------------------------------------------------------------------------
Of course, there is no assurance that a fund will achieve any specific tax-exempt yield. While it is expected that each
fund will invest principally in obligations which pay interest exempt from federal income tax and personal income tax of
its respective state, other income received by a fund may be taxable. The tables do not take into account any federal
alternative minimum taxes or state or local taxes payable on each fund's distributions except for the personal income
tax of its respective state.
</TABLE>
<PAGE>
ADDITIONAL OFFICERS
In addition to the persons listed as fund officers in Part II of
this SAI, each of the following persons is also a Vice President
of one or more funds and certain of the other Putnam funds, the
total number of which is noted parenthetically. Officers of
Putnam Management hold the same offices in Putnam Management's
parent company, Putnam Investments, Inc.
Officer Name (Age) (Number of funds)
Gary N. Coburn (age 50) (58 funds). Senior Managing Director of
Putnam Management.
James E. Erickson (age 61) (23 funds). Managing Director of
Putnam Management.
Blake E. Anderson (age 39) (15 funds). Senior Vice President of
Putnam Management.
Howard K. Manning (age 43) (5 funds). Senior Vice President of
Putnam Management.
Richard P. Wyke (age 40) (7 funds). Senior Vice President of
Putnam Management.
Leslie J. Burke (age 33) (3 funds). Vice President of Putnam
Management. Prior to 1992, Ms. Burke was a Research Associate and
Municipal Bond Trader at Fidelity Management and Research
Company.
INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS
Coopers & Lybrand L.L.P., One Post Office Square, Boston, MA
02109, are the independent accountants for the Arizona fund,
Michigan fund, New Jersey fund and Ohio fund, and Price
Waterhouse LLP, 160 Federal Street, Boston, MA 02110, are the
independent accountants for the Florida fund, Massachusetts
fund, Minnesota fund and Pennsylvania fund, each providing audit
services, tax return review services and assistance and
consultation in connection with the review of various Securities
and Exchange Commission filings. The Report of Independent
Accountants, financial highlights and financial statements
included in each fund's Annual Report for the fiscal year ended
May 31, 1996, filed electronically on the following dates, are
incorporated by reference into this SAI:
<PAGE>
Date filed
Fund File No. with SEC
_________________________________________________________
Arizona fund 811-6258 7/25/96
Florida fund 811-6129 8/2/96
Massachusetts fund 811-4518 7/30/96
Michigan fund 811-4529 7/25/96
Minnesota fund 811-4527 8/1/96
New Jersey fund 811-5977 7/29/96
Ohio fund 811-4528 7/29/96
Pennsylvania fund 811-5802 8/2/96
The financial highlights included in the prospectus and
incorporated by reference into this SAI and the financial
statements incorporated by reference into the prospectus and this
SAI have been so included and incorporated in reliance upon the
reports of Coopers & Lybrand, L.L.P. (for the Arizona, Michigan,
New Jersey and Ohio funds) and Price Waterhouse LLP (for the
Florida, Massachusetts, Minnesota and Pennsylvania funds),
independent accountants, given on the authority of said firms as
experts in auditing and accounting.
