PROSPECTUS
NOVEMBER 1, 1993 ,
AS REVISED MAY 1, 1994
PUTNAM NEW JERSEY TAX EXEMPT INCOME FUND
CLASS A AND B SHARES
INVESTMENT STRATEGY: TAX-ADVANTAGED
This Prospectus explains concisely what you should know before
investing in the Fund. Please read it carefully and keep it for
future reference. You can find more detailed information about
the Fund in the November 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 FUND 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 Jersey Tax Exempt Income Fund (the "Fund") seeks as
high a level of current income exempt from federal income tax and
New Jersey personal income tax as Putnam Investment Management,
Inc., the Fund's investment manager ("Putnam Management"),
believes is consistent with preservation of capital. The Fund
invests primarily in a portfolio of New Jersey Tax Exempt
Securities, which may include securities of issuers other than
New Jersey and its political subdivisions.
The 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."
<PAGE>
ABOUT THE FUND
Expenses summary.................................. 4
Financial highlights..............................
5
Objective......................................... 6
How objective is pursued.......................... 6
How performance is shown..........................15
How the Fund is managed...........................16
Organization and history..........................17
ABOUT YOUR INVESTMENT
Alternative sales arrangements....................18
How to buy shares.................................19
Distribution Plans. ...............................24
How to sell
shares. ...............................26
How to exchange
shares. ...........................27
How the Fund values its
shares. ...................28
How distributions are made; tax
information. ......28
ABOUT PUTNAM INVESTMENTS, INC. 31
APPENDIX
Tax Exempt Security Ratings
32
<PAGE>
About the Fund
EXPENSES SUMMARY
Expenses are one of several factors to consider when investing in
the Fund. The following table summarizes your maximum
transaction costs from investing in the Fund and expenses
incurred by the Fund based on its most recent fiscal year. The
Examples shows the cumulative expenses attributable to a
hypothetical $1,000 investment in the Fund over specified
periods.
CLASS A CLASS B
SHARES 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 year,
declining
(as a percentage of the lower
to 1.0% in the
of 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 .60% .60%
12b-1 Fees .20% .85%
Other Expenses .21% .21%
Total Fund Operating Expenses 1.01% 1.66%
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 $57 $78 $101 $165
CLASS B $67 $82 $110 $179***
Your investment of $1,000 would incur the following expenses,
assuming 5% annual return but no redemption:
CLASS A $57 $78 $101 $165
CLASS B $17 $52 $ 90 $179***
The table is provided to help you understand the expenses of
investing in the Fund and your share of the operating expenses
which the Fund incurs. The table and Examples are based on the
operating expenses for the Fund's last fiscal year, except for
12b-1 fees, which reflect the amounts to which the Fund's
Trustees currently limit payments under the Fund's Distribution
Plans. Actual 12b-1 fees and total fund operating expenses for
the last fiscal year were 0.11% and 0.92% for Class A shares and
0.42% and 1.23% for Class B shares. The table and Examples do
not represent past or future expense levels. Actual Fund
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 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 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."
FINANCIAL HIGHLIGHTS
The table on the following page presents per share financial
information for the life of the Fund. This information has been
audited and reported on by the Fund's independent accountants.
The Report of Independent Accountants and financial statements
included in the Fund's Annual Report to shareholders for the 1993
fiscal year are incorporated by reference into this Prospectus.
The Fund's Annual Report, which contains additional unaudited
performance information, will be made available without charge
upon request.
FINANCIAL HIGHLIGHTS *
(for a share outstanding throughout the period)
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS*
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
FOR THE PERIOD
JANUARY 4, 1993 FEBRUARY 20, 1990
(COMMENCEMENT OF (COMMENCEMENT
OPERATIONS) TO OF OPERATIONS TO
JUNE 30 YEAR ENDED JUNE 30 JUNE 30
1993 1993 1992 1991 1990
CLASS B CLASS A
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $9.02 $8.97 $8.64 $8.50 $8.50
INVESTMENT OPERATIONS
NET INVESTMENT INCOME .21 .54 .59(A) .62(A) .22(A)
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS .43 .58 .38 .13 .01
TOTAL FROM INVESTMENT OPERATIONS .64 1.12 .97 .75 .23
LESS DISTRIBUTIONS FROM:
NET INVESTMENT INCOME (.20) (.55) (.60) (.61) (.23)
NET REALIZED GAIN ON INVESTMENTS -- (.08) (.04) -- --
TOTAL DISTRIBUTIONS (.20) (.63) (.64) (.61) (.23)
NET ASSET VALUE, END OF PERIOD $9.46 $9.46 $8.97 $8.64 $8.50
TOTAL INVESTMENT RETURN AT NET
ASSET VALUE (%)(B) 14.71(C) 13.02 11.52 9.17 7.53(C)
NET ASSETS, END OF PERIOD (IN THOUSANDS) $15,113 $235,243 $159,658 $99,978 $34,588
RATIO OF EXPENSES TO AVERAGE NET ASSETS (%) .77(D) .92 .75(A) .66(A) .21(A)(D)
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET ASSETS (%) 2.24(D) 5.90 6.69(A) 7.09(A) 2.49(A)(D)
PORTFOLIO TURNOVER (%) 44.58 44.58 80.21 101.21 7.58(D)
<PAGE>
*FINANCIAL HIGHLIGHTS FOR PERIODS ENDED THROUGH JUNE 30, 1992 HAVE BEEN RESTATED TO CONFORM WITH REQUIREMENTS ISSUED BY THE
SEC IN APRIL 1993.
(A)REFLECTS AN EXPENSE LIMITATION, AND, DURING THE PERIOD ENDED JUNE 30, 1990, A VOLUNTARY ABSORPTION OF EXPENSES INCURRED
BY THE FUND. AS A RESULT, EXPENSES OF THE FUND FOR THE YEARS ENDED JUNE 30, 1992 AND 1991 AND FOR THE PERIOD ENDED JUNE 30,
1990 REFLECT A REDUCTION OF $0.01, $0.03 AND $0.02, RESPECTIVELY.
(B)TOTAL INVESTMENT RETURN ASSUMES DIVIDEND REINVESTMENT AND DOES NOT REFLECT THE EFFECT OF SALES CHARGES.
(C)ANNUALIZED.
(D)NOT ANNUALIZED.
</TABLE>
<PAGE>
OBJECTIVE
THE FUND'S OBJECTIVE IS TO SEEK AS HIGH A LEVEL OF CURRENT INCOME
EXEMPT FROM FEDERAL INCOME TAX AND NEW JERSEY PERSONAL INCOME TAX
AS PUTNAM MANAGEMENT BELIEVES IS CONSISTENT WITH PRESERVATION OF
CAPITAL. The Fund is not intended to be a complete investment
program, and there is no assurance it will achieve its objective.
HOW OBJECTIVE IS PURSUED
BASIC INVESTMENT STRATEGY
PUTNAM NEW JERSEY TAX EXEMPT INCOME FUND SEEKS ITS OBJECTIVE BY
FOLLOWING THE FUNDAMENTAL INVESTMENT POLICY OF INVESTING AT LEAST
80% OF ITS NET ASSETS IN NEW JERSEY TAX EXEMPT SECURITIES (WHICH
ARE DESCRIBED BELOW), EXCEPT WHEN INVESTING FOR DEFENSIVE PURPOSES
DURING TIMES OF ADVERSE MARKET CONDITIONS. The Fund intends to
qualify as a "qualified investment fund" under New Jersey law,
except when investing for defensive purposes (see "How
distributions are made; tax information" and "Alternative
investment strategies" below). As long as the Fund is a qualified
investment fund under New Jersey law and to the extent
distributions by the Fund are derived from interest on New Jersey
Tax Exempt Securities and are designated as such, they shall be
exempt from federal and New Jersey personal income taxes, but will
be reflected in the net income tax base for purposes of computing
New Jersey corporation business tax. The Fund may also invest in
taxable obligations, as described below, to the extent permitted by
its investment policies, or hold its assets in money market
instruments or in cash. The Fund's investments in New Jersey Tax
Exempt Securities and taxable obligations will be limited to
securities rated not lower than the five highest grades assigned by
Moody's Investors Service, Inc. (Aaa, Aa, A, Baa or Ba) and
Standard & Poor's Corporation (AAA, AA, A, BBB or BB), or unrated
securities which Putnam Management determines are of comparable
quality. Putnam Management expects the Fund will generally invest
in New Jersey Tax Exempt Securities of longer maturities (10 years
or more), but the Fund may invest in New Jersey Tax Exempt
Securities having a broad range of maturities.
INTEREST INCOME FROM CERTAIN TYPES OF NEW JERSEY TAX EXEMPT
SECURITIES MAY BE SUBJECT TO FEDERAL ALTERNATIVE MINIMUM TAX
APPLICABLE TO BOTH INDIVIDUALS AND CORPORATIONS. It is a
fundamental policy of the Fund to exclude these securities from the
term "New Jersey Tax Exempt Securities" for purposes of determining
compliance with the 80% test described above. In addition,
corporations may be subject to alternative minimum tax on a portion
of the exempt-interest dividends they receive from the Fund.
THE MARKET VALUE OF THE FUND'S INVESTMENTS WILL CHANGE IN RESPONSE
TO CHANGES IN INTEREST RATES AND OTHER FACTORS. During periods of
falling interest rates, the values of long-term, fixed-income
securities generally rise. Conversely, during periods of rising
interest rates, the values of such securities generally decline.
Changes by recognized rating services in their ratings of tax-
exempt securities and in the ability of an issuer to make payments
of interest and principal will also affect the value of these
investments. Changes in the value of portfolio securities will not
affect interest income derived from those securities but will
affect the Fund's net asset value.
ALTERNATIVE INVESTMENT STRATEGIES. At times Putnam Management may
judge that conditions in the markets for New Jersey Tax Exempt
Securities make pursuing the 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 Fund's assets which may include investments in taxable
obligations. In implementing these "defensive" strategies, the
Fund may invest in obligations of the U.S. government, its agencies
or instrumentalities; obligations issued by governmental issuers in
other states, the interest on which would be exempt from federal
income tax; other debt securities rated within the four highest
grades by either Moody's or 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 Fund will use
such alternative strategies. IN THE EVENT THAT TAXABLE
OBLIGATIONS EXCEED 20% OF THE FUND'S TOTAL INVESTMENTS (SUBJECT TO
CERTAIN EXCLUSIONS) AT THE CLOSE OF ANY QUARTER DURING THE TAXABLE
YEAR, NONE OF THE FUND'S DISTRIBUTIONS FOR THE ENTIRE YEAR WILL
QUALIFY FOR TAX-EXEMPT STATUS UNDER NEW JERSEY LAW.
NEW JERSEY TAX EXEMPT SECURITIES
NEW JERSEY TAX EXEMPT SECURITIES INCLUDE DEBT OBLIGATIONS ISSUED BY
THE STATE OF NEW JERSEY AND ITS POLITICAL SUBDIVISIONS, THE
INTEREST FROM WHICH IS, IN THE OPINION OF BOND COUNSEL, EXEMPT
FROM FEDERAL INCOME TAX AND NEW JERSEY GROSS INCOME TAX. 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 also 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 Jersey Tax Exempt
Securities may be issued as interim financing in anticipation of
tax collections, revenue receipts or bond sales to finance various
public purposes. New Jersey Tax Exempt Securities also include
debt obligations issued by other governmental entities (for
example, U.S. territories) if such debt obligations generate
interest income which is exempt from federal income tax and New
Jersey Gross Income Tax.
THE TWO PRINCIPAL CLASSIFICATIONS OF NEW JERSEY TAX EXEMPT
SECURITIES ARE GENERAL OBLIGATION AND LIMITED OBLIGATION (OR
REVENUE) SECURITIES. GENERAL OBLIGATION securities involve 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. LIMITED OBLIGATION (or REVENUE) 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 limited obligation securities, the credit quality of which is
directly related to the private user of the facilities.
The Fund may also invest in securities representing interests in
New Jersey 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. The interest rates on inverse
floating obligations or residual interest bonds will typically
decline 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.
INVESTMENTS IN PREMIUM SECURITIES
During a period of declining interest rates, many of the 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 market values greater than the principal
amounts payable on maturity, which would be reflected in the net
asset value of the Fund's shares. The value of such "premium"
securities tends to approach the principal amount as they approach
maturity (or call price in the case of securities approaching their
first call date). As a result, an investor who purchases shares of
the Fund during such periods would initially receive higher monthly
distributions (derived from the higher coupon rates payable on the
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 Fund, investors may
find it useful to compare the Fund's current dividend rate with the
Fund's "yield," which is computed on a yield-to-maturity basis in
accordance with SEC regulations and which reflects amortization of
market premiums. See "How performance is shown."
RISK FACTORS
THE FUND MAY INVEST IN BOTH HIGHER-RATED AND LOWER-RATED NEW
JERSEY 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 Fund will not
purchase a New Jersey Tax Exempt Security rated both Ba by Moody's
and BB by Standard & Poor's at the time of purchase, or, if
unrated, determined by Putnam Management to be of comparable
quality if, as a result, more than 25% of the Fund's total assets
would be of that quality. The rating services' descriptions of the
five highest grades of debt securities are included in the Appendix
to this Prospectus. New Jersey Tax Exempt Securities rated Ba or BB
are considered to have speculative elements, with large
uncertainties or major risk exposures to adverse conditions. 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
continued investment in the security will assist in meeting the
Fund's investment objective.
The table below shows the percentages of the Fund's assets invested
during fiscal 1993 in securities assigned to the various rating
categories by Moody's and Standard & Poor's and in unrated
securities determined by Putnam Management to be of comparable
quality:
UNRATED SECURITIES OF
RATED SECURITIES, AS COMPARABLE QUALITY,
PERCENTAGE OF AS PERCENTAGE OF
RATING FUND'S ASSETS FUND'S ASSETS
"AAA"/"Aaa" 27.1% -%
"AA"/"Aa " 19.4% -%
"A"/"A" 31.9% 1.1%
"BBB"/"Baa" 10.8% 3.0%
"BB"/"Ba" -% 6.7%
------ ------
89.2% 10.8%
====== ======
Putnam Management seeks to minimize the risks of investing in
lower-rated securities through careful investment analysis.
However, the amount of information about the financial condition
of an issuer of New Jersey Tax Exempt Securities may not be as
extensive as that which is made available by corporations whose
securities are publicly traded. When the Fund invests in New
Jersey Tax Exempt Securities in the lower rating categories, the
achievement of the Fund's goals is more dependent on Putnam
Management's ability than would be the case if the Fund were
investing in New Jersey Tax Exempt Securities in the higher
rating categories. Investors should consider carefully their
ability to assume the risks of owning shares of a mutual fund
which may invest in securities in certain of the lower rating
categories. For additional information concerning the risks
associated with investment by the Fund in securities in the lower
rating categories, see the Statement of Additional Information.
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. 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. Any income derived from the Fund's ownership or
operation of such assets would not be tax-exempt and could cause
the Fund to fail to qualify as a qualified investment fund, in
which event none of the Fund's distributions for the entire
taxable year would qualify for tax-exempt status under New Jersey
law.
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.
Some of the securities in which the 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 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 Fund may have to
sell other investments to obtain cash needed to make income
distributions.
SINCE THE FUND INVESTS PRIMARILY IN NEW JERSEY TAX EXEMPT
SECURITIES, THE VALUE OF ITS SHARES MAY BE ESPECIALLY AFFECTED BY
FACTORS PERTAINING TO THE NEW JERSEY ECONOMY AND OTHER FACTORS
SPECIFICALLY AFFECTING THE ABILITY OF ISSUERS OF NEW JERSEY TAX
EXEMPT SECURITIES TO MEET THEIR OBLIGATIONS. As a result, the
value of the 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 Jersey Tax Exempt
Securities may be affected from time to time by economic,
political, and demographic conditions within New Jersey. 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
Jersey Tax Exempt Securities may also affect their ability to meet
their obligations. Payments of principal and interest on limited
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. Any reduction
in the actual or perceived ability of an issuer of New Jersey 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 Jersey Tax Exempt
Securities as well.
The Fund believes that, in general, the secondary market for New
Jersey Tax Exempt Securities is less liquid than that for taxable
fixed-income securities. The ability of the Fund to buy and sell
securities may, at any particular time and with respect to any
particular securities, be limited.
THE FUND IS A "NON-DIVERSIFIED" INVESTMENT COMPANY UNDER THE
INVESTMENT COMPANY ACT OF 1940. This means that it may invest its
assets in a limited number of issuers. Under the Internal Revenue
Code, a regulated investment company such as the Fund may not
invest more than 25% of its assets in obligations of any one issuer
other than U.S. government obligations and, with respect to 50% of
its total assets, the Fund may not invest more than 5% of its total
assets in the securities of any one issuer (except U.S. government
securities). Thus the 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 Jersey Tax Exempt
Securities, the 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.
THE FUND WILL NOT INVEST MORE THAN 25% OF ITS TOTAL ASSETS IN ANY
INDUSTRY. Governmental issuers of New Jersey Tax Exempt Securities
are not considered part of any "industry." However, New Jersey 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 Fund may invest more than 25%
of its assets in a broader segment of the market for New Jersey Tax
Exempt Securities, 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 issuers (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
Jersey Tax Exempt Securities in such a market segment.
The Fund reserves the right to invest more than 25% of its assets
in industrial development securities and private activity bonds.
SHORT-TERM TRADING
UNDER CERTAIN MARKET CONDITIONS, THE FUND MAY SEEK PROFITS BY
SHORT-TERM TRADING. The length of time the Fund has held a
particular security is not generally a consideration in investment
decisions. A change in the securities owned by the 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 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 capital gains.
Portfolio turnover rates for the life of the Fund are shown in the
section "Financial highlights."
FINANCIAL FUTURES AND OPTIONS
THE 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 future, the Fund realizes a gain or loss. The Fund may
purchase and sell futures contracts on this 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 Jersey Tax Exempt Securities which the Fund owns or
expects to purchase. The Fund may also purchase and sell put and
call options on index futures or on the indices directly, in
addition or as an alternative to purchasing and selling index
futures.
The 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 options would
be used in a way similar to the 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
ew Jersey Tax Exempt Securities which are the subject of a 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 FUND MAY ALSO ENGAGE TO A LIMITED EXTENT IN THE FOLLOWING
INVESTMENT PRACTICES, SOME OF WHICH MAY RESULT IN TAXABLE INCOME OR
CAPITAL GAINS AND EACH OF WHICH INVOLVES 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. The Fund may enter
into repurchase agreements on up to 25% of its assets. These
transactions must be fully collateralized at all times.
The 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 the Fund
if the other party should default on its obligation and the Fund is
delayed or prevented from recovering the collateral or completing
the transaction.
LIMITING INVESTMENT RISK
SPECIFIC INVESTMENT RESTRICTIONS HELP THE FUND LIMIT INVESTMENT
RISKS FOR ITS SHAREHOLDERS. THESE RESTRICTIONS PROHIBIT THE FUND
FROM INVESTING MORE THAN: (a) (with respect to 50% of its total
assets) 5% of its total assets in the securities of any one issuer,
other than U.S. government securities;* (b) 5% of its net assets in
securities of any issuer if the party responsible for payment,
together with any predecessor, has been in operation for less than
three years (except obligations of the U.S. government or its
agencies or instrumentalities and obligations backed by the faith,
credit and taxing power of any person authorized to issue New
Jersey 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 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 Fund's 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 the 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 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 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 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 objective is 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 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 Fund's tax-exempt
yield. "Total return" for the one-year period and for the life of
the Fund (or since the commencement of the public offering
of the shares 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 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
total return, yield or tax-equivalent yield not reflecting the
maximum initial sales charge or 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 Fund's performance may be
compared to various indices. See the Statement of Additional
Information.
ALL DATA IS BASED ON THE 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 the Fund's portfolio, the Fund's operating expenses
and which class of shares you purchase. Investment performance
also often reflects the risks associated with the Fund's investment
objective and policies. These factors should be considered when
comparing the Fund's investment results to those of other mutual
funds and other investment vehicles.
HOW THE FUND IS MANAGED
THE TRUSTEES OF THE FUND ARE RESPONSIBLE FOR GENERALLY OVERSEEING
THE CONDUCT OF THE FUND'S BUSINESS. Subject to such policies as
the Trustees may determine, Putnam Management furnishes a
continuing investment program for the Fund and makes investment
decisions on its behalf. Subject to the control of the Trustees,
Putnam Management also manages the Fund's other affairs and
business. Thomas C. Goggins, Vice President of Putnam Management
and Vice President of the Fund, has had primary responsibility
for the day-to-day management of the Fund's portfolio since June
2, 1993. Mr. Goggins was employed by Transamerica Investment
Services, Inc. for the previous six years.
The Fund pays all expenses not assumed by Putnam Management,
including Trustees' fees and auditing, legal, custodial, investor
servicing and shareholder reporting expenses, and payments under
its Distribution Plans (which are in turn allocated to the
relevant class of shares). The Fund also reimburses Putnam
Management for the compensation and related expenses of certain
officers of the Fund and their staff who provide administrative
services to the Fund. The total reimbursement is determined
annually by the Trustees.
Putnam Management places all orders for purchases and sales of
the Fund's securities. In selecting broker-dealers, Putnam
Management may consider research and brokerage services furnished
to it and its affiliates. Subject to seeking the most favorable
price and execution available, Putnam Management may consider
sales of shares of the 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 Jersey Tax Exempt Income Fund is a Massachusetts
business trust organized on November 17, 1989. 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.
The Fund is an open-end, non-diversified management investment
company with an unlimited number of authorized shares of beneficial
interest. Shares of the Fund may, without shareholder approval, be
divided into two or more series of shares representing separate
investment portfolios. 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 may determine. The
Fund's shares are currently divided into two classes. Each share
has one vote, with fractional shares voting proportionally. Shares
of each class will vote together as a single class except when
required by law or as determined by the Trustees. Shares are
freely transferable, are entitled to dividends as declared by the
Trustees, and, if the Fund were liquidated, would receive the net
assets of the Fund. The Fund may suspend the sale of shares at any
time and may refuse any order to purchase shares. Although the
Fund is not required to hold annual meetings of its shareholders,
shareholders holding at least 10% of the outstanding shares
entitled to vote have the right to call a meeting to elect or
remove Trustees or to take other actions as provided in the
Declaration of Trust.
If you own fewer shares than a minimum amount set by the Trustees
(presently 20 shares), the Fund may choose to redeem your shares
and pay you for them. You will receive at least 30 days' written
notice before the Fund redeems your shares, and you may purchase
additional shares at any time to avoid a redemption. The Fund may
also redeem shares if you own shares above a maximum amount set by
the Trustees. There is presently no maximum, but the Trustees may
establish one at any time, which could apply to both present and
future shareholders.
THE 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
Accociates, 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 Fund's Trustees are also
Trustees of the other Putnam funds. Those marked with an asterisk
(*) are "interested persons" of the Fund, Putnam Management or
Putnam Mutual Funds.
ABOUT YOUR INVESTMENT
ALTERNATIVE SALES ARRANGEMENTS
The 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
Fund's average net assets attributable to Class A shares. See "How
to buy shares -- 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 fees than Class A shares, currently at the annual rate
of .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 --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 a Fund account with as little as $500 and make
additional investments at any time with as little as $50. You can
buy Fund shares three ways - through most investment dealers,
through Putnam Mutual Funds (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.
<PAGE>
<TABLE>
<CAPTION>
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:
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 .5
0 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
- ----------------------------------------------------------------------------
*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.
/TABLE
<PAGE>
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
the one-year period beginning with the date of the initial purchase
at net asset value and each subsequent one-year period beginning
with the first purchase at net asset value following the end of the
prior period. Such commissions are paid at the rate of 1.00% of
the amount under $3 million, 0.50% of the next $47 million and
0.25% thereafter. On sales at net asset value to a participant-
directed qualified retirement plan initially investing less than
$20 million in Putnam funds and other investments managed by Putnam
Management or its affiliates (including a plan 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 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 shares being redeemed.
Therefore when a share is redeemed, any increase in its 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 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 Fund may sell shares at net asset value without an
initial sales charge or a CDSC in connection with the acquisition
by the 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 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 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 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.
DISTRIBUTION PLANS
CLASS A DISTRIBUTION PLAN. The purpose of the Class A Plan is to
permit the 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 Fund to
Putnam Mutual Funds at the annual rate of up to 0.35% of the Fund's
average net assets attributable to Class A shares, subject to the
authority of the 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 Fund. At present, the 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 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 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 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 such 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.
CLASS B DISTRIBUTION PLAN. The Class B Plan provides for payments
by the Fund to Putnam Mutual Funds at the annual rate of up to
1.00% of the 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 of 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.
HOW TO SELL SHARES
You can sell your shares to the Fund any day the New York Stock
Exchange is open, either directly to the Fund or through your
investment dealer. The Fund will only repurchase shares for which
it has received payment.
SELLING SHARES DIRECTLY TO THE 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 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 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.
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 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. For federal income tax purposes, an exchange is
treated as a sale of shares and generally results in a capital gain
or loss. A Telephone Exchange Privilege is currently available for
amounts up to $500,000. Putnam Investor Services' procedures for
telephonic transactions are described above under "How to sell
shares." The Telephone Exchange Privilege is not available if you
were issued certificates for shares which remain outstanding. Ask
your investment dealer or Putnam Investor Services for prospectuses
of other Putnam funds. Shares of certain Putnam funds are not
available to residents of all states.
The exchange privilege is not intended as a vehicle for short-term
trading. Excessive exchange activity may interfere with portfolio
management and have an adverse effect on all shareholders. In
order to limit excessive exchange activity and in other
circumstances where the Trustees or Putnam Management believes
doing so would be in the best interests of the Fund, the Fund
reserves the right to revise or terminate the exchange privilege,
limit the amount or number of exchanges or reject any exchange.
Shareholders would be notified of any such action to the extent
required by law . Consult Putnam Investor Services before
requesting an exchange. See the Statement of Additional
Information to find out more about the exchange privilege.
HOW THE FUND VALUES ITS SHARES
THE 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. Tax-exempt securities (including New Jersey
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
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 net asset
value per share of Class B shares generally will be lower than the
net asset value per share of Class A shares because of the higher
distribution fee paid by Class B shares and any other expenses
attributable to that class.
HOW DISTRIBUTIONS ARE MADE; TAX INFORMATION
THE 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 Fund, less
accrued expenses, computed in each case since the most recent
determination of net asset value. Normally, the Fund pays
distributions of net interest income monthly. The Fund will
distribute at least annually all net realized capital gains, if
any, after applying any available capital loss carryovers.
Distributions paid by the 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. It is your responsibility to see that your dealer
forwards payment promptly.
YOU CAN CHOOSE FROM 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 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 the 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.
FEDERAL TAXES
The 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. The Fund will distribute
substantially all of its ordinary income and capital gain net
income on a current basis.
Distributions designated by the Fund as "exempt-interest dividends"
are not generally subject to federal income tax. However, if you
receive Social Security or railroad retirement benefits, you should
consult your tax adviser to determine what effect, if any, an
investment in the Fund may have on the taxation of your benefits.
In addition, an investment in the Fund may result in liability for
federal alternative minimum tax and for state and local taxes, both
for individual and corporate shareholders.
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. Distributions
will be taxable as described above whether received in cash or in
shares through the reinvestment of distributions.
Early in each year the Fund will notify you of the amount and tax
status of distributions paid to you by the Fund for the preceding
year.
NEW JERSEY TAXES
The Fund intends to qualify as a "qualified investment fund" under
the New Jersey Gross Income Tax law except when investing for
defensive purposes by using an investment mix such that the Fund
would not meet the definition of a qualified investment fund under
the New Jersey Gross Income Tax law. As long as the Fund is a
qualified investment fund and to the extent its distributions are
derived from interest or net gains on New Jersey Tax Exempt
Securities, such distributions will be exempt from New Jersey tax,
but will be reflected in the net income tax base for purposes of
computing the corporation business tax. The exemption from the New
Jersey Gross Income Tax will also extend to interest or net gains
on obligations of the United States, its territories and certain of
its agencies and instrumentalities which pay interest statutorily
free from state or local taxation under any laws of New Jersey or
under the Constitution or laws of the United States. Gains
resulting from the redemption or sale of shares of the Fund will
also be exempt from New Jersey Gross Income Tax. In order to be a
qualified investment fund, the Fund must, as of the end of each
fiscal quarter, invest at least 80% of the aggregate principal
amount of its investments (excluding financial options, futures,
forward contracts, or other similar financial instruments related
to interest-bearing obligations, obligations issued at a discount
or bond indexes related thereto to the extent such instruments are
authorized under the regulated investment company rules under the
Internal Revenue Code, cash and cash items, which cash items shall
include receivables) in the exempt obligations referred to above
and have no investments other than interest bearing or discounted
obligations, cash or cash items (including receivables) or
financial options, futures, forward contracts or certain other
similar instruments. If the Fund fails to be a qualified
investment fund, as a result of employing alternative investment
strategies or otherwise, none of its distributions for the entire
taxable year will qualify for tax-exempt status under New Jersey
law.
For New Jersey Gross Income Tax purposes, distributions by the Fund
derived from income or net gains on investments other than New
Jersey Tax Exempt Securities and obligations of the United States,
its territories and certain of its agencies and instrumentalities
will be taxable as ordinary income, whether paid in cash or
reinvested in additional shares.
GENERAL
The foregoing is a summary of certain tax consequences of investing
in the Fund. You should consult your tax adviser to determine the
precise effect of an investment in the Fund on your particular tax
situation (including possible liability for alternative minimum tax
and for state and local taxes).
ABOUT PUTNAM INVESTMENTS, INC.
PUTNAM MANAGEMENT HAS BEEN MANAGING MUTUAL FUNDS SINCE 1937.
Putnam Mutual Funds is the principal underwriter of the Fund 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.
<PAGE>
APPENDIX
TAX EXEMPT SECURITY RATINGS
The ratings services' descriptions of tax exempt securities in
which the Fund 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.
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 highest rated issues only in
small degree.
A -- Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
debt in higher rated categories.
BBB -- Debt rated BBB is regarded as having an adequate capacity to
pay interest and repay principal. Whereas it normally exhibits
adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for debt in this
category than 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.
<PAGE>
PUTNAM NEW JERSEY TAX EXEMPT INCOME FUND
One Post Office Square
Boston, MA 02109
FUND INFORMATION:
INVESTMENT MANAGER
Putnam Investment Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
INVESTOR SERVICING AGENT
Putnam Investor Services
Mailing address:
P.O. Box 41203
Providence, RI 02940-1203
CUSTODIAN
Putnam Fiduciary Trust Company
One Post Office Square
Boston, MA 02109
LEGAL COUNSEL
Ropes & Gray
One International Place
Boston, MA 02110
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand
One Post Office Square
Boston, MA 02109
PUTNAMINVESTMENTS
One Post Office Square
Boston, Massachusetts 02109
Toll-free 1-800-225-1581
<PAGE>
Differences between the typeset (printed) prospectus and the
EDGAR filing version.
1. Each interior page of the prospectus includes the word
"prospectus" at the bottom of the page.
2. Pagination is different in printed prospectus.
3. Section headings and subheadings in the printed prospectus are
printed in boldface type with colored ink.
4. The first page of the printed prospectus contains an
illustration of balanced scales, Putnam's logo.
5. The last page of the printed prospectus contains a graphic
recyclable logo.
<PAGE>
