PROSPECTUS
NOVEMBER 1, 1993 ,
AS REVISED
MAY
1, 1994
PUTNAM FLORIDA TAX EXEMPT INCOME FUND
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, 1993 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
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PUTNAM FLORIDA TAX EXEMPT INCOME FUND (THE "FUND") SEEKS AS HIGH
A LEVEL OF CURRENT INCOME EXEMPT FROM FEDERAL 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 TAX
EXEMPT SECURITIES OF FLORIDA ISSUERS AND OTHER TAX EXEMPT
SECURITIES EXEMPT FROM THE FLORIDA INTANGIBLES TAX, WHICH MAY
INCLUDE SECURITIES OF ISSUERS OTHER THAN THE STATE OF FLORIDA AND
ITS POLITICAL SUBDIVISIONS. THE FUND WILL SEEK GENERALLY TO
SELECT INVESTMENTS WHICH WILL ENABLE ITS SHARES TO BE EXEMPT FROM
THIS TAX. THE FUND MAY ALSO TRADE SECURITIES FOR SHORT-TERM
PROFITS.
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."
ABOUT THE FUND
Expenses summary
3
............................................................
Financial highlights
4
............................................................
Objective
6
............................................................
How objective is pursued
6
............................................................
How performance is shown
16
............................................................
How the Fund is managed
17
............................................................
Organization and history
18
ABOUT YOUR INVESTMENT
Alternative sales arrangements
19
............................................................
How to buy shares
20
............................................................
Distribution Plans
24
............................................................
How to sell shares
26
............................................................
How to exchange shares
28
............................................................
How the Fund values its shares
29
............................................................
How distributions are made; tax information
29
ABOUT PUTNAM INVESTMENTS, INC.
32
APPENDIX
Tax-Exempt Securities Ratings
33
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 show 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 year,
Deferred Sales Charge (as a declining to 1.0%
percentage of the lower of in the sixth year
original purchase price or and eliminated
redemption proceeds) NONE** thereafter
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average
net assets)
Management Fees 0.60% 0.60%
12b-1 Fees 0.20% 0.85%
Other Expenses 0.18% 0.18%
Total Fund Operating Expenses 0.98% 1.63%
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 $77 $ 99 $162
CLASS B $67 $81 $109 $176***
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Your investment of $1,000 would incur the following expenses,
assuming 5% annual return but no redemption:
1 3 5 10
year years years years
CLASS A $57 $77 $99 $162
CLASS B $17 $51 $89 $176***
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. " Other expenses " and total
Fund operating expenses have been restated to reflect the
termination of an expense limitation previously in effect.
Actual "Other expenses" and total Fund operating expenses for the
Class A shares were 0.17 % and 0.77% , respectively.
The 12b-1 fees shown in the table for each class
reflect the maximum amount permitted under its Distribution Plan.
The Class A Distribution Plan was implemented on July 9,
1993. For Class B shares, management fees and "Other
expenses" are based on the operating expenses for the Fund's
Class A shares. The Examples do not represent past or
future expense levels, and actual expenses may be more 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 below 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 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.
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS*
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
FOR THE PERIOD
JANUARY 4, 1993
AUGUST 24, 1990
(COMMENCEMENT OF
(COMMENCEMENT
OPERATIONS) TO
OF OPERATIONS) TO
JUNE 30
YEAR ENDED JUNE 30 JUNE 30
1993 1993
1992 1991
CLASS B
CLASS A
<S> <C> <C>
<C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $9.17
$9.08 $8.65 $8.50
INVESTMENT OPERATIONS
NET INVESTMENT INCOME .21
.56(A) .60(A) .52(A)
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS .36
.53 .45 .15
TOTAL FROM INVESTMENT OPERATIONS .57
1.09 1.05 .67
LESS DISTRIBUTIONS FROM:
NET INVESTMENT INCOME (.21)
(.56) (.60) (.52)
NET REALIZED GAIN ON INVESTMENTS
(.08) (.02)
TOTAL DISTRIBUTIONS (.21)
(.64) (.62) (.52)
NET ASSET VALUE, END OF PERIOD $9.53
$9.53 $9.08 $8.65
TOTAL INVESTMENT RETURN AT NET ASSET VALUE (%)(B) 12.84(C)
12.44 12.57 9.46(C)
NET ASSETS, END OF PERIOD (IN THOUSANDS) $17,881
$278,039 $195,963 $109,739
RATIO OF EXPENSES TO AVERAGE NET ASSETS (%) .78(D)
.77(A) .60(A) .41(A)(D)
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS (%) 2.21(D)
5.94(A) 6.73(A) 5.94(A)(D)
PORTFOLIO TURNOVER (%) 106.69
106.69 72.73 46.72(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 ABSORPTION OF EXPENSES INCURRED BY THE FUND AND
AN EXPENSE LIMITATION APPLICABLE DURING THE PERIOD. AS
A RESULT, EXPENSES OF THE FUND FOR THE YEAR ENDED JUNE 30,
1992 AND THE PERIOD ENDED JUNE 30, 1991 REFLECT A
REDUCTION OF $0.02 AND $0.04 PER SHARE, RESPECTIVELY. FOR
THE YEAR ENDED JUNE 30, 1993, EXPENSES REFLECT A
REDUCTION OF LESS THAN $0.01 PER SHARE.
(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 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 FLORIDA TAX EXEMPT INCOME FUND SEEKS ITS OBJECTIVE BY
FOLLOWING THE FUNDAMENTAL POLICY OF INVESTING AT LEAST 80% OF ITS
NET ASSETS IN TAX EXEMPT SECURITIES (WHICH ARE DESCRIBED BELOW),
EXCEPT WHEN INVESTING FOR DEFENSIVE PURPOSES DURING TIMES OF
ADVERSE MARKET CONDITIONS. To the extent distributions by the
Fund are derived from interest on Tax Exempt Securities, they
will be exempt from federal income 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 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. ("Moody's") (Aaa, Aa,
A, Baa or Ba) and Standard & Poor's Corporation ("Standard &
Poor's") (AAA, AA, A, BBB or BB), or unrated securities which
Putnam Management determines are of comparable quality. Putnam
Management expects the Fund will generally invest in Tax Exempt
Securities of longer maturities (10 years or more), but the Fund
may invest in Tax Exempt Securities having a broad range of
maturities.
UNDER NORMAL MARKET CONDITIONS, THE FUND WILL INVEST AT LEAST 65%
OF ITS NET ASSETS IN TAX EXEMPT SECURITIES ISSUED BY THE STATE OF
FLORIDA, ITS POLITICAL SUBDIVISIONS AND THEIR AGENCIES AND
INSTRUMENTALITIES AND IN OTHER TAX EXEMPT SECURITIES WHICH ARE
EXEMPT FROM THE FLORIDA INTANGIBLES TAX. The Fund will seek
generally to select investments which will enable its shares to
be exempt from this tax, except when pursuing the alternative
investment strategies described below. Such investments at times
may have lower yields than other Tax Exempt Securities available
for investment by the Fund. This investment strategy could also
result in higher portfolio turnover and related transaction
costs. See "How distributions are made; tax information--Florida
taxes."
INTEREST INCOME FROM CERTAIN TYPES OF TAX EXEMPT SECURITIES MAY
BE TREATED AS AN ITEM OF TAX PREFERENCE AND THEREBY 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 "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.
ALTERNATIVE INVESTMENT STRATEGIES. At times, Putnam Management
may judge that conditions in the markets for Tax Exempt
Securities generally, or in the market for Tax Exempt Securities
of Florida issuers, make pursuing the Fund's basic investment
strategy inconsistent with the best interests of its
shareholders. At such times, Putnam Management temporarily may
use alternative strategies, primarily designed to reduce
fluctuations in the value of the Fund's assets. In implementing
these "defensive" strategies, the Fund may invest a greater
portion of its assets in Tax Exempt Securities of non-Florida
issuers and may invest in taxable obligations, including:
obligations of the U.S. government, its agencies or
instrumentalities; other debt securities rated within the four
highest grades by either Moody's or Standard & Poor's; commercial
paper rated in the highest grade by either rating service (Prime-
1 or A-1+, respectively); certificates of deposit and bankers'
acceptances; repurchase agreements with respect to any of the
foregoing investments; or any other securities that Putnam
Management considers consistent with such strategy. It is
impossible to predict when, or for how long, the Fund will use
such alternative strategies.
TAX EXEMPT SECURITIES
TAX EXEMPT SECURITIES ARE DEBT OBLIGATIONS ISSUED BY THE STATE OF
FLORIDA, OTHER STATES, AND THEIR POLITICAL SUBDIVISIONS, AGENCIES
AND INSTRUMENTALITIES, THE INTEREST FROM WHICH IS, IN THE OPINION
OF BOND COUNSEL, EXEMPT FROM FEDERAL 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 also may include certain types of
industrial development bonds, private activity bonds or notes
issued by public authorities to finance privately owned or
operated facilities or to fund short-term cash requirements.
Short-term Tax Exempt Securities are generally issued as interim
financing in anticipation of tax collections, revenue receipts or
bond sales to finance various public purposes. Tax Exempt
Securities also include obligations issued by certain other
governmental entities (for example, U.S. possessions) if such
debt obligations generate interest income which is exempt from
federal income tax.
THE TWO PRINCIPAL CLASSIFICATIONS OF TAX EXEMPT SECURITIES ARE
GENERAL OBLIGATION AND SPECIAL OBLIGATION (OR SPECIAL REVENUE
OBLIGATION) SECURITIES. GENERAL OBLIGATION securities involve a
pledge of the credit of an issuer possessing taxing power and are
payable from the issuer's general unrestricted revenues.
Their payment may depend on an appropriation by the issuer's
legislative body. The characteristics and methods of
enforcement of general obligation securities vary according to
the law applicable to the particular issuer. SPECIAL OBLIGATION
(or SPECIAL REVENUE OBLIGATION) securities are payable only from
the revenues derived from a particular facility or class of
facilities, or a specific revenue source, and generally are not
payable from the unrestricted revenues of the issuer. Industrial
development bonds and private activity bonds are in most cases
special obligation securities, 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
Tax Exempt Securities, known as "inverse floating obligations" or
"residual interest bonds," paying interest rates that vary
inversely to changes in the interest rates of specified short-
term tax exempt securities or an index of short-term tax exempt
securities. The interest rates on inverse floating obligations
or residual interest bonds will typically decline as short-term
market interest rates increase and increase as short-term market
rates decline. Such securities have the effect of providing a
degree of investment leverage, since they will generally increase
or decrease in value in response to changes in market interest
rates at a rate which is a multiple (typically two) of the rate
at which fixed-rate long-term tax exempt securities increase or
decrease in response to such changes. As a result, the market
values of inverse floating obligations and residual interest
bonds will generally be more volatile than the market values of
fixed-rate tax exempt securities.
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 values of such
"premium" securities tend 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."
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."
RISK FACTORS
INTEREST RATE FLUCTUATIONS. 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 also will 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. 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.
LOWER RATED SECURITIES. INVESTORS SHOULD CAREFULLY CONSIDER
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. The Fund may invest in both higher-rated and
lower-rated Tax Exempt Securities.
The values of lower-rated securities generally fluctuate more
than those of higher-rated securities. In addition, the lower
rating reflects a greater possibility that the financial
condition of the issuer, or adverse changes in general economic
conditions, or both, may impair the ability of the issuer to make
payments of income and principal. The Fund will not purchase a
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. Tax Exempt Securities rated Ba or BB are considered
to have speculative elements, with large uncertainties or major
risk exposures to adverse conditions.
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
RATED SECURITIES OF COMPARABLE QUALITY,
AS PERCENTAGE OF AS PERCENTAGE OF
RATING FUND'S ASSETS FUND'S ASSETS
- -------------------------------------------------------------
"AAA"/"Aaa" 58.70% ---
"AA"/"Aa 10.83% ---
"A"/"A" 12.73% ---
"BBB"/"Baa" 10.94% .99%
"BB"/"Ba" 2.42% 3.39%
--- ---
Total 95.62% 4.38%
====== ======
<PAGE>
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.
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.
Putnam Management seeks to minimize the risks of investing in
lower-rated securities through investment analysis and attention
to current developments in interest rates and economic
conditions. The lower ratings of certain Tax Exempt Securities
held by the Fund reflect a greater possibility that adverse
changes in the financial condition of their issuers, or in
general economic conditions, or both, or an unanticipated rise in
interest rates, may impair the ability of their issuers to make
payments of interest and principal. In addition, under such
circumstances the values of such securities may be more volatile,
and the markets for such securities may be less liquid, than
those for higher-rated securities and the Fund may, as a result,
find it more difficult to determine the fair value of such
securities.
Some of the bonds 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. When the Fund invests in Tax
Exempt Securities in the lower rating categories, the achievement
of the Fund's goals is more dependent on Putnam Management's
investment analysis than would be the case if the Fund were
investing in Tax Exempt Securities in the higher rating
categories. The amount of information about the financial
condition of an issuer of Tax Exempt Securities may not be as
extensive as information about corporations whose securities are
publicly traded. The Fund believes that in general, the
secondary market for Tax Exempt Securities is less liquid than
that for taxable fixed-income securities, particularly in the
lower rating categories. The ability of the Fund to buy and sell
securities may, at any particular time and with respect to any
particular securities, be limited. 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.
SINCE THE FUND'S PORTFOLIO INVESTMENTS WILL GENERALLY EMPHASIZE
TAX EXEMPT SECURITIES OF FLORIDA ISSUERS, THE VALUE OF ITS SHARES
MAY BE ESPECIALLY AFFECTED BY FACTORS PERTAINING TO THE FLORIDA
ECONOMY AND OTHER FACTORS SPECIFICALLY AFFECTING THE ABILITY OF
ISSUERS OF SUCH 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 Tax Exempt Securities may be affected from time to
time by economic, political, and demographic conditions within
Florida. 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
Florida issuers of Tax Exempt Securities also may affect their
ability to meet their obligations. Payments of principal and
interest on special obligation securities will depend on the
economic condition of the facility or specific revenue source
from whose revenues the payments will be made, which in turn
could be affected by economic, political, and demographic
conditions in the state. Any reduction in the actual or
perceived ability of a Florida issuer of Tax Exempt Securities to
meet its obligations (including a reduction in the rating of its
outstanding securities) could affect adversely the market value
and marketability of its obligations and the values of Tax Exempt
Securities of other Florida issuers as well.
<PAGE>
SELECTION OF INVESTMENTS
DIVERSIFICATION. THE FUND IS A "NON-DIVERSIFIED" INVESTMENT
COMPANY UNDER THE INVESTMENT COMPANY ACT OF 1940. This means
that it may invest its assets in the securities of a limited
number of issuers. Under the Internal Revenue Code, the Fund
generally may not invest more than 25% of its assets in
securities of any one issuer, other than U.S. government
securities. Also, 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 (other than 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 Florida issuers of 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.
INDUSTRY CONCENTRATION. THE FUND WILL NOT INVEST MORE THAN 25%
OF ITS TOTAL ASSETS IN ANY INDUSTRY. Governmental issuers of Tax
Exempt Securities are not considered part of any "industry."
However, 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 Tax Exempt
Securities, such as revenue obligations of hospitals and other
health care facilities or housing agency 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
Tax Exempt Securities in such a market segment.
Housing revenue bonds typically are issued by a state, county or
local housing authority and are secured only by the revenues of
mortgages originated by the authority using the proceeds of the
bond issue. Because of the impossibility of precisely predicting
demand for mortgages from the proceeds of such an issue, there is
a risk that the proceeds of the issue will be in excess of
demand, which would result in early retirement of the bonds by
the issuer. Moreover, such housing revenue bonds depend for
their repayment in part upon the cash flow from the underlying
mortgages, which cannot be precisely predicted when the bonds are
issued. The financing of multi-family housing projects is
affected by a variety of factors, including satisfactory
completion of construction, a sufficient level of occupancy,
sound management, adequate rent to cover operating expenses,
changes in applicable laws and governmental regulations and
social and economic trends.
Health care facilities include nursing homes and hospitals.
Bonds to finance these facilities are issued by various
authorities. The bonds typically are secured by the revenues of
each facility and not by state or local government tax payments.
The projects must maintain adequate occupancy levels to be able
to provide revenues adequate to maintain debt service payments.
Nursing homes may be affected by regulatory cost restrictions
applied to health care delivery in general, restrictions imposed
by medical insurance companies and competition from alternative
health care or conventional housing facilities.
Hospital bond ratings are often based on feasibility studies
which contain projections of expenses, revenues and occupancy
levels. A hospital's income available to service its debt may be
influenced by demand for hospital services, management
capabilities, the service area economy, efforts by insurers and
government agencies to limit rates and expenses, competition,
availability and expense of malpractice insurance, and Medicaid
and Medicare funding. In recent years, nationally recognized
rating organizations have reduced their ratings of a substantial
number of obligations of issuers in the health care sector
of the State Tax Exempt Securities market. Reform of the health
care system is a topic of increasing discussion in the United
States, with proposals ranging from reform of the existing
employer-based system of insurance to a single-payer, public
program. Depending upon their terms, certain reform proposals
would have an adverse impact on certain health care issuers of
Tax Exempt Securities. Because the outcome of current
discussions concerning health care, including the deliberations
of President Clinton's task force on health care reform, is
highly uncertain, Putnam management cannot predict the likely
impact of reform initiatives.
The Fund reserves the right to invest more than 25% of its assets
in industrial development securities.
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 futures contract, the Fund realizes a gain or loss. The
Fund may purchase and sell futures contracts on the Index (or any
other tax-exempt bond index approved for trading by the Commodity
Futures Trading Commission) to hedge against general changes in
market values of 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 to 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 underlying
the futures and options purchased and sold by the Fund, the Tax
Exempt Securities which are the subject of a hedge and the
futures and options themselves. 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
options positions, and there can be no assurance that a liquid
secondary market will exist for any futures contract or option at
any 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, EACH OF WHICH MAY RESULT IN TAXABLE INCOME
OR CAPITAL GAINS AND 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. The Fund's ability to enter into repurchase
agreements and to purchase securities for future delivery may be
limited by state tax considerations. 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 transactions.
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 Tax Exempt Securities); (c) 15% of its net assets in
securities restricted as to resale (excluding securities
determined by the Fund's Trustees (or the person designated by
the Fund's Trustees 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
Trustees of the Fund (or the person designated by the Fund's
Trustees 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 tax-exempt yield of a class. "Total
return" for the one-year period and the life of the Fund (or
since the commencement of the public offering of a class, if
shorter) through the most recent calendar quarter represents the
average annual compounded rate of return on an investment of
$1,000 in the 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. Richard P. Wyke, Senior 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, 1990. Mr. Wyke has been employed by
Putnam Management since January, 1987.
The Fund pays all expenses not assumed by Putnam Management,
including Trustees' fees, auditing, legal, custodial, investor
servicing and shareholder reporting expenses, and payments under
its Distribution Plans (which are in turn allocated to the
relevant class of shares). 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 Florida Tax Exempt Income Fund is a Massachusetts business
trust organized on June 27, 1990. 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
Associates, Inc. ; HANS H. ESTIN, Vice Chairman, North
American Management; JOHN A. HILL, Principal and Managing
Director, First Reserve Corporation; ELIZABETH T. KENNAN,
President, Mount Holyoke College; LAWRENCE J. LASSER,* Vice
President of the Putnam funds. President, Chief Executive
Officer and Director of Putnam Investments, Inc. and Putnam
Management. Director, Marsh & McLennan Companies, Inc.; ROBERT
E. PATTERSON, Executive Vice President, Cabot Partners Limited
Partnership; DONALD S. PERKINS, Director of various corporations,
including AT&T, K mart Corporation and Time Warner Inc.; GEORGE
PUTNAM, III,* President, New Generation Research, Inc.; A.J.C.
SMITH,* Chairman, Chief Executive Officer and Director, Marsh &
McLennan Companies, Inc.; and W. NICHOLAS THORNDIKE, Director of
various corporations and charitable organizations, including
Providence Journal Co. Also, Trustee and President of
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.
<PAGE>
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 fee than Class A shares, currently at the annual
rate of 0.85% of the Fund's average net assets attributable to
Class B shares. Class B shares will automatically convert into
Class A shares, based on relative net asset value, approximately
eight years after purchase. Class B shares provide an investor
the benefit of putting all of the investor's dollars to work from
the time the investment is made, but (until conversion) will have
a higher expense ratio and pay lower dividends than Class A
shares due to the higher 12b-1 fee. See "How to buy shares --
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 (at 1-800-225-1581), or through a
systematic investment plan. If you do not have a dealer, Putnam
Mutual Funds can refer you to one.
BUYING SHARES THROUGH PUTNAM MUTUAL FUNDS. Complete an order
form and return it with a check payable to the Fund to Putnam
Mutual Funds, which will act as your agent in purchasing shares
through your designated investment dealer.
BUYING SHARES THROUGH SYSTEMATIC INVESTING. You can make regular
investments of $25 or more per month through automatic deductions
from your bank checking account. Application forms are available
from your investment dealer or through Putnam Investor Services.
Shares are sold at the public offering price based on the net
asset value next determined after Putnam Investor Services
receives your order. In most cases, in order to receive that
day's public offering price, Putnam Investor Services must
receive your order before the close of regular trading on the New
York Stock Exchange. If you buy shares through your investment
dealer, the dealer must receive your order before the close of
regular trading on the New York Stock Exchange to receive
that day's public offering price.
CLASS A SHARES
The public offering price of Class A shares is the net asset
value plus a sales charge. The Fund receives the net asset
value. The sales charge varies depending on the size of your
purchase and is allocated between your investment dealer and
Putnam Mutual Funds. The current sales charges are:
<PAGE>
<TABLE>
<CAPTION>
SALES CHARGE
AMOUNT OF
AS A PERCENTAGE OF
SALES CHARGE
------------------
REALLOWED
NET
TO DEALERS
AMOUNT OF TRANSACTION AMOUNT OFFERING
AS A PERCENTAGE
AT OFFERING PRICE INVESTED PRICE
OF OFFERING PRICE*
- -----------------------------------------------------------------
- --------------------
<C> <C> <C> <C> <C>
<C>
Less than $ 25,000 4.99% 4.75%
4.50%
$ 25,000 but less than 100,000 4.71 4.50
4.25
100,000 but less than 250,000 3.90 3.75
3.50
250,000 but less than 500,000 3.09 3.00
2.75
500,000 but less than 1,000,000 2.04 2.00
1.85
- -----------------------------------------------------------------
- --------------------
/TABLE
<PAGE>
* At the discretion of Putnam Mutual Funds, however, the
entire sales charge may at times be reallowed to dealers.
The Staff of the Securities and Exchange Commission has
indicated that dealers who receive more than 90% of the
sales charge may be considered underwriters.
There is no initial sales charge on purchases of Class A shares
of $1 million or more. However, a contingent
deferred sales charge ("CDSC") of 1.00% or 0.50%,
respectively, is imposed on redemptions of such shares
within the first or second year after purchase ,
based on the lower of the shares' cost
and current net asset value . Any shares acquired
by reinvestment of distributions will be redeemed without a CDSC.
In addition, shares purchased by certain investors investing
$1 million or more that have made arrangements with Putnam Mutual
Funds and whose dealer or 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
YEAR 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
July 8, 1993 and 0.20% of such average net asset value for
Class A 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 equal to 4.00% of the
amount invested (including a prepaid service fee of 0.20% of the
amount invested) to dealers who sell Class B shares. These
commissions are not paid on exchanges from other Putnam funds and
sales to investors exempt from the CDSC. In addition, in order
to further compensate dealers (including, for this purpose,
certain financial institutions) for services provided in
connection with sales of Class B shares and the maintenance of
shareholder accounts, Putnam Mutual Funds makes quarterly
payments to qualifying dealers based on the average net asset
value of Class B shares which are attributable to shareholders
for whom the dealers are designated as the dealer of record,
except for the first year's service fees, which are prepaid as
described above. Putnam Mutual Funds makes such quarterly
payments at an annual rate of 0.20% of the 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 for more information about where to obtain
a signature guarantee. Stock power forms are available from your
investment dealer, Putnam Investor Services and many commercial
banks. If you want your redemption proceeds sent to an address
other than your address as it appears on Putnam's records, a
signature guarantee is required. Putnam Investor Services
usually requires additional documentation for the sale of shares
by a corporation, partnership, agent or fiduciary, or 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 and transmit it to Putnam Mutual Funds
before 5 p.m. Boston time to receive that day's net asset value.
Your dealer will be responsible for furnishing all necessary
documentation to Putnam Investor Services, and may charge for its
services.
HOW TO EXCHANGE SHARES
You can exchange your shares for shares of the same class of
certain other Putnam funds at net asset value beginning 15 days
after purchase. Not all Putnam funds offer more than one class
of shares. If the other Putnam fund offers only one class of
shares, only Class A shares may be exchanged for such class. If
you exchange shares subject to a CDSC, the transaction
will not be subject to the CDSC. However, when you redeem the
shares acquired through the exchange, the redemption may be
subject to the CDSC, depending upon when you originally purchased
the shares 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
your 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 will 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 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 generally are not readily available for
purposes of valuing its portfolio securities. As a result, it is
likely that most of the valuations provided by 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 the Class B shares and any
other expenses attributable to that class.
HOW DISTRIBUTIONS ARE MADE; TAX INFORMATION
THE FUND DECLARES ALL OF ITS NET INVESTMENT INCOME AS A
DISTRIBUTION ON EACH DAY IT IS OPEN FOR BUSINESS. Net investment
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 investment 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 after Putnam Mutual Funds recives payment for your
shares. It is your reponsibility 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 investment 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 the Fund 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.
<PAGE>
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.
FLORIDA TAXES
Florida does not currently impose an income tax on individuals.
Thus individual shareholders of the Fund will not be subject to
any Florida state income tax on distributions received from the
Fund. However, certain distributions will be taxable to
corporate shareholders which are subject to Florida corporate
income tax.
Florida currently imposes an "intangibles tax" at the annual rate
of 0.2% on certain securities and other intangible assets owned
by Florida residents. Certain types of Tax Exempt Securities of
Florida issuers, U.S. Government Securities and Tax Exempt
Securities issued by certain U.S. territories and possessions are
exempt from this intangibles tax. The Fund has received a ruling
from Florida authorities that, if on December 31 of any year the
Fund's portfolio consists solely of such exempt assets, the
Fund's shares will be exempt from the Florida intangibles tax
payable in the year.
In order to take advantage of the exemption from the intangibles
tax in any year, the Fund must sell any non-exempt assets held in
its portfolio during the year and reinvest the proceeds in exempt
assets prior to December 31. Transaction costs involved in
restructuring the portfolio in this fashion would likely reduce
the Fund's investment return and might exceed any increased
investment return the Fund achieved by investing in non-exempt
assets during the year.
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).
<PAGE>
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 SECURITIES RATINGS
The ratings services' descriptions of tax exempt securities in
which the Fund will invest are:
MOODY'S INVESTORS SERVICE, INC.
BONDS
Aaa -- Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and
are generally referred to as "gilt-edge." Interest payments are
protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such
issues.
Aa -- Bonds which are rated Aa are judged to be of high quality
by all standards. Together with the Aaa group they comprise what
are generally known as high grade bonds. They are rated lower
than the best bonds because margins of protection may not be as
large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger
than in Aaa securities.
A -- Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest
are considered adequate but elements may be present which suggest
a susceptibility to impairment sometime in the future.
Baa -- Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear
adequate for the present, but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as
well.
Ba -- Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well assured.
Often the protection of interest and principal payments may be
very moderate and thereby not well safeguarded during both good
and bad times over the future. Uncertainty of position
characterizes bonds in this class.
<PAGE>
NOTES
MIG 1/VMIG 1 -- This designation denotes best quality. There is
present strong protection by established cash flows, superior
liquidity support or demonstrated broad-based access to the
market for refinancing.
MIG 2/VMIG 2 -- This designation denotes high quality. Margins
of protection are ample although not so large as in the preceding
group.
COMMERCIAL PAPER
Issuers rated PRIME-1 (or related supporting institutions)
have a superior capacity for repayment of short-term promissory
obligations. Prime-1 repayment capacity will normally be
evidenced by the following characteristics:
-- Leading market positions in well established
industries.
-- High rates of return on funds employed.
-- Conservative capitalization structures with moderate
reliance on debt and ample asset protection.
-- Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.
-- Well established access to a range of financial markets
and assured sources of alternate liquidity.
Issuers rated PRIME-2 (or related supporting institutions)
have a strong capacity for repayment of short-term promissory
obligations. This will normally be evidenced by many of the
characteristics cited above to a lesser degree. Earnings trends
and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample
alternate liquidity is maintained.
STANDARD & POOR'S CORPORATION
BONDS
AAA -- Debt rated AAA has the highest rating assigned by Standard
& Poor's. Capacity to pay interest and repay principal is
extremely strong.
AA -- Debt rated AA has a very strong capacity to pay interest
and repay principal and differs from the higher rated issues only
in small degree.
A -- Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
debt in higher rated categories.
BBB -- Debt rated BBB is regarded as having an adequate capacity
to pay interest and repay principal. Whereas it normally
exhibits adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal for debt in
this category than in higher rated categories.
BB -- Debt rated BB is regarded, on balance, as predominantly
speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the
obligation. While such debt will likely have some quality and
protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
NOTES
SP-1 -- Very strong or strong capacity to pay principal and
interest. Those issues determined to possess overwhelming safety
characteristics will be given a plus (+) designation.
SP-2 -- Satisfactory capacity to pay principal and interest.
COMMERCIAL PAPER
A-1 -- This designation indicates that the degree of safety
regarding timely payment is either overwhelming or very strong.
Those issues determined to possess overwhelming safety
characteristics are denoted with a plus (+) sign designation.
A-2 -- Capacity for timely payment on issues with this
designation is strong. However, the relative degree of safety is
not as high as for issues designated "A-1".<PAGE>
PUTNAM FLORIDA 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
Price Waterhouse
160 Federal Street
Boston, MA 02110
PUTNAM INVESTMENTS
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>
