December 4, 2000
To the Board of Trustees of Putnam Tax Smart Equity Fund:
In planning and performing our audit of the financial
statements of Putnam Tax Smart Equity Fund for the year ended
October 31, 2000, we considered its internal control, including
control activities for safeguarding securities, in order to
determine our auditing procedures for the purpose of expressing
our opinion on the financial statements and to comply with the
requirements of Form N-SAR, not to provide assurance on
internal control.
The management of Putnam Tax Smart Equity Fund is responsible
for establishing and maintaining internal control. In
fulfilling this responsibility, estimates and judgments by
management are required to assess the expected benefits and
related costs of controls. Generally, controls that are
relevant to an audit pertain to the entity's objective of
preparing financial statements for external purposes that are
fairly presented in conformity with generally accepted
accounting principles. Those controls include the safeguarding
of assets against unauthorized acquisition, use or disposition.
Because of inherent limitations in internal controls, errors or
fraud may occur and may not be detected. Also, projection of
any evaluation of internal control to future periods is subject
to the risk that it may become inadequate because of changes in
conditions or that the effectiveness of the design and
operation may deteriorate.
Our consideration of internal control would not necessarily
disclose all matters in internal control that might be material
weaknesses under standards established by the American
Institute of Certified Public Accountants. A material weakness
is a condition in which the design or operation of one or more
of the internal control components does not reduce to a
relatively low level the risk that misstatements caused by
errors or fraud in amounts that would be material in relation
to the financial statements being audited may occur and not be
detected within a timely period by employees in the normal
course of performing their assigned functions. However, we
noted no matters involving internal control and its operation,
including controls for safeguarding securities, that we
consider to be material weaknesses as defined above as of
October 31, 2000.
This report is intended solely for the information and use of
management and the Board of Trustees and the Securities and
Exchange Commission and is not intended to be and should not be
used by anyone other than these specified parties.
