PUTNAM HEALTH SCIENCES TRUST, 485BPOS, 1999-12-29

PUTNAM HEALTH SCIENCES TRUST
485BPOS, 1999-12-29

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As filed with the Securities and Exchange Commission on

December 29, 1999

Registration No. 2-75863
811-3386
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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FORM N-1A
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
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Pre-Effective Amendment No. / /
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Post-Effective Amendment No. 18 / X /

and/or ----
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY / X /
ACT OF 1940 ----
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Amendment No. 19 / X /

(Check appropriate box or boxes) ----
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PUTNAM HEALTH SCIENCES TRUST
(Exact Name of Registrant as Specified in Charter)

One Post Office Square, Boston, Massachusetts 02109
(Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, including Area Code
(617) 292-1000
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It is proposed that this filing will become effective
(check appropriate box)

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/ / immediately upon filing pursuant to paragraph (b)
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/ X / on December 30, 1999 pursuant to paragraph (b)

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/ / 60 days after filing pursuant to paragraph (a)(1)
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/ / on (date) pursuant to paragraph (a)(1)

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/ / 75 days after filing pursuant to paragraph (a)(2)
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/ / on (date) pursuant to paragraph (a)(2) of Rule 485.
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If appropriate, check the following box:
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/ / this post-effective amendment designates a new
- ---- effective date for a previously filed post-effective amendment.

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JOHN R. VERANI, Vice President
PUTNAM HEALTH SCIENCES TRUST
One Post Office Square
Boston, Massachusetts 02109
(Name and address of agent for service)
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Copy to:
JOHN W. GERSTMAYR, Esquire
ROPES & GRAY
One International Place
Boston, Massachusetts 02110

Prospectus

December 30, 1999

Putnam Health Sciences Trust

Class A, B, C and M shares
Investment Category: Growth

This prospectus explains what you should know about this mutual fund
before you invest. Please read it carefully.

Putnam Investment Management, Inc. (Putnam Management), which has managed
mutual funds since 1937, manages the fund.

These securities have not been approved or disapproved by the Securities
and Exchange Commission nor has the Commission passed upon the accuracy or
adequacy of this prospectus. Any statement to the contrary is a crime.

CONTENTS

2 Fund summary

2 Goal

2 Main investment strategies

2 Main risks

3 Performance information

4 Fees and expenses

5 What are the fund's main invest-
ment strategies and related risks?

7 Who manages the fund?

8 How does the fund price its shares?

9 How do I buy fund shares?

12 How do I sell fund shares?

13 How do I exchange fund shares?

14 Fund distributions and taxes

15 Financial highlights

[LOGO OMITTED: BOSTON * LONDON * TOKYO]

Fund summary

GOAL

The fund seeks capital appreciation.

MAIN INVESTMENT STRATEGIES -- GROWTH STOCKS

We invest mainly in common stocks of U.S. companies in the health sciences
industries, with a focus on growth stocks. Growth stocks are issued by
companies whose earnings we believe are likely to grow faster than the
economy as a whole. Growth in a company's earnings may lead to an increase
in the price of its stock. We invest mainly in midsized and large
companies.

MAIN RISKS

The main risks that could adversely affect the value of the fund's shares
and the total return on your investment include:

* The risk that the stock price of one or more of the companies in the
fund's portfolio will fall, or will fail to rise. Many factors can
adversely affect a stock's performance, including both general financial
market conditions and factors related to a specific company or industry.
This risk is generally greater for small and midsized companies, which tend
to be more vulnerable to adverse developments.

* The risk that movements in financial markets will adversely affect the
price of the fund's investments, regardless of how well the companies in
which we invest perform. The market as a whole may not favor the types of
investments we make.

* The risk of investing in a single group of industries. Investments in the
health sciences industries, even though representing interests in different
companies within these industries, may be affected by common economic
forces and other factors. This vulnerability to factors affecting the
health sciences industries is significantly greater than for a fund that
invests in a broader range of industries, and may result in greater fund
losses and volatility.

* The risk of loss from investing in fewer issuers than a fund that invests
more broadly. The fund is "non-diversified," which means that it may invest
more of its assets in the securities of fewer companies than a
"diversified" fund. This vulnerability to factors affecting a single
investment can result in greater fund losses and volatility.

You can lose money by investing in the fund. The fund may not achieve its
goals, and is not intended as a complete investment program. An investment
in the fund is not a deposit in a bank and is not insured or guaranteed by
the Federal Deposit Insurance Corporation or any other government agency.

PERFORMANCE INFORMATION

The following information provides some indication of the fund's risks. The
chart shows year-to-year changes in the performance of one of the fund's
classes of shares, class A shares. The table following the chart compares
the fund's performance to that of a broad measure of market performance. Of
course, a fund's past performance is not an indication of future
performance.

[GRAPHIC OMITTED: vertical bar chart CALENDAR YEAR TOTAL RETURNS FOR
CLASS A SHARES]

CALENDAR YEAR TOTAL RETURNS FOR CLASS A SHARES
Plot points

1989 41.98%
1990 15.51%
1991 49.07%
1992 -10.70%
1993 -0.04%
1994 15.16%
1995 47.00%
1996 12.43%
1997 32.37%
1998 27.10%

Performance figures in the bar chart do not reflect the impact of sales
charges. If they did, performance would be less than that shown.
Year-to-date performance through 9/30/99 was 16.15%. During the periods
shown in the bar chart, the highest return for a quarter was 21.49%
(quarter ending 3/31/91) and the lowest return for a quarter was -12.12%
(quarter ending 3/31/92).

Average Annual Total Returns (for periods ending 12/31/98)
- -------------------------------------------------------------------------------
Past Past Past
1 year 5 years 10 years
- -------------------------------------------------------------------------------
Class A 19.79% 24.72% 20.75%
Class B 21.17% 25.10% 20.50%
Class C 25.15% 25.25% 20.55%
Class M 22.06% 24.69% 20.38%
S&P 500 Index 28.58% 24.07% 19.21%
- -------------------------------------------------------------------------------

Unlike the bar chart, this performance information reflects the impact of
sales charges. Class A and class M share performance reflects the current
maximum initial sales charges; class B and class C share performance
reflects the maximum applicable deferred sales charge if shares had been
redeemed on 12/31/98 and, for class B, assumes conversion to class A shares
after eight years. For periods before the inception of class B shares
(3/1/93), class C shares (7/26/99) and class M shares (7/3/95), performance
shown for these classes in the table is based on the performance of the
fund's class A shares, adjusted to reflect the appropriate sales charge and
the higher 12b-1 fees paid by class B, class C and class M shares. The
fund's performance is compared to the Standard & Poor's 500 Index, an
unmanaged index of common stocks frequently used as a general measure of
U.S. stock market performance.

FEES AND EXPENSES

This table summarizes the fees and expenses you may pay if you invest in
the fund. Expenses are based on the fund's last fiscal year.

Shareholder Fees (fees paid directly from your investment)
- -------------------------------------------------------------------------------
Class A Class B Class C Class M
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Maximum Sales Charge
(Load) Imposed on Purchases
(as a percentage of
the offering price) 5.75% NONE NONE 3.50%

Maximum Deferred Sales
Charge (Load) (as a percentage
of the original purchase price
or redemption proceeds,
whichever is lower) NONE* 5.00% 1.00% NONE
- -------------------------------------------------------------------------------

Annual Fund Operating Expenses
(expenses that are deducted from fund assets)
- -------------------------------------------------------------------------------
Total Annual
Management Distribution Other Fund Operating
Fees (12b-1) Fees Expenses Expenses
- -------------------------------------------------------------------------------
Class A 0.54% 0.25% 0.16% 0.95%
Class B 0.54% 1.00% 0.16% 1.70%
Class C 0.54% 1.00% 0.16% 1.70%
Class M 0.54% 0.75% 0.16% 1.45%
- -------------------------------------------------------------------------------
* A deferred sales charge of up to 1% may be imposed on certain redemptions
of class A shares bought without an initial sales charge.

EXAMPLE

The example translates the expenses shown in the preceding table into
dollar amounts. By doing this, you can more easily compare the cost of
investing in the fund to the cost of investing in other mutual funds. The
example makes certain assumptions. It assumes that you invest $10,000 in
the fund for the time periods shown and then, except as shown for class B
and class C shares, redeem all your shares at the end of those periods. It
also assumes a 5% return on your investment each year and that the fund's
operating expenses remain the same. The example is hypothetical; your
actual costs and returns may be higher or lower.

- -------------------------------------------------------------------------------
1 year 3 years 5 years 10 years
- -------------------------------------------------------------------------------
Class A $666 $860 $1,070 $1,674
Class B $673 $836 $1,123 $1,810*
Class B
(no redemption) $173 $536 $ 923 $1,810*
Class C $273 $536 $ 923 $2,009
Class C
(no redemption) $173 $536 $ 923 $2,009
Class M $492 $793 $1,114 $2,025
- -------------------------------------------------------------------------------
* Reflects the conversion of class B shares to class A shares, which pay
lower 12b-1fees. Conversion occurs no more than eight years after purchase.

What are the fund's main investment strategies and related risks?

Any investment carries with it some level of risk that generally reflects
its potential for reward. We pursue the fund's goal by investing mainly in
growth stocks of companies in the health sciences industries. We will
consider, among other things, a company's financial strength, competitive
position in its industry, projected future earnings, cash flows and
dividends when deciding whether to buy or sell investments. A description
of the risks associated with the fund's main investment strategies follows.

* Common stocks. Common stock represents an ownership interest in a
company. The value of a company's stock may fall as a result of factors
relating directly to that company, such as decisions made by its management
or lower demand for the company's products or services. A stock's value may
also fall because of factors affecting not just the company, but also
companies in the same industry or in a number of different industries, such
as increases in production costs. The value of a company's stock may also
be affected by changes in financial markets that are relatively unrelated
to the company or its industry, such as changes in interest rates or
currency exchange rates. In addition, a company's stock generally pays
dividends only after the company invests in its own business and makes
required payments to holders of its bonds and other debt. For this reason,
the value of a company's stock will usually react more strongly than bonds
and other debt to actual or perceived changes in the company's financial
condition or prospects. Stocks of smaller companies may be more vulnerable
to adverse developments than those of larger companies.

* Growth stocks. These are stocks of companies whose earnings we believe
are likely to grow faster than the economy as a whole. Growth stocks
typically trade at higher multiples of current earnings than other stocks.
Therefore, the values of growth stocks may be more sensitive to changes in
current or expected earnings than the values of other stocks. If our
assessment of the prospects for a company's earnings growth is wrong, or if
our judgment of how other investors will value the company's earnings
growth is wrong, then the price of the company's stock may fall or not
approach the value that we have placed on it.

* Foreign investments. We may invest in securities of foreign issuers.
Foreign investments involve certain special risks. For example, their
values may decline in response to changes in currency exchange rates,
unfavorable political and legal developments, unreliable or untimely
information, and economic and financial instability. In addition, the
liquidity of these investments may be more limited than for U.S.
investments, which means we may at times be unable to sell them at
desirable prices. Foreign settlement procedures may also involve additional
risks. These risks are generally greater in the case of developing (also
known as emerging) markets with less developed legal and financial systems.

Certain of these risks may also apply to U.S. investments that are
denominated in foreign currencies or that are traded in foreign markets, or
to securities of U.S. companies that have significant foreign operations.

* Smaller companies. We may invest in smaller and midsized companies.
Smaller companies, which may have a market capitalization of less than $1
billion, are more likely than larger companies to have limited product
lines, markets or financial resources, or to depend on a small,
inexperienced management group. Stocks of these companies often trade less
frequently and in limited volume, and their prices may fluctuate more than
stocks of larger companies. Stocks of smaller and midsized companies may
therefore be more vulnerable to adverse developments than those of larger
companies.

* Industry focus. We invest primarily in companies that provide health care
services, applied research and development, pharmaceutical products, and
medical equipment and supplies, and companies that we believe will grow as
a result of their products, patents or other market advantages in the
health sciences industries. Events that affect the health sciences
industries will have a greater effect on the fund than they would on a fund
that is more widely diversified among a number of unrelated industries.
Examples include technological advances that make existing products and
services obsolete, and changes in regulatory policies concerning approvals
of new drugs, medical devices or procedures. In addition, changes in
governmental payment systems and use of managed care arrangements may be
more likely to adversely affect the fund.

* Other investments. In addition to the main investment strategies
described above, we may make other investments, such as investments in
preferred stocks, convertible securities, debt instruments and derivatives,
which may be subject to other risks, as described in the fund's statement
of additional information (SAI).

* Alternative strategies. At times we may judge that market conditions make
pursuing the fund's usual investment strategies inconsistent with the best
interests of the fund's shareholders. We then may temporarily use
alternative strategies that are mainly designed to limit losses. However,
we may choose not to use these strategies for a variety of reasons, even in
very volatile market conditions. These strategies may cause the fund to
miss out on investment opportunities, and may prevent the fund from
achieving its goal.

* Changes in policies. The fund's Trustees may change the fund's goal,
investment strategies and other policies without shareholder approval,
except as otherwise indicated.

Who manages the fund?

The fund's Trustees oversee the general conduct of the fund's business. The
Trustees have retained Putnam Management to be the fund's investment
manager, responsible for making investment decisions for the fund and
managing the fund's other affairs and business. The fund pays Putnam
Management a quarterly management fee for these services based on the
fund's average net assets. The fund paid Putnam Management a management fee
of 0.54% of average net assets for the fund's last fiscal year. Putnam
Management's address is One Post Office Square, Boston, MA 02109.

The following officers of Putnam Management have had primary responsibility
for the day-to-day management of the fund's portfolio since the years shown
below. Their experience as portfolio managers or investment analysts over
at least the last five years is also shown.

- ----------------------------------------------------------------------------------------------------
Manager Since Experience
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
David G. Carlson 1997 1990 - Present Putnam Management
Senior Vice President
- ----------------------------------------------------------------------------------------------------
Richard B. England 1997 1992 - Present Putnam Management
Senior Vice President
- ----------------------------------------------------------------------------------------------------
Margery C. Parker 1998 1997 - Present Putnam Management
Senior Vice President Prior to 1997 Keystone Investments
- ----------------------------------------------------------------------------------------------------

</TABLE>

* Year 2000 issues. The fund could be adversely affected if the computer
systems that we and the fund's other service providers use do not properly
process and calculate date-related information relating to the end of this
century and the beginning of the next. While year 2000-related computer
problems could have a negative effect on the fund, both in its operations
and in its investments, we are working to avoid such problems and to obtain
assurances from the fund's service providers that they are taking similar
steps. No assurances, though, can be provided that the fund will not be
adversely impacted by these matters.

How does the fund price its shares?

The price of the fund's shares is based on its net asset value (NAV). The
NAV per share of each class equals the total value of its assets, less its
liabilities, divided by the number of its outstanding shares. Shares are
only valued as of the close of regular trading on the New York Stock
Exchange each day the exchange is open.

The fund values its investments for which market quotations are readily
available at market value. It values short-term investments that will
mature within 60 days at amortized cost, which approximates market value.
It values all other investments and assets at their fair value.

The fund translates prices for its investments quoted in foreign currencies
into U.S. dollars at current exchange rates. As a result, changes in the
value of those currencies in relation to the U.S. dollar may affect the
fund's NAV. Because foreign markets may be open at different times than the
New York Stock Exchange, the value of the fund's shares may change on days
when shareholders are not able to buy or sell them. If events materially
affecting the values of the fund's foreign investments occur between the
close of foreign markets and the close of regular trading on the New York
Stock Exchange, these investments will be valued at their fair value.

How do I buy fund shares?

You can open a fund account with as little as $500 and make additional
investments at any time with as little as $50 ($25 through systematic
investing). The fund sells its shares at the offering price, which is the
NAV plus any applicable sales charge. Your financial advisor or Putnam
Investor Services generally must receive your completed buy order before
the close of regular trading on the New York Stock Exchange for your shares
to be bought at that day's offering price.

You can buy shares:

* Through a financial advisor. Your advisor will be responsible for
furnishing all necessary documents to Putnam Investor Services, and may
charge you for his or her services.

* Through systematic investing. You can make regular investments of $25 or
more per month through automatic deductions from your bank checking or
savings account. Application forms are available through your advisor or
Putnam Investor Services at 1-800-225-1581.

You may also complete an order form and write a check for the amount you
wish to invest, payable to the fund. Return the check and completed form to
Putnam Mutual Funds.

The fund may periodically close to new purchases of shares or refuse any
order to buy shares if the fund determines that doing so would be in the
best interests of the fund and its shareholders.

WHICH CLASS OF SHARES IS BEST FOR ME?

This prospectus offers you a choice of four classes of fund shares: A, B, C
and M. This allows you to choose among different types of sales charges and
different levels of ongoing operating expenses, as illustrated in the "Fees
and expenses" section. The class of shares that is best for you depends on
a number of factors, including the amount you plan to invest and how long
you plan to hold the shares. Here is a summary of the differences among the
classes of shares:

Class A shares

* Initial sales charge of up to 5.75%

* Lower sales charge for investments of $50,000 or more

* No deferred sales charge (except on certain redemptions of shares
bought without an initial sales charge)

* Lower annual expenses, and higher dividends, than class B, C or M shares
because of lower 12b-1 fee

Class B shares

* No initial sales charge; your entire investment goes to work for you

* Deferred sales charge of up to 5.00% if you sell shares within 6 years
after you bought them

* Higher annual expenses, and lower dividends, than class A or M shares
because of higher 12b-1 fee

* Convert automatically to class A shares after 8 years, reducing the
future 12b-1 fee (may convert sooner in some cases)

* Orders for class B shares for $250,000 or more are treated as orders for
class A shares or refused

Class C shares

* No initial sales charge; your entire investment goes to work for you

* Deferred sales charge of 1.00% if you sell shares within one year after
you bought them

* Higher annual expenses, and lower dividends, than class A or M shares
because of higher 12b-1 fee

* No conversion to class A shares, so future 12b-1 fee does not decrease

* Orders of $1,000,000 or more and orders that, because of a right of
accumulation or statement of intent would qualify for the purchase of class
A shares without an initial sales charge, will be treated as orders for
class A shares or refused

Class M shares

* Initial sales charge of up to 3.50%

* Lower sales charges for investments of $50,000 or more

* No deferred sales charge

* Lower annual expenses, and higher dividends, than class B or C shares
because of lower 12b-1 fee

* Higher annual expenses, and lower dividends, than class A shares because
of higher 12b-1 fee

* No conversion to class A shares, so future 12b-1 fee does not decrease

- -------------------------------------------------------------------------------
Initial sales charges for class A and M shares
- -------------------------------------------------------------------------------
Class A sales charge Class M sales charge
as a percentage of: as a percentage of:
- -------------------------------------------------------------------------------
Amount of purchase Net amount Offering Net amount Offering
at offering price ($) invested price* invested price*
- -------------------------------------------------------------------------------
Under 50,000 6.10% 5.75% 3.63% 3.50%
50,000 but under
100,000 4.71 4.50 2.56 2.50
100,000 but under
250,000 3.63 3.50 1.52 1.50
250,000 but under
500,000 2.56 2.50 1.01 1.00
500,000 but under
1,000,000 2.04 2.00 NONE NONE
1,000,000 and above NONE NONE NONE NONE
- -------------------------------------------------------------------------------
* Offering price includes sales charge.

Deferred sales charges for class B, class C and certain
class A shares

If you sell (redeem) class B shares within six years after you bought them,
you will generally pay a deferred sales charge according to the following
schedule.

Year after purchase 1 2 3 4 5 6 7+
- -------------------------------------------------------------------------------
Charge 5% 4% 3% 3% 2% 1% 0%

A deferred sales charge of 1% will apply to class C shares if redeemed
within one year of purchase. A deferred sales charge of up to 1% may apply
to class A shares purchased without an initial sales charge, if redeemed
within two years of purchase.

Deferred sales charges will be based on the lower of the shares' cost and
current NAV. Shares not subject to any charge will be redeemed first,
followed by shares held longest. You may sell shares acquired by
reinvestment of distributions without a charge at any time.

* You may be eligible for reductions and waivers of sales charges. Sales
charges may be reduced or waived under certain circumstances and for
certain groups. Information about reductions and waivers of sales charges
is included in the SAI. You may consult your financial advisor or Putnam
Mutual Funds for assistance.

* Distribution (12b-1) plans. The fund has adopted distribution plans to
pay for the marketing of fund shares and for services provided to
shareholders. The plans provide for payments at annual rates (based on
average net assets) of up to 0.35% on class A shares and 1.00% on class B,
class C and class M shares. The Trustees currently limit payments on class
A and class M shares to 0.25% and 0.75% of average net assets,
respectively. Because these fees are paid out of the fund's assets on an
ongoing basis, they will increase the cost of your investment. The higher
fees for class B, class C and class M shares may cost you more than paying
the initial sales charge for class A shares. Because class C and class M
shares, unlike class B shares, do not convert to class A shares, class C
and class M shares may cost you more over time than class B shares.

How do I sell fund shares?

You can sell your shares back to the fund any day the New York Stock
Exchange is open, either through your financial advisor or directly to the
fund. Payment for redemption may be delayed until the fund collects the
purchase price of shares, which may take up to 15 calendar days after the
purchase date.

* Selling shares through your financial advisor. Your advisor must receive
your request in proper form before the close of regular trading on the New
York Stock Exchange for you to receive that day's NAV, less any applicable
deferred sales charge. Your advisor will be responsible for furnishing all
necessary documents to Putnam Investor Services on a timely basis and may
charge you for his or her services.

* Selling shares directly to the fund. Putnam Investor Services must
receive your request in proper form before the close of regular trading on
the New York Stock Exchange in order to receive that day's NAV, less any
applicable sales charge.

By mail. Send a letter of instruction signed by all registered owners or
their legal representatives to Putnam Investor Services. If you have
certificates for the shares you want to sell, you must include them along
with completed stock power forms.

By telephone. You may use Putnam's telephone redemption privilege to redeem
shares valued at less than $100,000 unless you have notified Putnam
Investor Services of an address change within the preceding 15 days, in
which case other requirements may apply. Unless you indicate otherwise on
the account application, Putnam Investor Services will be authorized to
accept redemption instructions received by telephone.

The telephone redemption privilege is not available if there are
certificates for your shares. The telephone redemption privilege may be
modified or terminated without notice.

* Additional requirements. In certain situations, for example, if you sell
shares with a value of $100,000 or more, the signatures of all registered
owners or their legal representatives must be guaranteed by a bank,
broker-dealer or certain other financial institutions. In addition, Putnam
Investor Services usually requires additional documents for the sale of
shares by a corporation, partnership, agent or fiduciary, or a surviving
joint owner. For more information concerning Putnam's signature guarantee
and documentation requirements, contact Putnam Investor Services.

* When will the fund pay me? The fund generally sends you payment for your
shares the business day after your request is received. Under unusual
circumstances, the fund may suspend redemptions, or postpone payment for
more than seven days, as permitted by federal securities law.

* Redemption by the fund. If you own fewer shares than the minimum set by
the Trustees (presently 20 shares), the fund may redeem your shares without
your permission and send you the proceeds. The fund may also redeem shares
if you own more than a maximum amount set by the Trustees. There is
presently no maximum, but the Trustees could set a maximum that would apply
to both present and future shareholders.

How do I exchange fund shares?

If you want to switch your investment from one Putnam fund to another, you
can exchange your fund shares for shares of the same class of another
Putnam fund at NAV. Not all Putnam funds offer all classes of shares or are
open to new investors. If you exchange shares subject to a deferred sales
charge, the transaction will not be subject to the deferred sales charge.
When you redeem the shares acquired through the exchange, the redemption
may be subject to the deferred sales charge, depending upon when you
originally purchased the shares. The deferred sales charge will be computed
using the schedule of any fund into or from which you have exchanged your
shares that would result in your paying the highest deferred sales charge
applicable to your class of shares. For purposes of computing the deferred
sales charge, 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, complete an Exchange Authorization Form and send
it to Putnam Investor Services. The form is available from Putnam Investor
Services. A telephone exchange privilege is currently available for amounts
up to $500,000. The telephone exchange privilege is not available if the
fund issued certificates for your shares. Ask your financial advisor or
Putnam Investor Services for prospectuses of other Putnam funds. Some
Putnam funds are not available in 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 otherwise to promote 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. The fund
into which you would like to exchange may also reject your exchange. These
actions may apply to all shareholders or only to those shareholders whose
exchanges Putnam Management determines are likely to have a negative effect
on the fund or other Putnam funds. Consult Putnam Investor Services before
requesting an exchange.

Fund distributions and taxes

The fund distributes any net investment income and any net realized capital
gains at least once a year. You may choose to:

* reinvest all distributions in additional shares;

* receive any distributions from net investment income in cash while
reinvesting capital gains distributions in additional shares; or

* receive all distributions in cash.

If you do not select an option when you open your account, all
distributions will be reinvested. If you do not cash a distribution check
within a specified period or notify Putnam Investor Services to issue a new
check, the distribution will be reinvested in the fund. You will not
receive any interest on uncashed distribution or redemption checks.
Similarly, if any 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.

For federal income tax purposes, distributions of investment income are
taxable as ordinary income. Taxes on distributions of capital gains are
determined by how long the fund owned the investments that generated them,
rather than how long you have owned your shares. Distributions are taxable
to you even if they are paid from income or gains earned by the fund before
your investment (and thus were included in the price you paid).
Distributions of gains from investments that the fund owned for more than
one year will be taxable as capital gains. Distributions of gains from
investments that the fund owned for one year or less will be taxable as
ordinary income. Distributions are taxable whether you received them in
cash or reinvested them in additional shares.

The fund's investments in foreign securities may be subject to foreign
withholding taxes. In that case, the fund's return on those investments
would be decreased. Shareholders generally will not be entitled to claim a
credit or deduction with respect to foreign taxes. In addition, the fund's
investment in foreign securities or foreign currencies may increase the
amount of taxes payable by shareholders.

Any gain resulting from the sale or exchange of your shares will generally
also be subject to tax. You should consult your tax advisor for more
information on your own tax situation, including possible foreign, state
and local taxes.

Financial highlights

The financial highlights table is intended to help you understand the
fund's recent financial performance. Certain information reflects financial
results for a single fund share. The total returns represent the rate that
an investor would have earned or lost on an investment in the fund,
assuming reinvestment of all dividends and distributions. This information
has been derived from the fund's financial statements, which have been
audited by PricewaterhouseCoopers LLP. Its report and the fund's financial
statements are included in the fund's annual report to shareholders, which
is available upon request.

FINANCIAL HIGHLIGHTS
CLASS A
(For a share outstanding throughout the period)
Year ended August 31
---------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $53.50 $55.82 $43.67 $36.21 $29.77
- --------------------------------------------------------------------------------------------------------------------------
Investment operations
Net investment income (loss) (.07)c (.01)c .13c .19 .23
Net realized and unrealized gain
on investments 11.09 4.13 13.71 8.46 6.99
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations 11.02 4.12 13.84 8.65 7.22
- --------------------------------------------------------------------------------------------------------------------------
Less distributions:
From net investment income -- (.02) (.09) (.27) (.26)
From net realized gain on investments (4.98) (6.42) (1.60) (.92) (.52)
From return of capital (.03) -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------
Total distributions (5.01) (6.44) (1.69) (1.19) (.78)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $59.51 $53.50 $55.82 $43.67 $36.21
- --------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
Total return at
net asset value (%)a 20.50 7.48 32.46 24.12 24.81
Net assets, end of period
(in thousands) $2,883,732 $2,236,469 $1,681,187 $1,166,794 $929,484
- --------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average
net assets (%)b .95 1.00 1.08 1.10 1.12
Ratio of net investment income
(loss) to average net assets (%) (.11) (.02) .26 .43 .70
Portfolio turnover (%) 79.12 40.45 44.54 10.55 19.51
- --------------------------------------------------------------------------------------------------------------------------

a Total return assumes dividend reinvestment and does not reflect the effect of sales charges.

b The ratio of expenses to average net assets for the period ended August 31, 1996 and thereafter, includes amounts paid
through expense offset arrangements and brokerage service arrangements. Prior period ratios exclude these amounts.

c Per share net investment income (loss) has been determined on the basis of the weighted average number of shares
outstanding during the period.

</TABLE>

FINANCIAL HIGHLIGHTS
CLASS B
(For a share outstanding throughout the period)
Year ended August 31
---------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $51.74 $54.54 $42.94 $35.72 $29.47
- --------------------------------------------------------------------------------------------------------------------------
Investment operations
Net investment income (loss) (.50)c (.44)c (.24)c (.13)c .11
Net realized and unrealized gain
on investments 10.73 4.06 13.44 8.35 6.78
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations 10.23 3.62 13.20 8.22 6.89
- --------------------------------------------------------------------------------------------------------------------------
Less distributions:
From net investment income -- -- -- (.08) (.12)
From net realized gain on investments (4.98) (6.42) (1.60) (.92) (.52)
From return of capital (.03) -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------
Total distributions (5.01) (6.42) (1.60) (1.00) (.64)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $56.96 $51.74 $54.54 $42.94 $35.72
- --------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
Total return at
net asset value (%)a 19.61 6.67 31.46 23.19 23.83
Net assets, end of period
(in thousands) $2,141,640 $1,292,418 $567,928 $273,243 $113,329
- --------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average
net assets (%)b 1.70 1.75 1.83 1.85 1.88
Ratio of net investment income
(loss) to average net assets (%) (.86) (.76) (.49) (.31) (.05)
Portfolio turnover (%) 79.12 40.45 44.54 10.55 19.51
- --------------------------------------------------------------------------------------------------------------------------

a Total return assumes dividend reinvestment and does not reflect the effect of sales charges.

c Per share net investment income (loss) has been determined on the basis of the weighted average number of shares
outstanding during the period.

</TABLE>

FINANCIAL HIGHLIGHTS
CLASS C
(For a share outstanding throughout the period)
For the period
July 26, 1999+
to August 31
----------------
1999
<S> <C>
- --------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $59.32
- --------------------------------------------------------------------------------------------------------------------------
Investment operations
Net investment income (loss) (.04)c
Net realized and unrealized gain
on investments .20
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations .16
- --------------------------------------------------------------------------------------------------------------------------
Less distributions:
From net investment income --
From net realized gain on investments --
From return of capital --
- --------------------------------------------------------------------------------------------------------------------------
Total distributions --
- --------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $59.48
- --------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
Total return at
net asset value (%)a 0.27*
Net assets, end of period
(in thousands) $3,770
- --------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average
net assets (%)b .17*
Ratio of net investment income
(loss) to average net assets (%) (.09)*
Portfolio turnover (%) 79.12
- --------------------------------------------------------------------------------------------------------------------------

+ Commencement of operations.

* Not annualized.

a Total return assumes dividend reinvestment and does not reflect the effect of sales charges.

b The ratio of expenses to average net assets includes amounts paid through expense offset arrangements and brokerage
service arrangements.

c Per share net investment income (loss) has been determined on the basis of the weighted average number of shares
outstanding during the period.

</TABLE>

FINANCIAL HIGHLIGHTS
CLASS M
(For a share outstanding throughout the period)
For the
period
July 3,
1995+ to
Year ended August 31 August 31
---------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $52.87 $55.47 $43.54 $36.17 $33.96
- --------------------------------------------------------------------------------------------------------------------------
Investment operations
Net investment income (loss) (.37)c (.31)c (.12)c (.02)c (.02)
Net realized and unrealized gain
on investments 10.98 4.13 13.65 8.46 2.23
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations 10.61 3.82 13.53 8.44 2.21
- --------------------------------------------------------------------------------------------------------------------------
Less distributions:
From net investment income -- -- -- (.15) --
From net realized gain on investments (4.98) (6.42) (1.60) (.92) --
From return of capital (.03) -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------
Total distributions (5.01) (6.42) (1.60) (1.07) --
- --------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $58.47 $52.87 $55.47 $43.54 $36.17
- --------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
Total return at
net asset value (%)a 19.93 6.94 31.79 23.51 6.51*
Net assets, end of period
(in thousands) $93,216 $56,662 $23,675 $9,732 $321
- --------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average
net assets (%)b 1.45 1.50 1.58 1.61 .30*
Ratio of net investment income
(loss) to average net assets (%) (.61) (.51) (.24) (.05) (.02)*
Portfolio turnover (%) 79.12 40.45 44.54 10.55 19.51
- --------------------------------------------------------------------------------------------------------------------------

+ Commencement of operations.

* Not annualized.

a Total return assumes dividend reinvestment and does not reflect the effect of sales charges.

c Per share net investment income (loss) has been determined on the basis of the weighted average number of shares
outstanding during the period.

</TABLE>

Make the most of your Putnam privileges

As a Putnam mutual fund shareholder, you have access to a number of
services that can help you build a more effective and flexible financial
program. Here are some of the ways you can use these privileges to make
the most of your Putnam mutual fund investment.

* SYSTEMATIC INVESTMENT PLAN

Invest as much as you wish ($25 or more) on any business day of the
month except for the 29th, 30th, or 31st. The amount you choose will
be automatically transferred each month from your checking or savings
account.

* SYSTEMATIC WITHDRAWAL

Make regular withdrawals of $50 or more monthly, quarterly, or semiannually
from your Putnam mutual fund account valued at $10,000 or more. Your
automatic withdrawal may be made on any business day of the month except
for the 29th, 30th, or 31st.

* SYSTEMATIC EXCHANGE

Transfer assets automatically from one Putnam account to another on a
regular, prearranged basis. There is no additional charge for this service.

* FREE EXCHANGE PRIVILEGE

Exchange money between Putnam funds in the same class of shares without
charge. The exchange privilege allows you to adjust your investments as your
objectives change. A signature guarantee is required for exchanges of more
than $500,000 and shares of all Putnam funds may not be available to
all investors.

* DIVIDENDS PLUS

Diversify your portfolio by investing dividends and other distributions
from one Putnam fund automatically into another at net asset value.

* STATEMENT OF INTENTION

To reduce a front-end sales charge, you may agree to invest a minimum
dollar amount over 13 months. Depending on your fund, the minimum is
$25,000, $50,000, or $100,000. Whenever you make an investment under
this arrangement, you or your investment advisor should notify Putnam
Mutual Funds that a Statement of Intention is in effect.

Investors may not maintain, within the same fund, simultaneous plans
for systematic investment or exchange (into the fund) and systematic
withdrawal or exchange (out of the fund). These privileges are subject
to change or termination.

For more information about any of these services and privileges, call
your investment advisor or a Putnam customer service representative toll
free at 1-800-225-1581.

Putnam Family of Fundsa

PUTNAM GROWTH FUNDS

Putnam Asia Pacific Growth Fund
Putnam Capital Appreciation Fundb
Putnam Capital Opportunities Fund
Putnam Emerging Markets Fund
Putnam Europe Growth Fund
Putnam Global Equity Fund*
Putnam Global Growth Fund
Putnam Global Natural Resources Fund
Putnam Growth Opportunities Fund
Putnam Health Sciences Trust
Putnam International Growth Fund
Putnam International New Opportunities Fund
Putnam International Voyager Fund
Putnam Investors Fund
Putnam New Opportunities Fundb
Putnam OTC & Emerging Growth Fund
Putnam Research Fund
Putnam Vista Fund
Putnam Voyager Fund
Putnam Voyager Fund II

PUTNAM GROWTH AND INCOME FUNDS

Putnam Balanced Retirement Fund
Putnam Convertible Income-Growth Trust
Putnam Equity Income Fund
The George Putnam Fund of Boston
Putnam Global Growth and Income Fund
The Putnam Fund for Growth and Income
Putnam Growth and Income Fund II
Putnam International Growth and Income Fund
Putnam New Value Fund
Putnam Small Cap Value Fund
Putnam Utilities Growth and Income Fund

PUTNAM INCOME FUNDS

Putnam American Government Income Fund
Putnam Diversified Income Trust
Putnam Global Governmental Income Trust
Putnam High Yield Advantage Fundb
Putnam High Yield Trustb
Putnam High Yield Trust II
Putnam Income Fund
Putnam Intermediate U.S. Government Income Fund
Putnam Preferred Income Fund
Putnam Strategic Income Fund
Putnam U.S. Government Income Trust

PUTNAM TAX-FREE INCOME FUNDS

Putnam Municipal Income Fund
Putnam Tax Exempt Income Fund
Putnam Tax-Free High Yield Fund
Putnam Tax-Free Insured Fund
Putnam State tax-free income fundsc
Arizona, California, Florida, Massachusetts, Michigan, Minnesota,
New Jersey, New York, Ohio and Pennsylvania

LIFESTAGE SM FUNDS

Putnam Asset Allocation Funds-three investment portfolios that spread your
money across a variety of stocks, bonds, and money market investments
seeking to help maximize your return and reduce your risk.

The three portfolios:

Balanced Portfolio
Conservative Portfolio
Growth Portfolio

PUTNAM MONEY MARKET FUNDSd

Putnam Money Market Fund
Putnam California Tax Exempt Money Market Fund
Putnam New York Tax Exempt Money Market Fund
Putnam Tax Exempt Money Market Fund

a As of 9/30/99.

b New investments restricted; see your financial advisor for details.

c Not available in all states.

d Investments in money market funds are not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
Although these funds seek to preserve an investment's net asset value at
$1.00 per share, it is possible to lose money by investing in them.

* Formerly Putnam Diversified Equity Trust.

Please call your financial advisor or Putnam Mutual Funds to obtain a
prospectus for any Putnam fund. It contains more complete information,
including charges and expenses. Read it carefully before you invest or
send money.

For more information about Putnam Health Sciences Trust

The fund's statement of additional information (SAI) and annual and
semi-annual reports to shareholders include additional information about
the fund. The SAI, and the independent accountant's report and financial
statements included in the fund's most recent annual report to its
shareholders, are incorporated by reference into this prospectus, which
means they are part of this prospectus for legal purposes. The fund's
annual report discusses the market conditions and investment strategies
that significantly affected the fund's performance during its last fiscal
year. You may get free copies of these materials, request other
information about the fund and other Putnam funds, or make shareholder
inquiries, by contacting your financial advisor, by visiting Putnam's Web
site, or by calling Putnam toll-free at 1-800-225-1581.

You may review and copy information about the fund, including its SAI, at
the Securities and Exchange Commission's public reference room in
Washington, D.C. You may call the Commission at 1-800-SEC-0330 for
information about the operation of the public reference room. You may also
access reports and other information about the fund on the Commission's
Internet site at http://www.sec.gov. You may get copies of this
information, with payment of a duplication fee, by writing the Public
Reference Section of the Commission, Washington, D.C. 20549-6009. You may
need to refer to the fund's file number.

P U T N A M I N V E S T M E N T S

One Post Office Square
Boston, Massachusetts 02109
1-800-225-1581

Address correspondence to
Putnam Investor Services
P.O. Box 989
Boston, Massachusetts 02103

www.putnaminv.com

File No. 811-3386 NP008 57215 12/99

PUTNAM HEALTH SCIENCES TRUST

FORM N-1A
PART B

STATEMENT OF ADDITIONAL INFORMATION ("SAI")

December 30, 1999

This SAI is not a prospectus and is only authorized for distribution when
accompanied or preceded by the prospectus of the fund dated December 30,
1999, as revised from time to time. This SAI contains information that
may be useful to investors but is not included in the prospectus. If the
fund has more than one form of current prospectus, each reference to the
prospectus in this SAI shall include all of the fund's prospectuses, unless
otherwise noted. The SAI should be read together with the applicable
prospectus. Certain disclosure has been incorporated by reference from the
fund's annual report. For a free copy of the fund's annual report or
prospectus , call Putnam Investor Services at 1-800-225-1581 or write
Putnam Investor Services, Mailing address: P.O. Box 41203, Providence, RI
02940-1203.

Part I of this SAI contains specific information about the fund. Part II
includes information about the fund and the other Putnam funds.

Table of Contents

PART I

FUND ORGANIZATION AND CLASSIFICATION I-3

INVESTMENT RESTRICTIONS I-3

CHARGES AND EXPENSES I-5
INVESTMENT PERFORMANCE I-12
ADDITIONAL OFFICERS I-13

INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS I-14

PART II

MISCELLANEOUS INVESTMENTS, INVESTMENT PRACTICES AND RISKS II-1

TAXES II-25
MANAGEMENT II-28
DETERMINATION OF NET ASSET VALUE II-36
HOW TO BUY SHARES II-37
DISTRIBUTION PLANS II-47
INVESTOR SERVICES II-51
SIGNATURE GUARANTEES II-55
SUSPENSION OF REDEMPTIONS II-55
SHAREHOLDER LIABILITY II-56
STANDARD PERFORMANCE MEASURES II-56
COMPARISON OF PORTFOLIO PERFORMANCE II-57
SECURITIES RATINGS II-60
DEFINITIONS II-65

SAI
PART I

FUND ORGANIZATION AND CLASSIFICATION

Putnam Health Sciences Trust is a Massachusetts business trust organized on
January 28, 1982 (the "Trust"). 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 management investment company with an unlimited
number of authorized shares of beneficial interest which may be divided
without shareholder approval into two or more classes of shares having such
preferences and special or relative rights and privileges as the Trustees
determine. The fund offers classes of shares with different sales charges
and expenses. Because of these different sales charges and expenses, the
investment performance of the classes will vary. For more information,
including your eligibility to purchase certain classes of shares, contact
your investment dealer or Putnam Mutual Funds (at 1-800-225-1581).

Each share has one vote, with fractional shares voting proportionally.
Shares of all classes will vote together as a single class except when
otherwise 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
Agreement and Declaration of Trust.

INVESTMENT RESTRICTIONS

As fundamental investment restrictions, which may not be changed without a
vote of a majority of the outstanding voting securities, the fund may not
and will not:

(1) Borrow money in excess of 10% of the value (taken at the lower of cost
or current value) of its total assets (not including the amount borrowed)
at the time the borrowing is made, and then only from banks as a temporary
measure to facilitate the meeting of redemption requests (not for leverage)
which might otherwise require the untimely disposition of portfolio
investments or for extraordinary or emergency purposes. Such borrowings
will be repaid before any additional investments are purchased.

(2) Underwrite securities issued by other persons except to the extent
that, in connection with the disposition of its portfolio investments, it
may be deemed to be an underwriter under certain federal securities laws.

(3) Purchase or sell real estate, although it may purchase securities of
issuers which deal in real estate, securities which are secured by
interests in real estate, and securities which represent interests in real
estate, and it may acquire and dispose of real estate or interests in real
estate acquired through the exercise of its rights as a holder of debt
obligations secured by real estate or interests therein.

(4) Purchase or sell commodities or commodity contracts, except that the
fund may purchase and sell financial futures contracts and options and may
enter into foreign exchange contracts and other financial transactions not
involving physical commodities.

(5) Make loans, except by purchase of debt obligations in which the fund
may invest consistent with its investment policies, by entering into
repurchase agreements, or by lending its portfolio securities.

(6) With respect to 50% of its total assets, invest in the securities of
any issuer if, immediately after such investment, more than 5% of the total
assets of the fund (taken at current value) would be invested in the
securities of such issuer, provided that this limitation does not apply to
obligations issued or guaranteed as to interest and principal by the U.S.
government or its agencies or instrumentalities.

(7) With respect to 50% of its total assets, acquire more than 10% of the
outstanding voting securities of any issuer.

(8) Purchase securities (other than securities of the U.S. government, its
agencies or instrumentalities) if, as a result of such purchase, more than
25% of the fund's total assets would be invested in any one industry,
except that the fund will invest at least 25% of the value of its total
assets in common stocks of companies which Putnam Management determines are
principally engaged in the health sciences industries, except when
investing for defensive purposes.

The Investment Company Act of 1940 provides that a "vote of a majority of
the outstanding voting securities" of the fund means the affirmative vote
of the lesser of (l) more than 50% of the outstanding fund shares, or (2)
67% or more of the shares present at a meeting if more than 50% of the
outstanding fund shares are represented at the meeting in person or by
proxy.

It is contrary to the fund's present policy, which may be changed without
shareholder approval, to:

(1) Invest in (a) securities which are not readily marketable, (b)
securities restricted as to resale (excluding securities determined by the
Trustees of the fund (or the person designated by the Trustees of the fund
to make such determinations) to be readily marketable), and (c) repurchase
agreements maturing in more than seven days, if, as a result, more than 15%
of the fund's net assets (taken at current value) would be invested in
securities described in (a), (b) and (c) above.

(2) Invest less than 80% of its assets (other than assets invested in U.S.
government securities, short-term debt obligations and cash or money market
instruments) in common stocks and other securities of companies in the
health sciences industries, except when Putnam Management believes
alternative strategies are appropriate to protect the fund against a market
decline.

(3) Under normal market conditions, invest less than 65% of its total
assets in securities of (a) companies that derive at least 50% of their
assets, revenues or profits from the pharmaceutical, health care services,
applied research and development and medical equipment and supplies
industries, or (b) companies Putnam Management thinks have the potential
for growth as a result of their particular products, technology, patents or
other market advantages in the health sciences industries. Investments in
(b) will not usually represent more than 15% of the fund's health sciences
investments.

Subject to the approval of the Board of Trustees at its May 2000 meeting,
the policy stated in (2) will be eliminated and the policy stated in (3)
will be changed to:

"Under normal market conditions, invest less than 65% of its total assets
in securities of companies that derive at least 50% of their assets,
revenues or profits from the pharmaceutical, health care services, applied
research and development and medical equipment and supplies industries."

---------------------------------

All percentage limitations on investments (other than pursuant to the
non-fundamental restriction) will apply at the time of the making of an
investment and shall not be considered violated unless an excess or
deficiency occurs or exists immediately after and as a result of such
investment.

------------------

CHARGES AND EXPENSES

Management fees

Under a Management Contract dated October 20, 1996, the fund pays a
quarterly fee to Putnam Management based on the average net assets of the
fund, as determined at the close of each business day during the quarter,
at the annual rate of 0.70% of the first $500 million of average net
assets, 0.60% of the next $500 million, 0.55% of the next $500 million,
0.50% of the next $5 billion, 0.475% of the next $5 billion, 0.455% of the
next $5 billion, 0.44% of the next $5 billion and 0.43% of any excess
thereafter. For the past three fiscal years, pursuant to the Management
Contract and a management contract in effect prior to October 20, 1996,
under which the management fee payable to Putnam Management was paid at the
rate of 0.70% of the first $500 million of average net assets, 0.60% of the
next $500 million, 0.55% of the next $500 million and 0.50% of any amount
over $1.5 billion, the fund incurred the following fees:

Fiscal Management

year fee paid

1999 $25,715,677
1998 $17,688,445
1997 $10,970,406

Brokerage commissions

The following table shows brokerage commissions paid during the fiscal
periods indicated:

Fiscal Brokerage
year commissions

1999 $7,239,452
1998 $2,540,274

1997 $1,264,384

The following table shows transactions placed with brokers and dealers
during the most recent fiscal year to recognize research, statistical and
quotation services received by Putnam Management and its affiliates:

Dollar value Percent of
of these total Amount of
transactions transactions commissions

$2,958,355,753 45.85% $3,598,234

Administrative expense reimbursement

The fund reimbursed Putnam Management for administrative services during
fiscal 1999, including compensation of certain fund officers and
contributions to the Putnam Investments, Inc. Profit Sharing Retirement
Plan for their benefit, as follows:

Portion of total
reimbursement for
Total compensation and
reimbursement contributions

$35,765 $29,231

Trustee responsibilities and fees

The Trustees are responsible for generally overseeing the conduct of fund
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.

Each Trustee receives a fee for his or her services. Each Trustee also
receives fees for serving as Trustee of other Putnam funds. The Trustees
periodically review their fees to assure that such fees continue to be
appropriate in light of their responsibilities as well as in relation to
fees paid to trustees of other mutual fund complexes. The Trustees meet
monthly over a two-day period, except in August. The Board Policy
Committee, which consists solely of Trustees not affiliated with Putnam
Management and is responsible for recommending Trustee compensation,
estimates that Committee and Trustee meeting time together with the
appropriate preparation requires the equivalent of at least three business
days per Trustee meeting. The following table shows the year each Trustee
was first elected a Trustee of the Putnam funds, the fees paid to each
Trustee by the fund for fiscal 1999 and the fees paid to each Trustee by
all of the Putnam funds during calendar year 1998:

COMPENSATION TABLE

Pension or Estimated Total
Aggregate retirement annual benefits compensation
compensation benefits accrued from all Putnam from all
from the as part of funds upon Putnam
Trustees/Year fund(1) fund expenses retirement(2) funds(3)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Jameson A. Baxter/1994(4) $4,018 $830 $95,000 $207,000
Hans H. Estin/1972 3,989 1,870 95,000 182,500
John A. Hill/1985(4)(5) 5,034 876 115,000 200,500
Ronald J. Jackson/1996(4) 4,071 800 95,000 200,500
Paul L. Joskow/1997(4) 3,989 235 95,000 180,500
Elizabeth T. Kennan/1992 3,989 1,124 95,000 200,500
Lawrence J. Lasser/1992 3,989 854 95,000 178,500
John H. Mullin, III/1997(4) 4,135 353 95,000 180,500
Robert E. Patterson/1984 4,002 609 95,000 182,500
William F. Pounds/1971(5) 4,854 2,087 115,000 215,000
George Putnam/1957 3,989 1,964 95,000 179,500
George Putnam, III/1984 3,989 410 95,000 181,500
A.J.C. Smith/1986 3,970 1,316 95,000 176,500
W. Thomas Stephens/1997(4) 3,922 330 95,000 181,500
W. Nicholas Thorndike/1992 3,989 1,584 95,000 182,500

</TABLE>

(1) Includes an annual retainer and an attendance fee for each meeting
attended.

(2) Assumes that each Trustee retires at the normal retirement date.
Estimated benefits for each Trustee are based on Trustee fee rates in
effect during calendar 1998.

(3) As of December 31, 1998, there were 113 funds in the Putnam family.

(4) Includes compensation deferred pursuant to a Trustee Compensation
Deferral Plan. The total amounts of deferred compensation payable by the
fund to Ms. Baxter and Messrs. Hill, Jackson, Joskow, Mullin and Stephens
as of August 31, 1999 were $5,713, $17,185, $12,002, $6,112, $6,335 and
$7,090, respectively, including income earned on such amounts.

(5) Includes additional compensation for service as Vice Chairman of the
Putnam funds.

Under a Retirement Plan for Trustees of the Putnam funds (the "Plan"), each
Trustee who retires with at least five years of service as a Trustee of the
funds is entitled to receive an annual retirement benefit equal to one-half
of the average annual compensation paid to such Trustee for the last three
years of service prior to retirement. This retirement benefit is payable
during a Trustee's lifetime, beginning the year following retirement, for a
number of years equal to such Trustee's years of service. A death benefit,
also available under the Plan , assures that the Trustee and his or her
beneficiaries will receive benefit payments for the lesser of an aggregate
period of (i) ten years or (ii) such Trustee's total years of service.

The Plan Administrator (a committee comprised of Trustees that are not
"interested persons" of the fund, as defined in the Investment Company Act
of 1940) may terminate or amend the Plan at any time, but no termination or
amendment will result in a reduction in the amount of benefits (i)
currently being paid to a Trustee at the time of such termination or
amendment, or (ii) to which a current Trustee would have been entitled had
he or she retired immediately prior to such termination or amendment.

For additional information concerning the Trustees, see "Management" in
Part II of this SAI.

Share ownership

At November 30, 1999, the officers and Trustees of the fund as a group
owned less than 1% of the outstanding shares of each class of the fund,
and, except as noted below, to the knowledge of the fund, no person owned
of record or beneficially 5% or more of any class of shares of the fund.

Shareholder name Percentage
Class and address owned

A Merrill Lynch 10.10%
4800 Deer Lake Drive E
Jacksonville, FL 32246

B Merrill Lynch 13.70%
4800 Deer Lake Drive E
Jacksonville, FL 32246

C Merrill Lynch 23.20%
4800 Deer Lake Drive E
Jacksonville, FL 32246

M Merrill Lynch 7.80%
4800 Deer Lake Drive E
Jacksonville, FL 32246

M Edward D. Jones & Co. 5.60%
201 Progress Pkwy.
Maryland Heights, MO 63043-3003

Distribution fees

During fiscal 1999, the fund paid the following 12b-1 fees to Putnam
Mutual Funds:

Class A Class B Class C Class M

$6,977,931 $19,358,622 $1,858 $630,454

Class A sales charges and contingent deferred sales charges

Putnam Mutual Funds received sales charges with respect to class A shares
in the following amounts during the periods indicated:

Sales charges
retained by Putnam Contingent
Total Mutual Funds deferred
front-end after sales
Fiscal year sales charges dealer concessions charges

1999 $22,146,125 $3,320,429 $42,156
1998 $20,324,928 $3,062,273 $20,235
1997 $ 5,647,422 $ 862,756 $ 4,102

Class B contingent deferred sales charges

Putnam Mutual Funds received contingent deferred sales charges upon
redemptions of class B shares in the following amounts during the periods
indicated:

Contingent deferred
Fiscal year sales charges

1999 $4,397,043
1998 $1,095,991
1997 $ 611,861

Class C contingent deferred sales charges

Putnam Mutual Funds received contingent deferred sales charges upon
redemptions of class C shares in the following amount during the period
indicated:

Contingent deferred
Fiscal year sales charges

1999 $49

Class M sales charges

Putnam Mutual Funds received sales charges with respect to class M shares
in the following amounts during the periods indicated:

Sales charges
retained by Putnam
Mutual Funds
Total after
Fiscal year sales charges dealer concessions

1999 $1,026,835 $161,892
1998 $ 977,798 $155,442
1997 $ 211,101 $ 33,622

Investor servicing and custody fees and expenses

During the 1999 fiscal year, the fund incurred $5,051,256 in fees and
out-of-pocket expenses for investor servicing and custody services provided
by Putnam Fiduciary Trust Company.

INVESTMENT PERFORMANCE

Standard performance measures

(for periods ended August 31, 1999)

Class A Class B Class C Class M
Inception Date: 05/28/82 03/01/93 7/26/99 07/03/95

Average annual total return

1 year 13.57% 14.61% 18.63% 15.73%
5 years 20.15% 20.48% 20.68% 20.12%
10 years 16.66% 16.44% 16.47% 16.33%

Returns for class A and class M shares reflect the deduction of the current
maximum initial sales charges of 5.75% for class A shares and 3.50% for
class M shares.

Returns for class B and class C shares reflect the deduction of the
applicable contingent deferred sales charge ("CDSC"), which for class B is
5% in the first year, declining to 1% in the sixth year, and eliminated
thereafter, and for class C is 1% in the first year and eliminated
thereafter.

Returns shown for class B, class C and class M shares for periods prior to
their inception are derived from the historical performance of class A
shares, adjusted to reflect both the deduction of the initial sales charge
or CDSC, if any, currently applicable to each class and, in the case of
class B, class C and class M shares, the higher operating expenses
applicable to such shares.

Returns shown for class A shares have not been adjusted to reflect payments
under the class A distribution plan prior to its implementation. All
returns assume reinvestment of distributions at net asset value and
represent past performance; they do not guarantee future results.
Investment return and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.

See "Standard Performance Measures" in Part II of this SAI for information
on how performance is calculated.

ADDITIONAL OFFICERS

In addition to the persons listed as fund officers in Part II of this SAI,
each of the following persons is also a Vice President of the fund and
certain of the other Putnam funds, the total number of which is noted
parenthetically. Officers of Putnam Management hold the same offices in
Putnam Management's parent company, Putnam Investments, Inc.

Officer Name (Age) (Number of funds)

David G. Carlson (38) (2 funds), Senior Vice President of Putnam
Management.

C. Beth Cotner (47) (3 funds), Managing Director of Putnam Management.

Richard B. England (41) (4 funds), Senior Vice President of Putnam
Management.

John J. Morgan, Jr. (59) (28 funds), Managing Director of Putnam
Management.

Margery C. Parker (49) (4 funds), Senior Vice President of Putnam
Management. Prior to December 1997, Ms. Parker was a Vice President and
Portfolio Manager at Keystone Investments.

INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS

PricewaterhouseCoopers LLP, 160 Federal Street, Boston, Massachusetts
02110, are the fund's independent accountants, providing audit services,
tax return review and other tax consulting services and assistance and
consultation in connection with the review of various Securities and
Exchange Commission filings. The Report of Independent Accountants,
financial highlights and financial statements included in the fund's Annual
Report for the fiscal year ended August 31, 1999, filed electronically on
October 14, 1999 (File No. 811- 3386), are incorporated by reference into
this SAI. The financial highlights included in the prospectus and
incorporated by reference into this SAI and the financial statements
incorporated by reference into the prospectus and this SAI have been so
included and incorporated in reliance upon the report of the independent
accountants, given on their authority as experts in auditing and
accounting.

II-102
Oct/28/99

TABLE OF CONTENTS

MISCELLANEOUS INVESTMENTS, INVESTMENT PRACTICES AND RISKS II-1

TAXES.. II-25

MANAGEMENT II-28

DETERMINATION OF NET ASSET VALUE II-36

HOW TO BUY SHARES II-37

DISTRIBUTION PLANS II-47

INVESTOR SERVICES II-51

SIGNATURE GUARANTEES II-55

SUSPENSION OF REDEMPTIONS II-55

SHAREHOLDER LIABILITY II-56

STANDARD PERFORMANCE MEASURES II-56

COMPARISON OF PORTFOLIO PERFORMANCE II-57

SECURITIES RATINGS II-60

DEFINITIONS II-65

THE PUTNAM FUNDS
STATEMENT OF ADDITIONAL INFORMATION ("SAI")
PART II

As noted in the prospectus, in addition to the principal
investment strategies and the principal risks described in the
prospectus, the fund may employ other investment practices and
may be subject to other risks, which are described below.
Because the following is a combined description of investment
strategies of all of the Putnam funds, certain matters described
herein may not apply to your fund. Unless a strategy or policy
described below is specifically prohibited by the investment
restrictions explained in a fund's prospectus or part I of this
SAI, or by applicable law, the fund may engage in each of the
practices described below. Shareholders who purchase shares at
net asset value through employer-sponsored defined contribution
plans should also consult their employer for information about
the extent to which the matters described below apply to them.

MISCELLANEOUS INVESTMENTS, INVESTMENT PRACTICES AND RISKS

FOREIGN INVESTMENTS

The fund may invest in securities of foreign issuers. These
foreign investments involve certain special risks described
below.

Foreign securities are normally denominated and traded in foreign
currencies. As a result, the value of the fund's foreign
investments and the value of its shares may be affected favorably
or unfavorably by changes in currency exchange rates relative to
the U.S. dollar. There may be less information publicly
available about a foreign issuer than about a U.S. issuer, and
foreign issuers are not generally subject to accounting, auditing
and financial reporting standards and practices comparable to
those in the United States. The securities of some foreign
issuers are less liquid and at times more volatile than
securities of comparable U.S. issuers. Foreign brokerage
commissions and other fees are also generally higher than in the
United States. Foreign settlement procedures and trade
regulations may involve certain risks (such as delay in payment
or delivery of securities or in the recovery of the fund's assets
held abroad) and expenses not present in the settlement of
investments in U.S. markets.

In addition, the fund's investments in foreign securities may be
subject to the risk of nationalization or expropriation of
assets, imposition of currency exchange controls, foreign
withholding taxes or restrictions on the repatriation of foreign
currency, confiscatory taxation, political or financial
instability and diplomatic developments which could affect the
value of the fund's investments in certain foreign countries.
Dividends or interest on, or proceeds from the sale of, foreign
securities may be subject to foreign withholding taxes, and
special U.S. tax considerations may apply.

Legal remedies available to investors in certain foreign
countries may be more limited than those available with respect
to investments in the United States or in other foreign
countries. The laws of some foreign countries may limit the
fund's ability to invest in securities of certain issuers
organized under the laws of those foreign countries.

The risks described above, including the risks of nationalization
or expropriation of assets, are typically increased in connection
with investments in "emerging markets." For example, political
and economic structures in these countries may be in their
infancy and developing rapidly, and such countries may lack the
social, political and economic stability characteristic of more
developed countries. Certain of these countries have in the past
failed to recognize private property rights and have at times
nationalized and expropriated the assets of private companies.
High rates of inflation or currency devaluations may adversely
affect the economies and securities markets of such countries.
Investments in emerging markets may be considered speculative.

The currencies of certain emerging market countries have
experienced a steady devaluation relative to the U.S. dollar, and
continued devaluations may adversely affect the value of a fund's
assets denominated in such currencies. Many emerging market
companies have experienced substantial, and in some periods
extremely high, rates of inflation or deflation for many years,
and continued inflation may adversely affect the economies and
securities markets of such countries.

In addition, unanticipated political or social developments may
affect the value of the fund's investments in emerging markets
and the availability to the fund of additional investments in
these markets. The small size, limited trading volume and
relative inexperience of the securities markets in these
countries may make the fund's investments in securities traded in
emerging markets illiquid and more volatile than investments in
securities traded in more developed countries, and the fund may
be required to establish special custodial or other arrangements
before making investments in securities traded in emerging
markets. There may be little financial or accounting information
available with respect to issuers of emerging market securities,
and it may be difficult as a result to assess the value of
prospects of an investment in such securities.

Certain of the foregoing risks may also apply to some extent to
securities of U.S. issuers that are denominated in foreign
currencies or that are traded in foreign markets, or securities
of U.S. issuers having significant foreign operations.

FOREIGN CURRENCY TRANSACTIONS

The fund may engage without limit in currency exchange
transactions, including purchasing and selling foreign currency,
foreign currency options, foreign currency forward contracts and
foreign currency futures contracts and related options, to manage
its exposure to foreign currencies. In addition, the fund may
write covered call and put options on foreign currencies for the
purpose of increasing its current return.

Generally, the fund may engage in both "transaction hedging" and
"position hedging." The fund may also engage in foreign currency
transactions for non-hedging purposes, subject to applicable law.
When it engages in transaction hedging, the fund enters into
foreign currency transactions with respect to specific
receivables or payables, generally arising in connection with the
purchase or sale of portfolio securities. The fund will engage
in transaction hedging when it desires to "lock in" the U.S.
dollar price of a security it has agreed to purchase or sell, or
the U.S. dollar equivalent of a dividend or interest payment in a
foreign currency. By transaction hedging the fund will attempt
to protect itself against a possible loss resulting from an
adverse change in the relationship between the U.S. dollar and
the applicable foreign currency during the period between the
date on which the security is purchased or sold, or on which the
dividend or interest payment is earned, and the date on which
such payments are made or received.

The fund may purchase or sell a foreign currency on a spot (or
cash) basis at the prevailing spot rate in connection with the
settlement of transactions in portfolio securities denominated in
that foreign currency. If conditions warrant, for transaction
hedging purposes the fund may also enter into contracts to
purchase or sell foreign currencies at a future date ("forward
contracts") and purchase and sell foreign currency futures
contracts. A foreign currency forward contract is a negotiated
agreement to exchange currency at a future time at a rate or
rates that may be higher or lower than the spot rate. Foreign
currency futures contracts are standardized exchange-traded
contracts and have margin requirements. In addition, for
transaction hedging purposes the fund may also purchase or sell
exchange-listed and over-the-counter call and put options on
foreign currency futures contracts and on foreign currencies.
The fund may also enter into contracts to purchase or sell
foreign currencies at a future date ("forward contracts") and
purchase and sell foreign currency futures contracts.

For transaction hedging purposes the fund may also purchase
exchange-listed and over-the-counter call and put options on
foreign currency futures contracts and on foreign currencies. A
put option on a futures contract gives the fund the right to
assume a short position in the futures contract until the
expiration of the option. A put option on a currency gives the
fund the right to sell the currency at an exercise price until
the expiration of the option. A call option on a futures
contract gives the fund the right to assume a long position in
the futures contract until the expiration of the option. A call
option on a currency gives the fund the right to purchase the
currency at the exercise price until the expiration of the
option.

The fund may engage in position hedging to protect against a
decline in the value relative to the U.S. dollar of the
currencies in which its portfolio securities are denominated or
quoted (or an increase in the value of the currency in which the
securities the fund intends to buy are denominated, when the fund
holds cash or short-term investments). For position hedging
purposes, the fund may purchase or sell, on exchanges or in over-
the-counter markets, foreign currency futures contracts, foreign
currency forward contracts and options on foreign currency
futures contracts and on foreign currencies. In connection with
position hedging, the fund may also purchase or sell foreign
currency on a spot basis.

It is impossible to forecast with precision the market value of
portfolio securities at the expiration or maturity of a forward
or futures contract. Accordingly, it may be necessary for the
fund to purchase additional foreign currency on the spot market
(and bear the expense of such purchase) if the market value of
the security or securities being hedged is less than the amount
of foreign currency the fund is obligated to deliver and a
decision is made to sell the security or securities and make
delivery of the foreign currency. Conversely, it may be
necessary to sell on the spot market some of the foreign currency
received upon the sale of the portfolio security or securities if
the market value of such security or securities exceeds the
amount of foreign currency the fund is obligated to deliver.

Transaction and position hedging do not eliminate fluctuations in
the underlying prices of the securities which the fund owns or
intends to purchase or sell. They simply establish a rate of
exchange which one can achieve at some future point in time.
Additionally, although these techniques tend to minimize the risk
of loss due to a decline in the value of the hedged currency,
they tend to limit any potential gain which might result from the
increase in value of such currency. See "Risk factors in options
transactions."

The fund may seek to increase its current return or to offset
some of the costs of hedging against fluctuations in current
exchange rates by writing covered call options and covered put
options on foreign currencies. The fund receives a premium from
writing a call or put option, which increases the fund's current
return if the option expires unexercised or is closed out at a
net profit. The fund may terminate an option that it has written
prior to its expiration by entering into a closing purchase
transaction in which it purchases an option having the same terms
as the option written.

The fund's currency hedging transactions may call for the
delivery of one foreign currency in exchange for another foreign
currency and may at times not involve currencies in which its
portfolio securities are then denominated. Putnam Management
will engage in such "cross hedging" activities when it believes
that such transactions provide significant hedging opportunities
for the fund. Cross hedging transactions by the fund involve the
risk of imperfect correlation between changes in the values of
the currencies to which such transactions relate and changes in
the value of the currency or other asset or liability which is
the subject of the hedge.

The fund may also engage in non-hedging currency transactions.
For example, Putnam Management may believe that exposure to a
currency is in the fund's best interest but that securities
denominated in that currency are unattractive. In that case the
fund may purchase a currency forward contract or option in order
to increase its exposure to the currency. In accordance with SEC
regulations, the fund will segregate liquid assets in its
portfolio to cover forward contracts used for non-hedging
purposes.

The value of any currency, including U.S. dollars and foreign
currencies, may be affected by complex political and economic
factors applicable to the issuing country. In addition, the
exchange rates of foreign currencies (and therefore the values of
foreign currency options, forward contracts and futures
contracts) may be affected significantly, fixed, or supported
directly or indirectly by U.S. and foreign government actions.
Government intervention may increase risks involved in purchasing
or selling foreign currency options, forward contracts and
futures contracts, since exchange rates may not be free to
fluctuate in response to other market forces.

The value of a foreign currency option, forward contract or
futures contract reflects the value of an exchange rate, which in
turn reflects relative values of two currencies, the U.S. dollar
and the foreign currency in question. Because foreign currency
transactions occurring in the interbank market involve
substantially larger amounts than those that may be involved in
the exercise of foreign currency options, forward contracts and
futures contracts, investors may be disadvantaged by having to
deal in an odd-lot market for the underlying foreign currencies
in connection with options at prices that are less favorable than
for round lots. Foreign governmental restrictions or taxes could
result in adverse changes in the cost of acquiring or disposing
of foreign currencies.

There is no systematic reporting of last sale information for
foreign currencies and there is no regulatory requirement that
quotations available through dealers or other market sources be
firm or revised on a timely basis. Available quotation
information is generally representative of very large round-lot
transactions in the interbank market and thus may not reflect
exchange rates for smaller odd-lot transactions (less than $1
million) where rates may be less favorable. The interbank market
in foreign currencies is a global, around-the-clock market. To
the extent that options markets are closed while the markets for
the underlying currencies remain open, significant price and rate
movements may take place in the underlying markets that cannot be
reflected in the options markets.

The decision as to whether and to what extent the fund will
engage in foreign currency exchange transactions will depend on a
number of factors, including prevailing market conditions, the
composition of the fund's portfolio and the availability of
suitable transactions. Accordingly, there can be no assurance
that the fund will engage in foreign currency exchange
transactions at any given time or from time to time.

CURRENCY FORWARD AND FUTURES CONTRACTS. A forward foreign
currency contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number
of days from the date of the contract as agreed by the parties,
at a price set at the time of the contract. In the case of a
cancelable forward contract, the holder has the unilateral right
to cancel the contract at maturity by paying a specified fee.
The contracts are traded in the interbank market conducted
directly between currency traders (usually large commercial
banks) and their customers. A forward contract generally has no
deposit requirement, and no commissions are charged at any stage
for trades. A foreign currency futures contract is a
standardized contract for the future delivery of a specified
amount of a foreign currency at a price set at the time of the
contract. Foreign currency futures contracts traded in the
United States are designed by and traded on exchanges regulated
by the CFTC, such as the New York Mercantile Exchange.

Forward foreign currency exchange contracts differ from foreign
currency futures contracts in certain respects. For example, the
maturity date of a forward contract may be any fixed number of
days from the date of the contract agreed upon by the parties,
rather than a predetermined date in a given month. Forward
contracts may be in any amount agreed upon by the parties rather
than predetermined amounts. Also, forward foreign exchange
contracts are traded directly between currency traders so that no
intermediary is required. A forward contract generally requires
no margin or other deposit.

At the maturity of a forward or futures contract, the fund either
may accept or make delivery of the currency specified in the
contract, or at or prior to maturity enter into a closing
transaction involving the purchase or sale of an offsetting
contract. Closing transactions with respect to forward contracts
are usually effected with the currency trader who is a party to
the original forward contract. Closing transactions with respect
to futures contracts are effected on a commodities exchange; a
clearing corporation associated with the exchange assumes
responsibility for closing out such contracts.

Positions in the foreign currency futures contracts may be closed
out only on an exchange or board of trade which provides a
secondary market in such contracts. Although the fund intends to
purchase or sell foreign currency futures contracts only on
exchanges or boards of trade where there appears to be an active
secondary market, there is no assurance that a secondary market
on an exchange or board of trade will exist for any particular
contract or at any particular time. In such event, it may not be
possible to close a futures position and, in the event of adverse
price movements, the fund would continue to be required to make
daily cash payments of variation margin.

FOREIGN CURRENCY OPTIONS. In general, options on foreign
currencies operate similarly to options on securities and are
subject to many of the risks described above. Foreign currency
options are traded primarily in the over-the-counter market,
although options on foreign currencies are also listed on several
exchanges. Options are traded not only on the currencies of
individual nations, but also on the euro, the joint currency of
most countries in the European Union.

The fund will only purchase or write foreign currency options
when Putnam Management believes that a liquid secondary market
exists for such options. There can be no assurance that a liquid
secondary market will exist for a particular option at any
specific time. Options on foreign currencies are affected by all
of those factors which influence foreign exchange rates and
investments generally.

SETTLEMENT PROCEDURES. Settlement procedures relating to the
fund's investments in foreign securities and to the fund's
foreign currency exchange transactions may be more complex than
settlements with respect to investments in debt or equity
securities of U.S. issuers, and may involve certain risks not
present in the fund's domestic investments. For example,
settlement of transactions involving foreign securities or
foreign currencies may occur within a foreign country, and the
fund may be required to accept or make delivery of the underlying
securities or currency in conformity with any applicable U.S. or
foreign restrictions or regulations, and may be required to pay
any fees, taxes or charges associated with such delivery. Such
investments may also involve the risk that an entity involved in
the settlement may not meet its obligations.

FOREIGN CURRENCY CONVERSION. Although foreign exchange dealers
do not charge a fee for currency conversion, they do realize a
profit based on the difference (the "spread") between prices at
which they are buying and selling various currencies. Thus, a
dealer may offer to sell a foreign currency to the fund at one
rate, while offering a lesser rate of exchange should the fund
desire to resell that currency to the dealer.

OPTIONS ON SECURITIES

WRITING COVERED OPTIONS. The fund may write covered call options
and covered put options on optionable securities held in its
portfolio, when in the opinion of Putnam Management such
transactions are consistent with the fund's investment
objective(s) and policies. Call options written by the fund give
the purchaser the right to buy the underlying securities from the
fund at a stated exercise price; put options give the purchaser
the right to sell the underlying securities to the fund at a
stated price.

The fund may write only covered options, which means that, so
long as the fund is obligated as the writer of a call option, it
will own the underlying securities subject to the option (or
comparable securities satisfying the cover requirements of
securities exchanges). In the case of put options, the fund will
hold cash and/or high-grade short-term debt obligations equal to
the price to be paid if the option is exercised. In addition,
the fund will be considered to have covered a put or call option
if and to the extent that it holds an option that offsets some or
all of the risk of the option it has written. The fund may write
combinations of covered puts and calls on the same underlying
security.

The fund will receive a premium from writing a put or call
option, which increases the fund's return on the underlying
security in the event the option expires unexercised or is closed
out at a profit. The amount of the premium reflects, among other
things, the relationship between the exercise price and the
current market value of the underlying security, the volatility
of the underlying security, the amount of time remaining until
expiration, current interest rates, and the effect of supply and
demand in the options market and in the market for the underlying
security. By writing a call option, the fund limits its
opportunity to profit from any increase in the market value of
the underlying security above the exercise price of the option
but continues to bear the risk of a decline in the value of the
underlying security. By writing a put option, the fund assumes
the risk that it may be required to purchase the underlying
security for an exercise price higher than its then-current
market value, resulting in a potential capital loss unless the
security subsequently appreciates in value.

The fund may terminate an option that it has written prior to its
expiration by entering into a closing purchase transaction, in
which it purchases an offsetting option. The fund realizes a
profit or loss from a closing transaction if the cost of the
transaction (option premium plus transaction costs) is less or
more than the premium received from writing the option. If the
fund writes a call option but does not own the underlying
security, and when it writes a put option, the fund may be
required to deposit cash or securities with its broker as
"margin," or collateral, for its obligation to buy or sell the
underlying security. As the value of the underlying security
varies, the fund may have to deposit additional margin with the
broker. Margin requirements are complex and are fixed by
individual brokers, subject to minimum requirements currently
imposed by the Federal Reserve Board and by stock exchanges and
other self-regulatory organizations.

PURCHASING PUT OPTIONS. The fund may purchase put options to
protect its portfolio holdings in an underlying security against
a decline in market value. Such protection is provided during
the life of the put option since the fund, as holder of the
option, is able to sell the underlying security at the put
exercise price regardless of any decline in the underlying
security's market price. In order for a put option to be
profitable, the market price of the underlying security must
decline sufficiently below the exercise price to cover the
premium and transaction costs. By using put options in this
manner, the fund will reduce any profit it might otherwise have
realized from appreciation of the underlying security by the
premium paid for the put option and by transaction costs.

PURCHASING CALL OPTIONS. The fund may purchase call options to
hedge against an increase in the price of securities that the
fund wants ultimately to buy. Such hedge protection is provided
during the life of the call option since the fund, as holder of
the call option, is able to buy the underlying security at the
exercise price regardless of any increase in the underlying
security's market price. In order for a call option to be
profitable, the market price of the underlying security must rise
sufficiently above the exercise price to cover the premium and
transaction costs.

RISK FACTORS IN OPTIONS TRANSACTIONS

The successful use of the fund's options strategies depends on
the ability of Putnam Management to forecast correctly interest
rate and market movements. For example, if the fund were to
write a call option based on Putnam Management's expectation that
the price of the underlying security would fall, but the price
were to rise instead, the fund could be required to sell the
security upon exercise at a price below the current market price.
Similarly, if the fund were to write a put option based on Putnam
Management's expectation that the price of the underlying
security would rise, but the price were to fall instead, the fund
could be required to purchase the security upon exercise at a
price higher than the current market price.

When the fund purchases an option, it runs the risk that it will
lose its entire investment in the option in a relatively short
period of time, unless the fund exercises the option or enters
into a closing sale transaction before the option's expiration.
If the price of the underlying security does not rise (in the
case of a call) or fall (in the case of a put) to an extent
sufficient to cover the option premium and transaction costs, the
fund will lose part or all of its investment in the option. This
contrasts with an investment by the fund in the underlying
security, since the fund will not realize a loss if the
security's price does not change.

The effective use of options also depends on the fund's ability
to terminate option positions at times when Putnam Management
deems it desirable to do so. There is no assurance that the fund
will be able to effect closing transactions at any particular
time or at an acceptable price.

If a secondary market in options were to become unavailable, the
fund could no longer engage in closing transactions. Lack of
investor interest might adversely affect the liquidity of the
market for particular options or series of options. A market may
discontinue trading of a particular option or options generally.
In addition, a market could become temporarily unavailable if
unusual events -- such as volume in excess of trading or clearing
capability -- were to interrupt its normal operations.

A market may at times find it necessary to impose restrictions on
particular types of options transactions, such as opening
transactions. For example, if an underlying security ceases to
meet qualifications imposed by the market or the Options Clearing
Corporation, new series of options on that security will no
longer be opened to replace expiring series, and opening
transactions in existing series may be prohibited. If an options
market were to become unavailable, the fund as a holder of an
option would be able to realize profits or limit losses only by
exercising the option, and the fund, as option writer, would
remain obligated under the option until expiration or exercise.

Disruptions in the markets for the securities underlying options
purchased or sold by the fund could result in losses on the
options. If trading is interrupted in an underlying security,
the trading of options on that security is normally halted as
well. As a result, the fund as purchaser or writer of an option
will be unable to close out its positions until options trading
resumes, and it may be faced with considerable losses if trading
in the security reopens at a substantially different price. In
addition, the Options Clearing Corporation or other options
markets may impose exercise restrictions. If a prohibition on
exercise is imposed at the time when trading in the option has
also been halted, the fund as purchaser or writer of an option
will be locked into its position until one of the two
restrictions has been lifted. If the Options Clearing
Corporation were to determine that the available supply of an
underlying security appears insufficient to permit delivery by
the writers of all outstanding calls in the event of exercise, it
may prohibit indefinitely the exercise of put options. The fund,
as holder of such a put option, could lose its entire investment
if the prohibition remained in effect until the put option's
expiration.

Foreign-traded options are subject to many of the same risks
presented by internationally-traded securities. In addition,
because of time differences between the United States and various
foreign countries, and because different holidays are observed in
different countries, foreign options markets may be open for
trading during hours or on days when U.S. markets are closed. As
a result, option premiums may not reflect the current prices of
the underlying interest in the United States.

Over-the-counter ("OTC") options purchased by the fund and assets
held to cover OTC options written by the fund may, under certain
circumstances, be considered illiquid securities for purposes of
any limitation on the fund's ability to invest in illiquid
securities.

INVESTMENTS IN MISCELLANEOUS FIXED-INCOME SECURITIES

If the fund may invest in inverse floating obligations, premium
securities, or interest-only or principal-only classes of
mortgage-backed securities (IOs and POs), it may do so without
limit. The fund, however, currently does not intend to invest
more than 15% of its assets in inverse floating obligations or
more than 35% of its assets in IOs and POs under normal market
conditions.

LOWER-RATED SECURITIES

The fund may invest in lower-rated fixed-income securities
(commonly known as "junk bonds"). The lower ratings of certain
securities held by the fund reflect a greater possibility that
adverse changes in the financial condition of the issuer or in
general economic conditions, or both, or an unanticipated rise in
interest rates, may impair the ability of the issuer to make
payments of interest and principal. The inability (or perceived
inability) of issuers to make timely payment of interest and
principal would likely make the values of securities held by the
fund more volatile and could limit the fund's ability to sell its
securities at prices approximating the values the fund had placed
on such securities. In the absence of a liquid trading market
for securities held by it, the fund at times may be unable to
establish the fair value of such securities.

Securities ratings are based largely on the issuer's historical
financial condition and the rating agencies' analysis at the time
of rating. Consequently, the rating assigned to any particular
security is not necessarily a reflection of the issuer's current
financial condition, which may be better or worse than the rating
would indicate. In addition, the rating assigned to a security
by Moody's Investors Service, Inc. or Standard & Poor's (or by
any other nationally recognized securities rating agency) does
not reflect an assessment of the volatility of the security's
market value or the liquidity of an investment in the security.
See "Securities ratings."

Like those of other fixed-income securities, the values of lower-
rated securities fluctuate in response to changes in interest
rates. A decrease in interest rates will generally result in an
increase in the value of the fund's assets. Conversely, during
periods of rising interest rates, the value of the fund's assets
will generally decline. The values of lower-rated securities may
often be affected to a greater extent by changes in general
economic conditions and business conditions affecting the issuers
of such securities and their industries. Negative publicity or
investor perceptions may also adversely affect the values of
lower-rated securities. Changes by nationally recognized
securities rating agencies in their ratings of any fixed-income
security and changes in the ability of an issuer to make payments
of interest and principal may also affect the value of these
investments. Changes in the value of portfolio securities
generally will not affect income derived from these 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. However, Putnam
Management will monitor the investment to determine whether its
retention will assist in meeting the fund's investment
objective(s).

Issuers of lower-rated securities are often highly leveraged, so
that their ability to service their debt obligations during an
economic downturn or during sustained periods of rising interest
rates may be impaired. Such issuers may not have more
traditional methods of financing available to them and may be
unable to repay outstanding obligations at maturity by
refinancing. The risk of loss due to default in payment of
interest or repayment of principal by such issuers is
significantly greater because such securities frequently are
unsecured and subordinated to the prior payment of senior
indebtedness.

At times, a substantial portion of the fund's assets may be
invested in securities of which the fund, by itself or together
with other funds and accounts managed by Putnam Management or its
affiliates, holds all or a major portion. Although Putnam
Management generally considers such securities to be liquid
because of the availability of an institutional market for such
securities, it is possible that, under adverse market or economic
conditions or in the event of adverse changes in the financial
condition of the issuer, the fund could find it more difficult to
sell these securities when Putnam Management believes it
advisable to do so or may be able to sell the securities only at
prices lower than if they were more widely held. Under these
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 of such securities, the fund may be required
to participate in various legal proceedings or take possession of
and manage assets securing the issuer's obligations on such
securities. This could increase the fund's operating expenses
and adversely affect the fund's net asset value. In the case of
tax-exempt funds, any income derived from the fund's ownership or
operation of such assets would not be tax-exempt. The ability of
a holder of a tax-exempt security to enforce the terms of that
security in a bankruptcy proceeding may be more limited than
would be the case with respect to securities of private issuers.
In addition, the fund's intention to qualify as a "regulated
investment company" under the Internal Revenue Code may limit the
extent to which the fund may exercise its rights by taking
possession of such assets.

Certain securities held by the fund may permit the issuer at its
option to "call," or redeem, its securities. If an issuer were
to redeem securities held by the fund during a time of declining
interest rates, the fund may not be able to reinvest the proceeds
in securities providing the same investment return as the
securities redeemed.

The fund may invest without limit in so-called "zero-coupon"
bonds and "payment-in-kind" bonds. Zero-coupon bonds are issued
at a significant discount from their principal amount in lieu of
paying interest periodically. Payment-in-kind bonds allow the
issuer, at its option, to make current interest payments on the
bonds either in cash or in additional bonds. Because zero-coupon
and payment-in-kind bonds do not pay current interest in cash,
their value is subject to greater fluctuation in response to
changes in market interest rates than bonds that pay interest
currently. Both zero-coupon and payment-in-kind bonds allow an
issuer to avoid the need to generate cash to meet current
interest payments. Accordingly, such bonds may involve greater
credit risks than bonds paying interest currently in cash. The
fund is required to accrue interest income on such investments
and to distribute such amounts at least annually to shareholders
even though such bonds do not pay current interest in cash.
Thus, it may be necessary at times for the fund to liquidate
investments in order to satisfy its dividend requirements.

To the extent the fund invests in securities in the lower rating
categories, the achievement of the fund's goals is more dependent
on Putnam Management's investment analysis than would be the case
if the fund were investing in securities in the higher rating
categories. This may be particularly true with respect to tax-
exempt securities, as the amount of information about the
financial condition of an issuer of tax-exempt securities may not
be as extensive as that which is made available by corporations
whose securities are publicly traded.

LOAN PARTICIPATIONS

The fund may invest in "loan participations." By purchasing a
loan participation, the fund acquires some or all of the interest
of a bank or other lending institution in a loan to a particular
borrower. Many such loans are secured, and most impose
restrictive covenants which must be met by the borrower.

The loans in which the fund may invest are typically made by a
syndicate of banks, represented by an agent bank which has
negotiated and structured the loan and which is responsible
generally for collecting interest, principal, and other amounts
from the borrower on its own behalf and on behalf of the other
lending institutions in the syndicate and for enforcing its and
their other rights against the borrower. Each of the lending
institutions, including the agent bank, lends to the borrower a
portion of the total amount of the loan, and retains the
corresponding interest in the loan.

The fund's ability to receive payments of principal and interest
and other amounts in connection with loan participations held by
it will depend primarily on the financial condition of the
borrower. The failure by the fund to receive scheduled interest
or principal payments on a loan participation would adversely
affect the income of the fund and would likely reduce the value
of its assets, which would be reflected in a reduction in the
fund's net asset value. Banks and other lending institutions
generally perform a credit analysis of the borrower before
originating a loan or participating in a lending syndicate. In
selecting the loan participations in which the fund will invest,
however, Putnam Management will not rely solely on that credit
analysis, but will perform its own investment analysis of the
borrowers. Putnam Management's analysis may include
consideration of the borrower's financial strength and managerial
experience, debt coverage, additional borrowing requirements or
debt maturity schedules, changing financial conditions, and
responsiveness to changes in business conditions and interest
rates. Because loan participations in which the fund may invest
are not generally rated by independent credit rating agencies, a
decision by the fund to invest in a particular loan participation
will depend almost exclusively on Putnam Management's, and the
original lending institution's, credit analysis of the borrower.

Loan participations may be structured in different forms,
including novations, assignments, and participating interests.
In a novation, the fund assumes all of the rights of a lending
institution in a loan, including the right to receive payments of
principal and interest and other amounts directly from the
borrower and to enforce its rights as a lender directly against
the borrower. The fund assumes the position of a co-lender with
other syndicate members. As an alternative, the fund may
purchase an assignment of a portion of a lender's interest in a
loan. In this case, the fund may be required generally to rely
upon the assigning bank to demand payment and enforce its rights
against the borrower, but would otherwise be entitled to all of
such bank's rights in the loan. The fund may also purchase a
participating interest in a portion of the rights of a lending
institution in a loan. In such case, it will be entitled to
receive payments of principal, interest, and premium, if any, but
will not generally be entitled to enforce its rights directly
against the agent bank or the borrower, but must rely for that
purpose on the lending institution. The fund may also acquire a
loan participation directly by acting as a member of the original
lending syndicate.

The fund will in many cases be required to rely upon the lending
institution from which it purchases the loan participation to
collect and pass on to the fund such payments and to enforce the
fund's rights under the loan. As a result, an insolvency,
bankruptcy, or reorganization of the lending institution may
delay or prevent the fund from receiving principal, interest, and
other amounts with respect to the underlying loan. When the fund
is required to rely upon a lending institution to pay to the fund
principal, interest, and other amounts received by it, Putnam
Management will also evaluate the creditworthiness of the lending
institution.

The borrower of a loan in which the fund holds a participation
interest may, either at its own election or pursuant to terms of
the loan documentation, prepay amounts of the loan from time to
time. There is no assurance that the fund will be able to
reinvest the proceeds of any loan prepayment at the same interest
rate or on the same terms as those of the original loan
participation.

Corporate loans in which the fund may purchase a loan
participation are made generally to finance internal growth,
mergers, acquisitions, stock repurchases, leveraged buy-outs, and
other corporate activities. Under current market conditions,
most of the corporate loan participations purchased by the fund
will represent interests in loans made to finance highly
leveraged corporate acquisitions, known as "leveraged buy-out"
transactions. The highly leveraged capital structure of the
borrowers in such transactions may make such loans especially
vulnerable to adverse changes in economic or market conditions.
In addition, loan participations generally are subject to
restrictions on transfer, and only limited opportunities may
exist to sell such participations in secondary markets. As a
result, the fund may be unable to sell loan participations at a
time when it may otherwise be desirable to do so or may be able
to sell them only at a price that is less than their fair market
value.

Certain of the loan participations acquired by the fund may
involve revolving credit facilities under which a borrower may
from time to time borrow and repay amounts up to the maximum
amount of the facility. In such cases, the fund would have an
obligation to advance its portion of such additional borrowings
upon the terms specified in the loan participation. To the
extent that the fund is committed to make additional loans under
such a participation, it will at all times hold and maintain in a
segregated account liquid assets in an amount sufficient to meet
such commitments. Certain of the loan participations acquired by
the fund may also involve loans made in foreign currencies. The
fund's investment in such participations would involve the risks
of currency fluctuations described above with respect to
investments in the foreign securities.

FLOATING RATE AND VARIABLE RATE DEMAND NOTES

Certain funds may purchase floating rate and variable rate demand
notes and bonds. These securities may have a stated maturity in
excess of one year, but permit a holder to demand payment of
principal plus accrued interest upon a specified number of days
notice. Frequently, such obligations are secured by letters of
credit or other credit support arrangements provided by banks.
The issuer has a corresponding right, after a given period, to
prepay in its discretion the outstanding principal of the
obligation plus accrued interest upon a specific number of days
notice to the holders. The interest rate of a floating rate
instrument may be based on a known lending rate, such as a bank's
prime rate, and is reset whenever such rate is adjusted. The
interest rate on a variable rate demand note is reset at
specified intervals at a market rate.

MORTGAGE RELATED AND ASSET-BACKED SECURITIES

The fund may invest in mortgage-backed securities, including
collateralized mortgage obligations ("CMOs") and certain stripped
mortgage-backed securities. CMOs and other mortgage-backed
securities represent a participation in, or are secured by,
mortgage loans.

The fund may also invest in asset-backed securities. Asset-backed
securities are structured like mortgage-backed securities, but
instead of mortgage loans or interests in mortgage loans, the
underlying assets may include such items as motor vehicle
installment sales or installment loan contracts, leases of
various types of real and personal property, and receivables from
credit card agreements. The ability of an issuer of asset-backed
securities to enforce its security interest in the underlying
assets may be limited.

Mortgage-backed securities have yield and maturity
characteristics corresponding to the underlying assets. Unlike
traditional debt securities, which may pay a fixed rate of
interest until maturity, when the entire principal amount comes
due, payments on certain mortgage-backed securities include both
interest and a partial repayment of principal. Besides the
scheduled repayment of principal, repayments of principal may
result from the voluntary prepayment, refinancing, or foreclosure
of the underlying mortgage loans. If property owners make
unscheduled prepayments of their mortgage loans, these
prepayments will result in early payment of the applicable
mortgage-related securities. In that event the fund may be
unable to invest the proceeds from the early payment of the
mortgage-related securities in an investment that provides as
high a yield as the mortgage-related securities. Consequently,
early payment associated with mortgage-related securities may
cause these securities to experience significantly greater price
and yield volatility than that experienced by traditional fixed-
income securities. The occurrence of mortgage prepayments is
affected by factors including the level of interest rates,
general economic conditions, the location and age of the mortgage
and other social and demographic conditions. During periods of
falling interest rates, the rate of mortgage prepayments tends to
increase, thereby tending to decrease the life of mortgage-
related securities. During periods of rising interest rates, the
rate of mortgage prepayments usually decreases, thereby tending
to increase the life of mortgage-related securities. If the life
of a mortgage-related security is inaccurately predicted, the
fund may not be able to realize the rate of return it expected.

Mortgage-backed and asset-backed securities are less effective
than other types of securities as a means of "locking in"
attractive long-term interest rates. One reason is the need to
reinvest prepayments of principal; another is the possibility of
significant unscheduled prepayments resulting from declines in
interest rates. These prepayments would have to be reinvested at
lower rates. As a result, these securities may have less
potential for capital appreciation during periods of declining
interest rates than other securities of comparable maturities,
although they may have a similar risk of decline in market value
during periods of rising interest rates. Prepayments may also
significantly shorten the effective maturities of these
securities, especially during periods of declining interest
rates. Conversely, during periods of rising interest rates, a
reduction in prepayments may increase the effective maturities of
these securities, subjecting them to a greater risk of decline in
market value in response to rising interest rates than
traditional debt securities, and, therefore, potentially
increasing the volatility of the fund.

Prepayments may cause losses on securities purchased at a
premium. At times, some of the mortgage-backed and asset-backed
securities in which the fund may invest will have higher than
market interest rates and therefore will be purchased at a
premium above their par value. Unscheduled prepayments, which are
made at par, will cause the fund to experience a loss equal to
any unamortized premium.

CMOs may be issued by a U.S. government agency or instrumentality
or by a private issuer. Although payment of the principal of,
and interest on, the underlying collateral securing privately
issued CMOs may be guaranteed by the U.S. government or its
agencies or instrumentalities, these CMOs represent obligations
solely of the private issuer and are not insured or guaranteed by
the U.S. government, its agencies or instrumentalities or any
other person or entity.

Prepayments could cause early retirement of CMOs. CMOs are
designed to reduce the risk of prepayment for investors by
issuing multiple classes of securities, each having different
maturities, interest rates and payment schedules, and with the
principal and interest on the underlying mortgages allocated
among the several classes in various ways. Payment of interest
or principal on some classes or series of CMOs may be subject to
contingencies or some classes or series may bear some or all of
the risk of default on the underlying mortgages. CMOS of
different classes or series are generally retired in sequence as
the underlying mortgage loans in the mortgage pool are repaid.
If enough mortgages are repaid ahead of schedule, the classes or
series of a CMO with the earliest maturities generally will be
retired prior to their maturities. Thus, the early retirement of
particular classes or series of a CMO held by the fund would have
the same effect as the prepayment of mortgages underlying other
mortgage-backed securities. Conversely, slower than anticipated
prepayments can extend the effective maturities of CMOs,
subjecting them to a greater risk of decline in market value in
response to rising interest rates than traditional debt
securities, and, therefore, potentially increasing the volatility
of the fund.

Prepayments could result in losses on stripped mortgage-backed
securities. Stripped mortgage-backed securities are usually
structured with two classes that receive different portions of
the interest and principal distributions on a pool of mortgage
loans. The fund may invest in both the interest-only or "IO"
class and the principal-only or "PO" class. The yield to
maturity on an IO class of stripped mortgage-backed securities is
extremely sensitive not only to changes in prevailing interest
rates but also to the rate of principal payments (including
prepayments) on the underlying assets. A rapid rate of principal
prepayments may have a measurable adverse effect on the fund's
yield to maturity to the extent it invests in IOs. If the assets
underlying the IO experience greater than anticipated prepayments
of principal, the fund may fail to recoup fully its initial
investment in these securities. Conversely, POs tend to increase
in value if prepayments are greater than anticipated and decline
if prepayments are slower than anticipated.

The secondary market for stripped mortgage-backed securities may
be more volatile and less liquid than that for other mortgage-
backed securities, potentially limiting the fund's ability to buy
or sell those securities at any particular time.

STRUCTURED NOTES

A fund may be able to invest in so-called structured notes. These
securities are generally derivative instruments whose value is
tied to an underlying index or other security or asset class.
Such structured notes may include, for example, notes that allow
a fund to invest indirectly in certain foreign investments which
the fund would otherwise would not be able to directly invest
often because of restrictions imposed by local laws.

TAX-EXEMPT SECURITIES

GENERAL DESCRIPTION. As used in this SAI, the term "Tax-exempt
securities" includes debt obligations issued by a state, its
political subdivisions (for example, counties, cities, towns,
villages, districts and authorities) and their agencies,
instrumentalities or other governmental units, the interest from
which is, in the opinion of bond counsel, exempt from federal
income tax and the appropriate state's personal income tax. Such
obligations are issued to obtain funds for various public
purposes, including the construction of a wide range of public
facilities, such as airports, bridges, highways, housing,
hospitals, mass transportation, schools, streets and water and
sewer works. Other public purposes for which Tax-exempt
securities may be issued include the refunding of outstanding
obligations or the payment of general operating expenses.

Short-term Tax-exempt securities are generally issued by state
and local governments and public authorities as interim financing
in anticipation of tax collections, revenue receipts, or bond
sales to finance such public purposes.

In addition, certain types of "private activity" bonds may be
issued by public authorities to finance projects such as
privately operated housing facilities; certain local facilities
for supplying water, gas or electricity; sewage or solid waste
disposal facilities; student loans; or public or private
institutions for the construction of educational, hospital,
housing and other facilities. Such obligations are included
within the term Tax-exempt securities if the interest paid
thereon is, in the opinion of bond counsel, exempt from federal
income tax and state personal income tax (such interest may,
however, be subject to federal alternative minimum tax). Other
types of private activity bonds, the proceeds of which are used
for the construction, repair or improvement of, or to obtain
equipment for, privately operated industrial or commercial
facilities, may also constitute Tax-exempt securities, although
the current federal tax laws place substantial limitations on the
size of such issues.

PARTICIPATION INTERESTS (MONEY MARKET FUNDS ONLY). The Money
Market Fund may invest in Tax-exempt securities either by
purchasing them directly or by purchasing certificates of accrual
or similar instruments evidencing direct ownership of interest
payments or principal payments, or both, on Tax-exempt
securities, provided that, in the opinion of counsel to the
initial seller of each such certificate or instrument, any
discount accruing on a certificate or instrument that is
purchased at a yield not greater than the coupon rate of interest
on the related Tax-exempt securities will be exempt from federal
income tax to the same extent as interest on the Tax-exempt
securities. The Money Market Fund may also invest in Tax-exempt
securities by purchasing from banks participation interests in
all or part of specific holdings of Tax-exempt securities. These
participations may be backed in whole or in part by an
irrevocable letter of credit or guarantee of the selling bank.
The selling bank may receive a fee from the Money Market Fund in
connection with the arrangement. The Money Market Fund will not
purchase such participation interests unless it receives an
opinion of counsel or a ruling of the Internal Revenue Service
that interest earned by it on Tax-exempt securities in which it
holds such participation interests is exempt from federal income
tax. The Money Market Fund does not expect to invest more than
5% of its assets in participation interests.

STAND-BY COMMITMENTS. When the fund purchases Tax-exempt
securities, it has the authority to acquire stand-by commitments
from banks and broker-dealers with respect to those Tax-exempt
securities. A stand-by commitment may be considered a security
independent of the Tax-exempt security to which it relates. The
amount payable by a bank or dealer during the time a stand-by
commitment is exercisable, absent unusual circumstances, would be
substantially the same as the market value of the underlying Tax-
exempt security to a third party at any time. The fund expects
that stand-by commitments generally will be available without the
payment of direct or indirect consideration. The fund does not
expect to assign any value to stand-by commitments.

YIELDS. The yields on Tax-exempt securities depend on a variety
of factors, including general money market conditions, effective
marginal tax rates, the financial condition of the issuer,
general conditions of the Tax-exempt security market, the size of
a particular offering, the maturity of the obligation and the
rating of the issue. The ratings of nationally recognized
securities rating agencies represent their opinions as to the
credit quality of the Tax-exempt securities which they undertake
to rate. It should be emphasized, however, that ratings are
general and are not absolute standards of quality. Consequently,
Tax-exempt securities with the same maturity and interest rate
but with different ratings may have the same yield. Yield
disparities may occur for reasons not directly related to the
investment quality of particular issues or the general movement
of interest rates and may be due to such factors as changes in
the overall demand or supply of various types of Tax-exempt
securities or changes in the investment objectives of investors.
Subsequent to purchase by the fund, an issue of Tax-exempt
securities or other investments may cease to be rated, or its
rating may be reduced below the minimum rating required for
purchase by the fund. Neither event will require the elimination
of an investment from the fund's portfolio, but Putnam Management
will consider such an event in its determination of whether the
fund should continue to hold an investment in its portfolio.

"MORAL OBLIGATION" BONDS. The fund does not currently intend to
invest in so-called "moral obligation" bonds, where repayment is
backed by a moral commitment of an entity other than the issuer,
unless the credit of the issuer itself, without regard to the
"moral obligation," meets the investment criteria established for
investments by the fund.

MUNICIPAL LEASES. The fund may acquire participations in lease
obligations or installment purchase contract obligations
(collectively, "lease obligations") of municipal authorities or
entities. Lease obligations do not constitute general obligations
of the municipality for which the municipality's taxing power is
pledged. Certain of these lease obligations contain "non-
appropriation" clauses, which provide that the municipality has
no obligation to make lease or installment purchase payments in
future years unless money is appropriated for such purpose on a
yearly basis. In addition to the "non-appropriation" risk, these
securities represent a relatively new type of financing that has
not yet developed the depth of marketability associated with more
conventional bonds. In the case of a "non-appropriation" lease,
the fund's ability to recover under the lease in the event of non-
appropriation or default will be limited solely to the
repossession of the leased property, and in any event,
foreclosure of that property might prove difficult.

ADDITIONAL RISKS. Securities in which the fund may invest,
including Tax-exempt securities, are subject to the provisions of
bankruptcy, insolvency and other laws affecting the rights and
remedies of creditors, such as the federal Bankruptcy Code
(including special provisions related to municipalities and other
public entities), and laws, if any, that may be enacted by
Congress or state legislatures extending the time for payment of
principal or interest, or both, or imposing other constraints
upon enforcement of such obligations. There is also the
possibility that, as a result of litigation or other conditions,
the power, ability or willingness of issuers to meet their
obligations for the payment of interest and principal on their
Tax-exempt securities may be materially affected.

From time to time, proposals have been introduced before Congress
for the purpose of restricting or eliminating the federal income
tax exemption for interest on debt obligations issued by states
and their political subdivisions. Federal tax laws limit the
types and amounts of tax-exempt bonds issuable for certain
purposes, especially industrial development bonds and private
activity bonds. Such limits may affect the future supply and
yields of these types of Tax-exempt securities. Further
proposals limiting the issuance of tax-exempt bonds may well be
introduced in the future. If it appeared that the availability
of Tax-exempt securities for investment by the fund and the value
of the fund's portfolio could be materially affected by such
changes in law, the Trustees of the fund would reevaluate its
investment objective and policies and consider changes in the
structure of the fund or its dissolution.

CONVERTIBLE SECURITIES

Convertible securities include bonds, debentures, notes,
preferred stocks and other securities that may be converted into
or exchanged for, at a specific price or formula within a
particular period of time, a prescribed amount of common stock or
other equity securities of the same or a different issuer.
Convertible securities entitle the holder to receive interest
paid or accrued on debt or dividends paid or accrued on preferred
stock until the security matures or is redeemed, converted or
exchanged.

The market value of a convertible security is a function of its
"investment value" and its "conversion value." A security's
"investment value" represents the value of the security without
its conversion feature (i.e., a nonconvertible fixed income
security). The investment value may be determined by reference
to its credit quality and the current value of its yield to
maturity or probable call date. At any given time, investment
value is dependent upon such factors as the general level of
interest rates, the yield of similar nonconvertible securities,
the financial strength of the issuer and the seniority of the
security in the issuer's capital structure. A security's
"conversion value" is determined by multiplying the number of
shares the holder is entitled to receive upon conversion or
exchange by the current price of the underlying security.

If the conversion value of a convertible security is
significantly below its investment value, the convertible
security will trade like nonconvertible debt or preferred stock
and its market value will not be influenced greatly by
fluctuations in the market price of the underlying security.
Conversely, if the conversion value of a convertible security is
near or above its investment value, the market value of the
convertible security will be more heavily influenced by
fluctuations in the market price of the underlying security.

The fund's investments in convertible securities may at times
include securities that have a mandatory conversion feature,
pursuant to which the securities convert automatically into
common stock or other equity securities at a specified date and a
specified conversion ratio, or that are convertible at the option
of the issuer. Because conversion of the security is not at the
option of the holder, the fund may be required to convert the
security into the underlying common stock even at times when the
value of the underlying common stock or other equity security has
declined substantially.

The fund's investments in convertible securities, particularly
securities that are convertible into securities of an issuer
other than the issuer of the convertible security, may be
illiquid. The fund may not be able to dispose of such securities
in a timely fashion or for a fair price, which could result in
losses to the fund.

PRIVATE PLACEMENTS

The fund may invest in securities that are purchased in private
placements and, accordingly, are subject to restrictions on
resale as a matter of contract or under federal securities laws.
Because there may be relatively few potential purchasers for such
investments, especially 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. At times,
it may also be more difficult to determine the fair value of such
securities for purposes of computing the fund's net asset value.

While such private placements may often offer attractive
opportunities for investment not otherwise available on the open
market, the securities so purchased are often "restricted
securities," i.e., securities which cannot be sold to the
public without registration under the Securities Act of 1933 or
the availability of an exemption from registration (such as
Rules 144 or 144A), or which are "not readily marketable" because
they are subject to other legal or contractual delays in or
restrictions on resale.

The absence of a trading market can make it difficult to
ascertain a market value for illiquid investments. Disposing of
illiquid investments may involve time-consuming negotiation and
legal expenses, and it may be difficult or impossible for the
fund to sell them promptly at an acceptable price. The fund may
have to bear the extra expense of registering such securities for
resale and the risk of substantial delay in effecting such
registration. Also market quotations are less readily available.
The judgment of Putnam Management may at times play a greater
role in valuing these securities than in the case of unrestricted
securities.

Generally speaking, restricted securities may be sold only to
qualified institutional buyers, or in a privately negotiated
transaction to a limited number of purchasers, or in limited
quantities after they have been held for a specified period of
time and other conditions are met pursuant to an exemption from
registration, or in a public offering for which a registration
statement is in effect under the Securities Act of 1933. The
funds may be deemed to be an "underwriter" for purposes of the
Securities Act of 1933 when selling restricted securities to the
public, and in such event the fund may be liable to purchasers of
such securities if the registration statement prepared by the
issuer, or the prospectus forming a part of it, is materially
inaccurate or misleading.

FUTURES CONTRACTS AND RELATED OPTIONS

Subject to applicable law the fund may invest without limit in
futures contracts and related options for hedging and non-hedging
purposes, such as to manage the effective duration of the fund's
portfolio or as a substitute for direct investment. A financial
futures contract sale creates an obligation by the seller to
deliver the type of financial instrument called for in the
contract in a specified delivery month for a stated price. A
financial futures contract purchase creates an obligation by the
purchaser to take delivery of the type of financial instrument
called for in the contract in a specified delivery month at a
stated price. The specific instruments delivered or taken,
respectively, at settlement date are not determined until on or
near that date. The determination is made in accordance with the
rules of the exchange on which the futures contract sale or
purchase was made. Futures contracts are traded in the United
States only on commodity exchanges or boards of trade -- known as
"contract markets" -- approved for such trading by the Commodity
Futures Trading Commission (the "CFTC"), and must be executed
through a futures commission merchant or brokerage firm which is
a member of the relevant contract market.

Although futures contracts (other than index futures) by their
terms call for actual delivery or acceptance of commodities or
securities, in most cases the contracts are closed out before the
settlement date without the making or taking of delivery.
Closing out a futures contract sale is effected by purchasing a
futures contract for the same aggregate amount of the specific
type of financial instrument or commodity with the same delivery
date. If the price of the initial sale of the futures contract
exceeds the price of the offsetting purchase, the seller is paid
the difference and realizes a gain. Conversely, if the price of
the offsetting purchase exceeds the price of the initial sale,
the seller realizes a loss. If the fund is unable to enter into
a closing transaction, the amount of the fund's potential loss is
unlimited. The closing out of a futures contract purchase is
effected by the purchaser's entering into a futures contract
sale. If the offsetting sale price exceeds the purchase price,
the purchaser realizes a gain, and if the purchase price exceeds
the offsetting sale price, he realizes a loss. In general, 40%
of the gain or loss arising from the closing out of a futures
contract traded on an exchange approved by the CFTC is treated as
short-term gain or loss, and 60% is treated as long-term gain or
loss.

Unlike when the fund purchases or sells a security, no price is
paid or received by the fund upon the purchase or sale of a
futures contract. Upon entering into a contract, the fund is
required to deposit with its custodian in a segregated account in
the name of the futures broker an amount of liquid assets. This
amount is known as "initial margin." The nature of initial
margin in futures transactions is different from that of margin
in security transactions in that futures contract margin does not
involve the borrowing of funds to finance the transactions.
Rather, initial margin is similar to a performance bond or good
faith deposit which is returned to the fund upon termination of
the futures contract, assuming all contractual obligations have
been satisfied. Futures contracts also involve brokerage costs.

Subsequent payments, called "variation margin" or "maintenance
margin," to and from the broker (or the custodian) are made on a
daily basis as the price of the underlying security or commodity
fluctuates, making the long and short positions in the futures
contract more or less valuable, a process known as "marking to
the market." For example, when the fund has purchased a futures
contract on a security and the price of the underlying security
has risen, that position will have increased in value and the
fund will receive from the broker a variation margin payment
based on that increase in value. Conversely, when the fund has
purchased a security futures contract and the price of the
underlying security has declined, the position would be less
valuable and the fund would be required to make a variation
margin payment to the broker.

The fund may elect to close some or all of its futures positions
at any time prior to their expiration in order to reduce or
eliminate a hedge position then currently held by the fund. The
fund may close its positions by taking opposite positions which
will operate to terminate the fund's position in the futures
contracts. Final determinations of variation margin are then
made, additional cash is required to be paid by or released to
the fund, and the fund realizes a loss or a gain. Such closing
transactions involve additional commission costs.

The fund does not intend to purchase or sell futures or related
options for other than hedging purposes, if, as a result, the sum
of the initial margin deposits on the fund's existing futures and
related options positions and premiums paid for outstanding
options on futures contracts would exceed 5% of the fund's net
assets.

OPTIONS ON FUTURES CONTRACTS. The fund may purchase and write
call and put options on futures contracts it may buy or sell and
enter into closing transactions with respect to such options to
terminate existing positions. In return for the premium paid,
options on futures contracts give the purchaser the right to
assume a position in a futures contract at the specified option
exercise price at any time during the period of the option. The
fund may use options on futures contracts in lieu of writing or
buying options directly on the underlying securities or
purchasing and selling the underlying futures contracts. For
example, to hedge against a possible decrease in the value of its
portfolio securities, the fund may purchase put options or write
call options on futures contracts rather than selling futures
contracts. Similarly, the fund may purchase call options or
write put options on futures contracts as a substitute for the
purchase of futures contracts to hedge against a possible
increase in the price of securities which the fund expects to
purchase. Such options generally operate in the same manner as
options purchased or written directly on the underlying
investments.

As with options on securities, the holder or writer of an option
may terminate his position by selling or purchasing an offsetting
option. There is no guarantee that such closing transactions can
be effected.

The fund will be required to deposit initial margin and
maintenance margin with respect to put and call options on
futures contracts written by it pursuant to brokers' requirements
similar to those described above in connection with the
discussion of futures contracts.

RISKS OF TRANSACTIONS IN FUTURES CONTRACTS AND RELATED OPTIONS.
Successful use of futures contracts by the fund is subject to
Putnam Management's ability to predict movements in various
factors affecting securities markets, including interest rates.
Compared to the purchase or sale of futures contracts, the
purchase of call or put options on futures contracts involves
less potential risk to the fund because the maximum amount at
risk is the premium paid for the options (plus transaction
costs). However, there may be circumstances when the purchase of
a call or put option on a futures contract would result in a loss
to the fund when the purchase or sale of a futures contract would
not, such as when there is no movement in the prices of the
hedged investments. The writing of an option on a futures
contract involves risks similar to those risks relating to the
sale of futures contracts.

The use of options and futures strategies also involves the risk
of imperfect correlation among movements in the prices of the
securities underlying the futures and options purchased and sold
by the fund, of the options and futures contracts themselves,
and, in the case of hedging transactions, of the securities which
are the subject of a hedge. The successful use of these
strategies further depends on the ability of Putnam Management to
forecast interest rates and market movements correctly.

There is no assurance that higher than anticipated trading
activity or other unforeseen events might not, at times, render
certain market clearing facilities inadequate, and thereby result
in the institution by exchanges of special procedures which may
interfere with the timely execution of customer orders.

To reduce or eliminate a position held by the fund, the fund may
seek to close out such position. The ability to establish and
close out positions will be subject to the development and
maintenance of a liquid secondary market. It is not certain that
this market will develop or continue to exist for a particular
futures contract or option. Reasons for the absence of a liquid
secondary market on an exchange include the following: (i) there
may be insufficient trading interest in certain contracts or
options; (ii) restrictions may be imposed by an exchange on
opening transactions or closing transactions or both; (iii)
trading halts, suspensions or other restrictions may be imposed
with respect to particular classes or series of contracts or
options, or underlying securities; (iv) unusual or unforeseen
circumstances may interrupt normal operations on an exchange; (v)
the facilities of an exchange or a clearing corporation may not
at all times be adequate to handle current trading volume; or
(vi) one or more exchanges could, for economic or other reasons,
decide or be compelled at some future date to discontinue the
trading of contracts or options (or a particular class or series
of contracts or options), in which event the secondary market on
that exchange for such contracts or options (or in the class or
series of contracts or options) would cease to exist, although
outstanding contracts or options on the exchange that had been
issued by a clearing corporation as a result of trades on that
exchange would continue to be exercisable in accordance with
their terms.

U.S. TREASURY SECURITY FUTURES CONTRACTS AND OPTIONS. U.S.
Treasury security futures contracts require the seller to
deliver, or the purchaser to take delivery of, the type of U.S.
Treasury security called for in the contract at a specified date
and price. Options on U.S. Treasury security futures contracts
give the purchaser the right in return for the premium paid to
assume a position in a U.S. Treasury security futures contract at
the specified option exercise price at any time during the period
of the option.

Successful use of U.S. Treasury security futures contracts by the
fund is subject to Putnam Management's ability to predict
movements in the direction of interest rates and other factors
affecting markets for debt securities. For example, if the fund
has sold U.S. Treasury security futures contracts in order to
hedge against the possibility of an increase in interest rates
which would adversely affect securities held in its portfolio,
and the prices of the fund's securities increase instead as a
result of a decline in interest rates, the fund will lose part or
all of the benefit of the increased value of its securities which
it has hedged because it will have offsetting losses in its
futures positions. In addition, in such situations, if the fund
has insufficient cash, it may have to sell securities to meet
daily maintenance margin requirements at a time when it may be
disadvantageous to do so.

There is also a risk that price movements in U.S. Treasury
security futures contracts and related options will not correlate
closely with price movements in markets for particular
securities. For example, if the fund has hedged against a
decline in the values of tax-exempt securities held by it by
selling Treasury security futures and the values of Treasury
securities subsequently increase while the values of its tax-
exempt securities decrease, the fund would incur losses on both
the Treasury security futures contracts written by it and the tax-
exempt securities held in its portfolio.

INDEX FUTURES CONTRACTS. An index futures contract is a contract
to buy or sell units of an index at a specified future date at a
price agreed upon when the contract is made. Entering into a
contract to buy units of an index is commonly referred to as
buying or purchasing a contract or holding a long position in the
index. Entering into a contract to sell units of an index is
commonly referred to as selling a contract or holding a short
position. A unit is the current value of the index. The fund
may enter into stock index futures contracts, debt index futures
contracts, or other index futures contracts appropriate to its
objective(s). The fund may also purchase and sell options on
index futures contracts.

For example, the Standard & Poor's 500 Composite Stock Price
Index ("S&P 500") is composed of 500 selected common stocks, most
of which are listed on the New York Stock Exchange. The S&P 500
assigns relative weightings to the common stocks included in the
Index, and the value fluctuates with changes in the market values
of those common stocks. In the case of the S&P 500, contracts
are to buy or sell 500 units. Thus, if the value of the S&P 500
were $150, one contract would be worth $75,000 (500 units x
$150). The stock index futures contract specifies that no
delivery of the actual stocks making up the index will take
place. Instead, settlement in cash must occur upon the
termination of the contract, with the settlement being the
difference between the contract price and the actual level of the
stock index at the expiration of the contract. For example, if
the fund enters into a futures contract to buy 500 units of the
S&P 500 at a specified future date at a contract price of $150
and the S&P 500 is at $154 on that future date, the fund will
gain $2,000 (500 units x gain of $4). If the fund enters into a
futures contract to sell 500 units of the stock index at a
specified future date at a contract price of $150 and the S&P 500
is at $152 on that future date, the fund will lose $1,000 (500
units x loss of $2).

There are several risks in connection with the use by the fund of
index futures. One risk arises because of the imperfect
correlation between movements in the prices of the index futures
and movements in the prices of securities which are the subject
of the hedge. Putnam Management will, however, attempt to reduce
this risk by buying or selling, to the extent possible, futures
on indices the movements of which will, in its judgment, have a
significant correlation with movements in the prices of the
securities sought to be hedged.

Successful use of index futures by the fund is also subject to
Putnam Management's ability to predict movements in the direction
of the market. For example, it is possible that, where the fund
has sold futures to hedge its portfolio against a decline in the
market, the index on which the futures are written may advance
and the value of securities held in the fund's portfolio may
decline. If this occurred, the fund would lose money on the
futures and also experience a decline in value in its portfolio
securities. It is also possible that, if the fund has hedged
against the possibility of a decline in the market adversely
affecting securities held in its portfolio and securities prices
increase instead, the fund will lose part or all of the benefit
of the increased value of those securities it has hedged because
it will have offsetting losses in its futures positions. In
addition, in such situations, if the fund has insufficient cash,
it may have to sell securities to meet daily variation margin
requirements at a time when it is disadvantageous to do so.

In addition to the possibility that there may be an imperfect
correlation, or no correlation at all, between movements in the
index futures and the portion of the portfolio being hedged, the
prices of index futures may not correlate perfectly with
movements in the underlying index due to certain market
distortions. First, all participants in the futures market are
subject to margin deposit and maintenance requirements. Rather
than meeting additional margin deposit requirements, investors
may close futures contracts through offsetting transactions which
could distort the normal relationship between the index and
futures markets. Second, margin requirements in the futures
market are less onerous than margin requirements in the
securities market, and as a result the futures market may attract
more speculators than the securities market does. Increased
participation by speculators in the futures market may also cause
temporary price distortions. Due to the possibility of price
distortions in the futures market and also because of the
imperfect correlation between movements in the index and
movements in the prices of index futures, even a correct forecast
of general market trends by Putnam Management may still not
result in a profitable position over a short time period.

OPTIONS ON STOCK INDEX FUTURES. Options on index futures are
similar to options on securities except that options on index
futures give the purchaser the right, in return for the premium
paid, to assume a position in an index futures contract (a long
position if the option is a call and a short position if the
option is a put) at a specified exercise price at any time during
the period of the option. Upon exercise of the option, the
delivery of the futures position by the writer of the option to
the holder of the option will be accompanied by delivery of the
accumulated balance in the writer's futures margin account which
represents the amount by which the market price of the index
futures contract, at exercise, exceeds (in the case of a call) or
is less than (in the case of a put) the exercise price of the
option on the index future. If an option is exercised on the
last trading day prior to its expiration date, the settlement
will be made entirely in cash equal to the difference between the
exercise price of the option and the closing level of the index
on which the future is based on the expiration date. Purchasers
of options who fail to exercise their options prior to the
exercise date suffer a loss of the premium paid.

OPTIONS ON INDICES

As an alternative to purchasing call and put options on index
futures, the fund may purchase and sell call and put options on
the underlying indices themselves. Such options would be used in
a manner identical to the use of options on index futures.

INDEX WARRANTS

The fund may purchase put warrants and call warrants whose values
vary depending on the change in the value of one or more
specified securities indices ("index warrants"). Index warrants
are generally issued by banks or other financial institutions and
give the holder the right, at any time during the term of the
warrant, to receive upon exercise of the warrant a cash payment
from the issuer based on the value of the underlying index at the
time of exercise. In general, if the value of the underlying
index rises above the exercise price of the index warrant, the
holder of a call warrant will be entitled to receive a cash
payment from the issuer upon exercise based on the difference
between the value of the index and the exercise price of the
warrant; if the value of the underlying index falls, the holder
of a put warrant will be entitled to receive a cash payment from
the issuer upon exercise based on the difference between the
exercise price of the warrant and the value of the index. The
holder of a warrant would not be entitled to any payments from
the issuer at any time when, in the case of a call warrant, the
exercise price is greater than the value of the underlying index,
or, in the case of a put warrant, the exercise price is less than
the value of the underlying index. If the fund were not to
exercise an index warrant prior to its expiration, then the fund
would lose the amount of the purchase price paid by it for the
warrant.

The fund will normally use index warrants in a manner similar to
its use of options on securities indices. The risks of the
fund's use of index warrants are generally similar to those
relating to its use of index options. Unlike most index options,
however, index warrants are issued in limited amounts and are not
obligations of a regulated clearing agency, but are backed only
by the credit of the bank or other institution which issues the
warrant. Also, index warrants generally have longer terms than
index options. Although the fund will normally invest only in
exchange-listed warrants, index warrants are not likely to be as
liquid as certain index options backed by a recognized clearing
agency. In addition, the terms of index warrants may limit the
fund's ability to exercise the warrants at such time, or in such
quantities, as the fund would otherwise wish to do.

SHORT-TERM TRADING

In seeking the fund's objective(s), Putnam Management will buy or
sell portfolio securities whenever Putnam Management believes it
appropriate to do so. In deciding whether to sell a portfolio
security, Putnam Management does not consider how long the fund
has owned the security. From time to time the fund will buy
securities intending to seek short-term trading profits. A
change in the securities held by the fund is known as "portfolio
turnover" and generally involves some expense to the fund. This
expense may include brokerage commissions or dealer markups and
other transaction costs on both the sale of securities and the
reinvestment of the proceeds in other securities. If sales of
portfolio securities cause the fund to realize net short-term
capital gains, such gains will be taxable as ordinary income. As
a result of the fund's investment policies, under certain market
conditions the fund's portfolio turnover rate may be higher than
that of other mutual funds. Portfolio turnover rate for a fiscal
year is the ratio of the lesser of purchases or sales of
portfolio securities to the monthly average of the value of
portfolio securities -- excluding securities whose maturities at
acquisition were one year or less. The fund's portfolio turnover
rate is not a limiting factor when Putnam Management considers a
change in the fund's portfolio.

SECURITIES LOANS

The fund may make secured loans of its portfolio securities, on
either a short-term or long-term basis, amounting to not more
than 25% of its total assets, thereby realizing additional
income. The risks in lending portfolio securities, as with other
extensions of credit, consist of possible delay in recovery of
the securities or possible loss of rights in the collateral
should the borrower fail financially. As a matter of policy,
securities loans are made to broker-dealers pursuant to
agreements requiring that the loans be continuously secured by
collateral consisting of cash or short-term debt obligations at
least equal at all times to the value of the securities on loan,
"marked-to-market" daily. The borrower pays to the fund an
amount equal to any dividends or interest received on securities
lent. The fund retains all or a portion of the interest received
on investment of the cash collateral or receives a fee from the
borrower. Although voting rights, or rights to consent, with
respect to the loaned securities may pass to the borrower, the
fund retains the right to call the loans at any time on
reasonable notice, and it will do so to enable the fund to
exercise voting rights on any matters materially affecting the
investment. The fund may also call such loans in order to sell
the securities.

REPURCHASE AGREEMENTS

The fund (except for Putnam Money Market Fund) may enter into
repurchase agreements, amounting to not more than 25% of its
total assets. A repurchase agreement is a contract under which
the fund acquires a security for a relatively short period
(usually not more than one week) subject to the obligation of the
seller to repurchase and the fund to resell such security at a
fixed time and price (representing the fund's cost plus
interest). It is the fund's present intention to enter into
repurchase agreements only with commercial banks and registered
broker-dealers and only with respect to obligations of the U.S.
government or its agencies or instrumentalities. Repurchase
agreements may also be viewed as loans made by the fund which are
collateralized by the securities subject to repurchase. Putnam
Management will monitor such transactions to ensure that the
value of the underlying securities will be at least equal at all
times to the total amount of the repurchase obligation, including
the interest factor. If the seller defaults, the fund could
realize a loss on the sale of the underlying security to the
extent that the proceeds of the sale including accrued interest
are less than the resale price provided in the agreement
including interest. In addition, if the seller should be
involved in bankruptcy or insolvency proceedings, the fund may
incur delay and costs in selling the underlying security or may
suffer a loss of principal and interest if the fund is treated as
an unsecured creditor and required to return the underlying
collateral to the seller's estate.

Pursuant to an exemptive order issued by the Securities and
Exchange Commission, the fund may transfer uninvested cash
balances into a joint account, along with cash of other Putnam
funds and certain other accounts. These balances may be invested
in one or more repurchase agreements and/or short-term money
market instruments.

RESTRICTED SECURITIES

The SEC Staff currently takes the view that any delegation by the
Trustees of the authority to determine that a restricted security
is readily marketable (as described in the investment
restrictions of the funds) must be pursuant to written procedures
established by the Trustees. It is the present intention of the
funds' Trustees that, if the Trustees decide to delegate such
determinations to Putnam Management or another person, they would
do so pursuant to written procedures, consistent with the Staff's
position. Should the Staff modify its position in the future,
the Trustees would consider what action would be appropriate in
light of the Staff's position at that time.

FORWARD COMMITMENTS

The fund may enter into contracts to purchase securities for a
fixed price at a future date beyond customary settlement time
("forward commitments") if the fund sets aside, on the books and
records of its custodian, liquid assets in an amount sufficient
to meet the purchase price, or if the fund enters into offsetting
contracts for the forward sale of other securities it owns. In
the case of to-be-announced ("TBA") purchase commitments, the
unit price and the estimated principal amount are established
when the fund enters into a contract, with the actual principal
amount being within a specified range of the estimate. Forward
commitments may be considered securities in themselves, and
involve a risk of loss if the value of the security to be
purchased declines prior to the settlement date, which risk is in
addition to the risk of decline in the value of the fund's other
assets. Where such purchases are made through dealers, the fund
relies on the dealer to consummate the sale. The dealer's
failure to do so may result in the loss to the fund of an
advantageous yield or price. Although the fund will generally
enter into forward commitments with the intention of acquiring
securities for its portfolio or for delivery pursuant to options
contracts it has entered into, the fund may dispose of a
commitment prior to settlement if Putnam Management deems it
appropriate to do so. The fund may realize short-term profits or
losses upon the sale of forward commitments.

The fund may enter into TBA sale commitments to hedge its
portfolio positions or to sell securities it owns under delayed
delivery arrangements. Proceeds of TBA sale commitments are not
received until the contractual settlement date. During the time
a TBA sale commitment is outstanding, equivalent deliverable
securities, or an offsetting TBA purchase commitment deliverable
on or before the sale commitment date, are held as "cover" for
the transaction. Unsettled TBA sale commitments are valued at
current market value of the underlying securities. If the TBA
sale commitment is closed through the acquisition of an
offsetting purchase commitment, the fund realizes a gain or loss
on the commitment without regard to any unrealized gain or loss
on the underlying security. If the fund delivers securities
under the commitment, the fund realizes a gain or loss from the
sale of the securities based upon the unit price established at
the date the commitment was entered into.

SWAP AGREEMENTS

The fund may enter into swap agreements and other types of over-
the-counter transactions with broker-dealers or other financial
institutions . Depending on their structures, swap agreements
may increase or decrease a fund's exposure to long-or short-term
interest rates (in the United States or abroad), foreign currency
values, mortgage securities, corporate borrowing rates, or other
factors such as security prices or inflation rates. The value of
a fund's swap positions would increase or decrease depending on
the changes in value of the underlying rates, currency
values, or other indices or measures. A fund's ability to engage
in certain swap transactions may be limited by tax
considerations.

The fund's ability to realize a profit from such transactions
will depend on the ability of the financial institutions with
which it enters into the transactions to meet their obligations
to the fund. Under certain circumstances, suitable transactions
may not be available to the fund, or the fund may be unable to
close out its position under such transactions at the same time,
or at the same price, as if it had purchased comparable publicly
traded securities.

DERIVATIVES

Certain of the instruments in which the fund may invest, such as
futures contracts, options and forward contracts, are considered
to be "derivatives." Derivatives are financial instruments whose
value depends upon, or is derived from, the value of an
underlying asset, such as a security or an index. Further
information about these instruments and the risks involved in
their use is included elsewhere in the prospectus or in this SAI.
The fund's use of derivatives may cause the fund to recognize
higher amounts of short-term capital gains, generally taxed to
shareholders at ordinary income tax rates.

YEAR 2000

Like other financial and business organizations, the funds depend
on the proper function of their service providers' computer
systems. To the extent that the systems used by the funds or
their service providers cannot distinguish between the year 1900
and the year 2000 or have other operating difficulties as a
result of the year 2000, the operations of and services provided
to the funds and their shareholders could be adversely impacted.
Putnam Management and its affiliates have reported that each
expects to modify its systems, as necessary, to address this so-
called "year 2000 problem," and will, on behalf of the funds,
inquire as to the year 2000 compliance of the funds' other major
service providers. However, there can be no assurance that the
operations of and services provided to the funds and their
shareholders will not be adversely affected. Similarly,
companies in which the funds invest may also experience "year
2000 problems," which could ultimately result in losses to a fund
to the extent that the securities of any such company decline in
value as a result of a "year 2000 problem."

EURO CONVERSION

Eleven member countries of the European Economic and Monetary
Union (the "EMU") have qualified for conversion of their national
currencies to the euro on January 1, 1999. The euro is a common
currency that is expected to eventually be used as the sole
currency for these countries and other EMU members that wish to
convert to the euro. National currencies will remain for the
converting countries through at least July of 2002 while the full
transition to the euro in the countries involved in the
conversion occurs. Possible consequences to funds that invest in
securities denominated in any of the national currencies affected
include the risks that: (i) the unification of economic and
monetary policies underpinning the currency unification may
increase the potential for similarities in the movements of
markets in the European countries converting to the euro, (ii)
contracts (including contracts regarding currency transactions)
denominated in (or tied to) those currencies may become more
difficult to enforce, and that (iii) companies in which the funds
invest may be adversely affected by their failure (or the failure
of other companies with which they do business) to adequately
address the operational aspects of the conversion.

Like other financial and business organizations, the funds depend
on the proper function of their service providers' computer and
other systems. The funds could be adversely affected if the
computer or other systems used by Putnam Management and the
funds' other service providers cannot appropriately account for
the conversion to the euro. Putnam Management and its affiliates
expect that their systems will be able to address this issue
without any material interruption of service. However, there can
be no assurance that the operations of and services provided to
the funds and their shareholders will not be adversely affected.
Similarly, companies in which the funds invest may also
experience similar problems in dealing with the conversion to the
euro, which could result in losses to the funds.

TAXES

TAXATION OF THE FUND. The fund intends to qualify each year as a
regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). In order to
qualify for the special tax treatment accorded regulated
investment companies and their shareholders, the fund must, among
other things:

(a) Derive at least 90% of its gross income from dividends,
interest, payments with respect to certain securities loans, and
gains from the sale of stock, securities and foreign currencies,
or other income (including but not limited to gains from options,
futures, or forward contracts) derived with respect to its
business of investing in such stock, securities, or currencies;

(b) distribute with respect to each taxable year at least 90% of
the sum of its taxable net investment income, its net tax-exempt
income, and the excess, if any, of net short-term capital gains
over net long-term capital losses for such year; and

(c) diversify its holdings so that, at the end of each fiscal
quarter, (i) at least 50% of the market value of the fund's
assets is represented by cash and cash items, U.S. government
securities, securities of other regulated investment companies,
and other securities limited in respect of any one issuer to a
value not greater than 5% of the value of the fund's total assets
and to not more than 10% of the outstanding voting securities of
such issuer, and (ii) not more than 25% of the value of its
assets is invested in the securities (other than those of the
U.S. Government or other regulated investment companies) of any
one issuer or of two or more issuers which the fund controls and
which are engaged in the same, similar, or related trades or
businesses.

If the fund qualifies as a regulated investment company that is
accorded special tax treatment, the fund will not be subject to
federal income tax on income paid to its shareholders in the form
of dividends (including capital gain dividends).

If the fund failed to qualify as a regulated investment company
accorded special tax treatment in any taxable year, the fund
would be subject to tax on its taxable income at corporate rates,
and all distributions from earnings and profits, including any
distributions of net tax-exempt income and net long-term capital
gains, would be taxable to shareholders as ordinary income. In
addition, the fund could be required to recognize unrealized
gains, pay substantial taxes and interest and make substantial
distributions before requalifying as a regulated investment
company that is accorded special tax treatment.

If the fund fails to distribute in a calendar year substantially
all of its ordinary income for such year and substantially all of
its capital gain net income for the one-year period ending
October 31 (or later if the fund is permitted so to elect and so
elects), plus any retained amount from the prior year, the fund
will be subject to a 4% excise tax on the undistributed amounts.
A dividend paid to shareholders by the fund in January of a year
generally is deemed to have been paid by the fund on December 31
of the preceding year, if the dividend was declared and payable
to shareholders of record on a date in October, November or
December of that preceding year. The fund intends generally to
make distributions sufficient to avoid imposition of the 4%
excise tax.

FUND DISTRIBUTIONS. Distributions from the fund (other than
exempt-interest dividends, as discussed below) will be taxable to
shareholders as ordinary income to the extent derived from the
fund's investment income and net short-term gains. Distributions
of net capital gains (that is, the excess of net gains from
capital assets held more than one year over net losses from
capital assets held for not more than one year) will be taxable
to shareholders as such, regardless of how long a shareholder has
held the shares in the fund.

EXEMPT-INTEREST DIVIDENDS. The fund will be qualified to pay
exempt-interest dividends to its shareholders only if, at the
close of each quarter of the fund's taxable year, at least 50% of
the total value of the fund's assets consists of obligations the
interest on which is exempt from federal income tax.
Distributions that the fund properly designates as exempt-
interest dividends are treated as interest excludable from
shareholders' gross income for federal income tax purposes but
may be taxable for federal alternative minimum tax purposes and
for state and local purposes. If the fund intends to be
qualified to pay exempt-interest dividends, the fund may be
limited in its ability to enter into taxable transactions
involving forward commitments, repurchase agreements, financial
futures and options contracts on financial futures, tax-exempt
bond indices and other assets.

Part or all of the interest on indebtedness, if any, incurred or
continued by a shareholder to purchase or carry shares of a fund
paying exempt-interest dividends is not deductible. The portion
of interest that is not deductible is equal to the total interest
paid or accrued on the indebtedness, multiplied by the percentage
of the fund's total distributions (not including distributions
from net long-term capital gains) paid to the shareholder that
are exempt-interest dividends. Under rules used by the Internal
Revenue Service for determining when borrowed funds are
considered used for the purpose of purchasing or carrying
particular assets, the purchase of shares may be considered to
have been made with borrowed funds even though such funds are not
directly traceable to the purchase of shares.

In general, exempt-interest dividends, if any, attributable to
interest received on certain private activity obligations and
certain industrial development bonds will not be tax-exempt to
any shareholders who are "substantial users" of the facilities
financed by such obligations or bonds or who are "related
persons" of such substantial users.

A fund which is qualified to pay exempt-interest dividends will
inform investors within 60 days of the fund's fiscal year-end of
the percentage of its income distributions designated as tax-
exempt. The percentage is applied uniformly to all distributions
made during the year. The percentage of income designated as tax-
exempt for any particular distribution may be substantially
different from the percentage of the fund's income that was tax-
exempt during the period covered by the distribution.

HEDGING TRANSACTIONS. If the fund engages in hedging
transactions, including hedging transactions in options, futures
contracts, and straddles, or other similar transactions, it will
be subject to special tax rules (including constructive sale,
mark-to-market, straddle, wash sale, and short sale rules), the
effect of which may be to accelerate income to the fund, defer
losses to the fund, cause adjustments in the holding periods of
the fund's securities, convert long-term capital gains into short-
term capital gains or convert short-term capital losses into long-
term capital losses. These rules could therefore affect the
amount, timing and character of distributions to shareholders.
The fund will endeavor to make any available elections pertaining
to such transactions in a manner believed to be in the best
interests of the fund.

Certain of the fund's hedging activities (including its
transactions, if any, in foreign currencies or foreign currency-
denominated instruments) are likely to produce a difference
between its book income and its taxable income. If the fund's
book income exceeds its taxable income, the distribution (if any)
of such excess will be treated as (i) a dividend to the extent of
the fund's remaining earnings and profits (including earnings and
profits arising from tax-exempt income), (ii) thereafter as a
return of capital to the extent of the recipient's basis in the
shares, and (iii) thereafter as gain from the sale or exchange of
a capital asset. If the fund's book income is less than its
taxable income, the fund could be required to make distributions
exceeding book income to qualify as a regulated investment
company that is accorded special tax treatment.

RETURN OF CAPITAL DISTRIBUTIONS. If the fund makes a
distribution to you in excess of its current and accumulated
"earnings and profits" in any taxable year, the excess
distribution will be treated as a return of capital to the extent
of your tax basis in your shares, and thereafter as capital gain.
A return of capital is not taxable, but it reduces your tax basis
in your shares, thus reducing any loss or increasing any gain on
a subsequent taxable disposition by you of your shares.

Dividends and distributions on a fund's shares are generally
subject to federal income tax as described herein to the extent
they do not exceed the fund's realized income and gains, even
though such dividends and distributions may economically
represent a return of a particular shareholder's investment.
Such distributions are likely to occur in respect of shares
purchased at a time when the fund's net asset value reflects
gains that are either unrealized, or realized but not
distributed.

SECURITIES ISSUED OR PURCHASED AT A DISCOUNT. The fund's
investment in securities issued at a discount and certain other
obligations will (and investments in securities purchased at a
discount may) require the fund to accrue and distribute income
not yet received. In order to generate sufficient cash to make
the requisite distributions, the fund may be required to sell
securities in its portfolio that it otherwise would have
continued to hold.

CAPITAL LOSS CARRYOVER. Distributions from capital gains are
generally made after applying any available capital loss
carryovers. The amounts and expiration dates of any capital loss
carryovers available to the fund are shown in Note 1 (Federal
income taxes) to the financial statements included in Part I of
this SAI or incorporated by reference into this SAI.

FOREIGN CURRENCY-DENOMINATED SECURITIES AND RELATED HEDGING
TRANSACTIONS. The fund's transactions in foreign currencies,
foreign currency-denominated debt securities and certain foreign
currency options, futures contracts and forward contracts (and
similar instruments) may give rise to ordinary income or loss to
the extent such income or loss results from fluctuations in the
value of the foreign currency concerned.

If more than 50% of the fund's assets at year end consists of the
securities of foreign corporations, the fund may elect to permit
shareholders to claim a credit or deduction on their income tax
returns for their pro rata portion of qualified taxes paid by the
fund to foreign countries in respect of foreign securities the
fund has held for at least the minimum period specified in the
Code. In such a case, shareholders will include in gross income
from foreign sources their pro rata shares of such taxes. A
shareholder's ability to claim a foreign tax credit or deduction
in respect of foreign taxes paid by the fund may be subject to
certain limitations imposed by the Code, as a result of which a
shareholder may not get a full credit or deduction for the amount
of such taxes. In particular, shareholders must hold their fund
shares (without protection from risk of loss) on the ex-dividend
date and for at least 15 additional days during the 30-day period
surrounding the ex-dividend date to be eligible to claim a
foreign tax credit with respect to a given dividend.
Shareholders who do not itemize on their federal income tax
returns may claim a credit (but no deduction) for such foreign
taxes.

Investment by the fund in "passive foreign investment companies"
could subject the fund to a U.S. federal income tax or other
charge on the proceeds from the sale of its investment in such a
company; however, this tax can be avoided by making an election
to mark such investments to market annually or to treat the
passive foreign investment company as a "qualified electing
fund."

A "passive foreign investment company" is any foreign
corporation: (i) 75 percent or more of the income of which for
the taxable year is passive income, or (ii) the average
percentage of the assets of which (generally by value, but by
adjusted tax basis in certain cases) that produce or are held for
the production of passive income is at least 50 percent.
Generally, passive income for this purpose means dividends,
interest (including income equivalent to interest), royalties,
rents, annuities, the excess of gains over losses from certain
property transactions and commodities transactions, and foreign
currency gains. Passive income for this purpose does not include
rents and royalties received by the foreign corporation from
active business and certain income received from related persons.

SALE OR REDEMPTION OF SHARES. The sale, exchange or redemption
of fund shares may give rise to a gain or loss. In general, any
gain or loss realized upon a taxable disposition of shares will
be treated as long-term capital gain or loss if the shares have
been held for more than 12 months. Otherwise the gain or loss on
the sale, exchange or redemption of fund shares will be treated
as short-term capital gain or loss. However, if a shareholder
sells shares at a loss within six months of purchase, any loss
will be disallowed for Federal income tax purposes to the extent
of any exempt-interest dividends received on such shares. In
addition, any loss (not already disallowed as provided in the
preceding sentence) realized upon a taxable disposition of shares
held for six months or less will be treated as long-term, rather
than short-term, to the extent of any long-term capital gain
distributions received by the shareholder with respect to the
shares. All or a portion of any loss realized upon a taxable
disposition of fund shares will be disallowed if other shares of
the same fund are purchased within 30 days before or after the
disposition. In such a case, the basis of the newly purchased
shares will be adjusted to reflect the disallowed loss.

SHARES PURCHASED THROUGH TAX-QUALIFIED PLANS. Special tax rules
apply to investments though defined contribution plans and other
tax-qualified plans. Shareholders should consult their tax
adviser to determine the suitability of shares of a fund as an
investment through such plans and the precise effect of an
investment on their particular tax situation.

BACKUP WITHHOLDING. The fund generally is required to withhold
and remit to the U.S. Treasury 31% of the taxable dividends and
other distributions paid to any individual shareholder who fails
to furnish the fund with a correct taxpayer identification number
(TIN), who has under-reported dividends or interest income, or
who fails to certify to the fund that he or she is not subject to
such withholding.

The Internal Revenue Service recently revised its regulations
affecting the application to foreign investors of the back-up
withholding and withholding tax rules described above. The new
regulations will generally be effective for payments made after
December 31, 1999 (although transition rules will apply). In
some circumstances, the new rules will increase the certification
and filing requirements imposed on foreign investors in order to
qualify for exemption from the 31% back-up withholding tax rates
under income tax treaties. Foreign investors in a fund should
consult their tax advisors with respect to the potential
application of these new regulations.

MANAGEMENT

TRUSTEES NAME (AGE)

*+GEORGE PUTNAM (72), Chairman and President. Chairman and
Director of Putnam Management and Putnam Mutual Funds. Director,
Freeport Copper and Gold, Inc. (a mining and natural resource
company), Houghton Mifflin Company (a major publishing company)
and Marsh & McLennan Companies, Inc.

JOHN A. HILL (57), Vice Chairman. Chairman and Managing
Director, First Reserve Corporation (a registered investment
adviser investing in companies in the world-wide energy industry
on behalf of institutional investors). Director of Snyder Oil
Corporation, TransMontaigne Oil Company and various private
companies owned by First Reserve Corporation, such as James River
Coal and Anker Coal Corporation.

+WILLIAM F. POUNDS (70), Vice Chairman. Professor Emeritus of
Management, Alfred P. Sloan School of Management, Massachusetts
Institute of Technology. Director of IDEXX Laboratories, Inc. (a
provider of diagnostic products and services for the animal
health and food and environmental industries), Management
Sciences for Health, Inc. (a non-profit organization), and Sun
Company, Inc. (a petroleum refining and marketing company).

JAMESON A. BAXTER (55), Trustee. President, Baxter Associates,
Inc. (a management consulting and private investments firm).
Director of MB Financial, Inc., ASHTA Chemicals, Inc., Banta
Corporation (printing and digital imaging), and Ryerson Tull,
Inc. (America's largest steel service corporation). Chairman
Emeritus of the Board of Trustees, Mount Holyoke College.

+HANS H. ESTIN (70), Trustee. Chartered Financial Analyst and
Vice Chairman, North American Management Corp. (a registered
investment adviser).

RONALD J. JACKSON (55), Trustee. Former Chairman, President and
Chief Executive Officer of Fisher-Price, Inc. (a major toy
manufacturer).

*PAUL L. JOSKOW (51), Trustee. Professor Emeritus of Economics
and Management and Director of the Center for Energy and
Environmental Policy Research, Massachusetts Institute of
Technology. Director, New England Electric System (a public
utility holding company), State Farm Indemnity Company (an
automobile insurance company) and the Whitehead Institute for
Biomedical Research (a non-profit research institution).

ELIZABETH T. KENNAN (61), Trustee. President Emeritus and
Professor, Mount Holyoke College. Director, Bell Atlantic (a
telecommunications company), the Kentucky Home Life Insurance
Companies, Bell Atlantic, Northeast Utilities and Talbots (a
distributor of women's apparel).

*LAWRENCE J. LASSER (56), Trustee and Vice President. President,
Chief Executive Officer and Director of Putnam Investments, Inc.
and Putnam Investment Management, Inc. Director of Marsh &
McLennan Companies, Inc. and the United Way of Massachusetts Bay.

JOHN H. MULLIN, III (57), Trustee. Chairman and CEO of Ridgeway
Farm, Director of ACX Technologies, Inc. (a company engaged in
the manufacture of industrial ceramics and packaging products),
Alex. Brown Realty, Inc. and The Liberty Corporation (a company
engaged in the life insurance and broadcasting industries).

+ROBERT E. PATTERSON (53), Trustee. President and Trustee of
Cabot Industrial Trust (a publicly traded real estate investment
trust). Director of Brandywine Trust Company.

*GEORGE PUTNAM III (47), Trustee. President, New Generation
Research, Inc. (a publisher of financial advisory and other
research services relating to bankrupt and distressed companies)
and New Generation Advisers, Inc. (a registered investment
adviser). Director, Massachusetts Audubon Society and The Boston
Family Office, L.L.C. (a registered investment advisor).

*A.J.C. SMITH (64), Trustee. Chairman and Chief Executive
Officer, Marsh & McLennan Companies, Inc. Director, Trident
Partnership (a $667 million 10-year limited partnership with over
30 institutional investors).

W. THOMAS STEPHENS (56), Trustee. President and Chief Executive
Officer of MacMillan Bloedel Ltd. (a major forest products
company). Director, Qwest Communications (a fiber optics
manufacturer) and New Century Energies (a public utility
company).

W. NICHOLAS THORNDIKE (65), Trustee. Director of various
corporations and charitable organizations, including Courier
Corporation (a book manufacturer), Data General Corporation (a
provider of customized computer solutions), Bradley Real Estate,
Inc., and Providence Journal Co.

OFFICERS NAME (AGE)

CHARLES E. PORTER (60), Executive Vice President. Managing
Director of Putnam Investments, Inc. and Putnam Management.

PATRICIA C. FLAHERTY (52), Vice President. Senior Vice President
of Putnam Investments, Inc. and Putnam Management.

GORDON H. SILVER (51), Vice President. Director and Senior
Managing Director of Putnam Investments, Inc. and Putnam
Management.

BRETT C. BROWCHUK (36), Vice President. Managing Director of
Putnam Management.

IAN C. FERGUSON (41), Vice President. Senior Managing Director
of Putnam Investments, Inc. and Putnam Management.

RICHARD A. MONAGHAN (44), Vice President. Managing Director of
Putnam Investments, Inc., Putnam Management and Putnam Mutual
Funds.

JOHN R. VERANI (59), Vice President. Senior Vice President of
Putnam Investments, Inc. and Putnam Management.

JOHN D. HUGHES (64), Senior Vice President and Treasurer.

*Trustees who are or may be deemed to be "interested persons" (as
defined in the Investment Company Act of 1940) of the fund,
Putnam Management or Putnam Mutual Funds.

Messrs. Putnam, Lasser and Smith are deemed "interested persons"
by virtue of their positions as officers or shareholders of the
fund, or directors of Putnam Management, Putnam Mutual Funds, or
Marsh & McLennan Companies, Inc., the parent company of Putnam
Management and Putnam Mutual Funds.

Mr. George Putnam, III, Mr. Putnam's son, is also an "interested
person" of the fund, Putnam Management, and Putnam Mutual Funds.
Mr. Joskow is not currently an "interested person" of the fund
but could be deemed by the Securities and Exchange Commission to
be an "interested person" on account of his prior consulting
relationship with National Economic Research Associates, Inc., a
wholly-owned subsidiary of Marsh & McLennan Companies, Inc.,
which was terminated as of August 31, 1998. The balance of the
Trustees are not "interested persons."

+Members of the Executive Committee of the Trustees. The
Executive Committee meets between regular meetings of the
Trustees as may be required to review investment matters and
other affairs of the fund and may exercise all of the powers of
the Trustees.

-----------------

Certain other officers of Putnam Management are officers of the
fund. SEE "ADDITIONAL OFFICERS" IN PART I OF THIS SAI. The
mailing address of each of the officers and Trustees is One Post
Office Square, Boston, Massachusetts 02109.

Except as stated below, the principal occupations of the officers
and Trustees for the last five years have been with the employers
as shown above, although in some cases they have held different
positions with such employers. Prior to July, 1998, Mr. Joskow
was Chairman of the Department of Economics, Massachusetts
Institute of Technology, and, prior to September, 1998, he was a
consultant to National Economic Research Associates. Prior to
June, 1995, Dr. Kennan was President of Mount Holyoke College.
Prior to 1996, Mr. Stephens was Chairman of the Board of
Directors, President and Chief Executive Officer of Johns
Manville Corporation. Prior to April, 1996, Mr. Ferguson was CEO
at Hong Kong Shanghai Banking Corporation. Prior to February,
1998, Mr. Patterson was Executive Vice President and Director of
Acquisitions of Cabot Partners Limited Partnership. Prior to
November, 1998, Mr. Monaghan was Managing Director at Merrill
Lynch.

Each Trustee of the fund receives an annual fee and an additional
fee for each Trustees' meeting attended. Trustees who are not
interested persons of Putnam Management and who serve on
committees of the Trustees receive additional fees for attendance
at certain committee meetings and for special services rendered
in that connection. All of the Trustees are Trustees of all the
Putnam funds and each receives fees for his or her services. FOR
DETAILS OF TRUSTEES' FEES PAID BY THE FUND AND INFORMATION
CONCERNING RETIREMENT GUIDELINES FOR THE TRUSTEES, SEE "CHARGES
AND EXPENSES" IN PART I OF THIS SAI.

The Agreement and Declaration of Trust of the fund provides that
the fund will indemnify its Trustees and officers against
liabilities and expenses incurred in connection with litigation
in which they may be involved because of their offices with the
fund, except if it is determined in the manner specified in the
Agreement and Declaration of Trust that they have not acted in
good faith in the reasonable belief that their actions were in
the best interests of the fund or that such indemnification would
relieve any officer or Trustee of any liability to the fund or
its shareholders by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of his or her duties. The
fund, at its expense, provides liability insurance for the
benefit of its Trustees and officers.

PUTNAM MANAGEMENT AND ITS AFFILIATES

Putnam Management is one of America's oldest and largest money
management firms. Putnam Management's staff of experienced
portfolio managers and research analysts selects securities and
constantly supervises the fund's portfolio. By pooling an
investor's money with that of other investors, a greater variety
of securities can be purchased than would be the case
individually; the resulting diversification helps reduce
investment risk. Putnam Management has been managing mutual funds
since 1937. Today, the firm serves as the investment manager for
the funds in the Putnam Family, with nearly $222 billion in
assets in nearly 11 million shareholder accounts at December 31,
1998. An affiliate, The Putnam Advisory Company, Inc., manages
domestic and foreign institutional accounts and mutual funds,
including the accounts of many Fortune 500 companies. Another
affiliate, Putnam Fiduciary Trust Company, provides investment
advice to institutional clients under its banking and fiduciary
powers. At December 31, 1998, Putnam Management and its
affiliates managed over $294 billion in assets, including over
$20 billion in tax-exempt securities and over $71 billion in
retirement plan assets.

Putnam Management, Putnam Mutual Funds and Putnam Fiduciary Trust
Company are subsidiaries of Putnam Investments, Inc., a holding
company which in turn is, except for a minority stake owned by
employees, 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.

Trustees and officers of the fund who are also officers of Putnam
Management or its affiliates or who are stockholders of Marsh &
McLennan Companies, Inc. will benefit from the advisory fees,
sales commissions, distribution fees, custodian fees and transfer
agency fees paid or allowed by the fund.

THE MANAGEMENT CONTRACT

Under a Management Contract between the fund and Putnam
Management, subject to such policies as the Trustees may
determine, Putnam Management, at its expense, furnishes
continuously an investment program for the fund and makes
investment decisions on behalf of the fund. Subject to the
control of the Trustees, Putnam Management also manages,
supervises and conducts the other affairs and business of the
fund, furnishes office space and equipment, provides bookkeeping
and clerical services (including determination of the fund's net
asset value, but excluding shareholder accounting services) and
places all orders for the purchase and sale of the fund's
portfolio securities. Putnam Management may place fund portfolio
transactions with broker-dealers which furnish Putnam Management,
without cost to it, certain research, statistical and quotation
services of value to Putnam Management and its affiliates in
advising the fund and other clients. In so doing, Putnam
Management may cause the fund to pay greater brokerage
commissions than it might otherwise pay.

FOR DETAILS OF PUTNAM MANAGEMENT'S COMPENSATION UNDER THE
MANAGEMENT CONTRACT, SEE "CHARGES AND EXPENSES" IN PART I OF THIS
SAI. Putnam Management's compensation under the Management
Contract may be reduced in any year if the fund's expenses exceed
the limits on investment company expenses imposed by any statute
or regulatory authority of any jurisdiction in which shares of
the fund are qualified for offer or sale. The term "expenses" is
defined in the statutes or regulations of such jurisdictions, and
generally excludes brokerage commissions, taxes, interest,
extraordinary expenses and, if the fund has a distribution plan,
payments made under such plan.

Under the Management Contract, Putnam Management may reduce its
compensation to the extent that the fund's expenses exceed such
lower expense limitation as Putnam Management may, by notice to
the fund, declare to be effective. The expenses subject to this
limitation are exclusive of brokerage commissions, interest,
taxes, deferred organizational and extraordinary expenses and, if
the fund has a distribution plan, payments required under such
plan. For the purpose of determining any such limitation on
Putnam Management's compensation, expenses of the fund shall not
reflect the application of commissions or cash management credits
that may reduce designated fund expenses. THE TERMS OF ANY
EXPENSE LIMITATION FROM TIME TO TIME IN EFFECT ARE DESCRIBED IN
THE PROSPECTUS AND/OR PART I OF THIS SAI.

In addition to the fee paid to Putnam Management, the fund
reimburses Putnam Management for the compensation and related
expenses of certain officers of the fund and their assistants who
provide certain administrative services for the fund and the
other Putnam funds, each of which bears an allocated share of the
foregoing costs. The aggregate amount of all such payments and
reimbursements is determined annually by the Trustees.

THE AMOUNT OF THIS REIMBURSEMENT FOR THE FUND'S MOST RECENT
FISCAL YEAR IS INCLUDED IN "CHARGES AND EXPENSES" IN PART I OF
THIS SAI. Putnam Management pays all other salaries of officers
of the fund. The fund pays all expenses not assumed by Putnam
Management including, without limitation, auditing, legal,
custodial, investor servicing and shareholder reporting expenses.
The fund pays the cost of typesetting for its prospectuses and
the cost of printing and mailing any prospectuses sent to its
shareholders. Putnam Mutual Funds pays the cost of printing and
distributing all other prospectuses.

The Management Contract provides that Putnam Management shall not
be subject to any liability to the fund or to any shareholder of
the fund for any act or omission in the course of or connected
with rendering services to the fund in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of
its duties on the part of Putnam Management.

The Management Contract may be terminated without penalty by vote
of the Trustees or the shareholders of the fund, or by Putnam
Management, on 30 days' written notice. It may be amended only
by a vote of the shareholders of the fund. The Management
Contract also terminates without payment of any penalty in the
event of its assignment. The Management Contract provides that
it will continue in effect only so long as such continuance is
approved at least annually by vote of either the Trustees or the
shareholders, and, in either case, by a majority of the Trustees
who are not "interested persons" of Putnam Management or the
fund. In each of the foregoing cases, the vote of the
shareholders is the affirmative vote of a "majority of the
outstanding voting securities" as defined in the Investment
Company Act of 1940.

PERSONAL INVESTMENTS BY EMPLOYEES OF PUTNAM MANAGEMENT

Employees of Putnam Management are permitted to engage in
personal securities transactions, subject to requirements and
restrictions set forth in Putnam Management's Code of Ethics.
The Code of Ethics contains provisions and requirements designed
to identify and address certain conflicts of interest between
personal investment activities and the interests of investment
advisory clients such as the funds. Among other things, the Code
of Ethics, consistent with standards recommended by the
Investment Company Institute's Advisory Group on Personal
Investing, prohibits certain types of transactions absent prior
approval, imposes time periods during which personal transactions
may not be made in certain securities, and requires the
submission of duplicate broker confirmations and quarterly
reporting of securities transactions. Additional restrictions
apply to portfolio managers, traders, research analysts and
others involved in the investment advisory process. Exceptions
to these and other provisions of the Code of Ethics may be
granted in particular circumstances after review by appropriate
personnel.

PORTFOLIO TRANSACTIONS

INVESTMENT DECISIONS. Investment decisions for the fund and for
the other investment advisory clients of Putnam Management and
its affiliates are made with a view to achieving their respective
investment objectives. Investment decisions are the product of
many factors in addition to basic suitability for the particular
client involved. Thus, a particular security may be bought or
sold for certain clients even though it could have been bought or
sold for other clients at the same time. Likewise, a particular
security may be bought for one or more clients when one or more
other clients are selling the security. In some instances, one
client may sell a particular security to another client. It also
sometimes happens that two or more clients simultaneously
purchase or sell the same security, in which event each day's
transactions in such security are, insofar as possible, averaged
as to price and allocated between such clients in a manner which
in Putnam Management's opinion is equitable to each and in
accordance with the amount being purchased or sold by each.
There may be circumstances when purchases or sales of portfolio
securities for one or more clients will have an adverse effect on
other clients.

BROKERAGE AND RESEARCH SERVICES. Transactions on U.S. stock
exchanges, commodities markets and futures markets and other
agency transactions involve the payment by the fund of negotiated
brokerage commissions. Such commissions vary among different
brokers. A particular broker may charge different commissions
according to such factors as the difficulty and size of the
transaction. Transactions in foreign investments often involve
the payment of fixed brokerage commissions, which may be higher
than those in the United States. There is generally no stated
commission in the case of securities traded in the over-the-
counter markets, but the price paid by the fund usually includes
an undisclosed dealer commission or mark-up. In underwritten
offerings, the price paid by the fund includes a disclosed, fixed
commission or discount retained by the underwriter or dealer. It
is anticipated that most purchases and sales of securities by
funds investing primarily in tax-exempt securities and certain
other fixed-income securities will be with the issuer or with
underwriters of or dealers in those securities, acting as
principal. Accordingly, those funds would not ordinarily pay
significant brokerage commissions with respect to securities
transactions. SEE "CHARGES AND EXPENSES" IN PART I OF THIS SAI
FOR INFORMATION CONCERNING COMMISSIONS PAID BY THE FUND.

It has for many years been a common practice in the investment
advisory business for advisers of investment companies and other
institutional investors to receive brokerage and research
services (as defined in the Securities Exchange Act of 1934, as
amended (the "1934 Act")) from broker-dealers that execute
portfolio transactions for the clients of such advisers and from
third parties with which such broker-dealers have arrangements.
Consistent with this practice, Putnam Management receives
brokerage and research services and other similar services from
many broker-dealers with which Putnam Management places the
fund's portfolio transactions and from third parties with which
these broker-dealers have arrangements. These services include
such matters as general economic and market reviews, industry and
company reviews, evaluations of investments, recommendations as
to the purchase and sale of investments, newspapers, magazines,
pricing services, quotation services, news services and personal
computers utilized by Putnam Management's managers and analysts.
Where the services referred to above are not used exclusively by
Putnam Management for research purposes, Putnam Management, based
upon its own allocations of expected use, bears that portion of
the cost of these services which directly relates to their non-
research use. Some of these services are of value to Putnam
Management and its affiliates in advising various of their
clients (including the fund), although not all of these services
are necessarily useful and of value in managing the fund. The
management fee paid by the fund is not reduced because Putnam
Management and its affiliates receive these services even though
Putnam Management might otherwise be required to purchase some of
these services for cash.

Putnam Management places all orders for the purchase and sale of
portfolio investments for the fund and buys and sells investments
for the fund through a substantial number of brokers and dealers.
In so doing, Putnam Management uses its best efforts to obtain
for the fund the most favorable price and execution available,
except to the extent it may be permitted to pay higher brokerage
commissions as described below. In seeking the most favorable
price and execution, Putnam Management, having in mind the fund's
best interests, considers all factors it deems relevant,
including, by way of illustration, price, the size of the
transaction, the nature of the market for the security or other
investment, the amount of the commission, the timing of the
transaction taking into account market prices and trends, the
reputation, experience and financial stability of the broker-
dealer involved and the quality of service rendered by the broker-
dealer in other transactions.

As permitted by Section 28(e) of the 1934 Act, and by the
Management Contract, Putnam Management may cause the fund to pay
a broker-dealer which provides "brokerage and research services"
(as defined in the 1934 Act) to Putnam Management an amount of
disclosed commission for effecting securities transactions on
stock exchanges and other transactions for the fund on an agency
basis in excess of the commission which another broker-dealer
would have charged for effecting that transaction. Putnam
Management's authority to cause the fund to pay any such greater
commissions is also subject to such policies as the Trustees may
adopt from time to time. Putnam Management does not currently
intend to cause the fund to make such payments. It is the
position of the staff of the Securities and Exchange Commission
that Section 28(e) does not apply to the payment of such greater
commissions in "principal" transactions. Accordingly Putnam
Management will use its best effort to obtain the most favorable
price and execution available with respect to such transactions,
as described above.

The Management Contract provides that commissions, fees,
brokerage or similar payments received by Putnam Management or an
affiliate in connection with the purchase and sale of portfolio
investments of the fund, less any direct expenses approved by the
Trustees, shall be recaptured by the fund through a reduction of
the fee payable by the fund under the Management Contract.
Putnam Management seeks to recapture for the fund soliciting
dealer fees on the tender of the fund's portfolio securities in
tender or exchange offers. Any such fees which may be recaptured
are likely to be minor in amount.

Consistent with the Conduct Rules of the National Association of
Securities Dealers, Inc. and subject to seeking the most
favorable price and execution available and such other policies
as the Trustees may determine, Putnam Management may consider
sales of shares of the fund (and, if permitted by law, of the
other Putnam funds) as a factor in the selection of broker-
dealers to execute portfolio transactions for the fund.

PRINCIPAL UNDERWRITER

Putnam Mutual Funds is the principal underwriter of shares of the
fund and the other continuously offered Putnam funds. Putnam
Mutual Funds is not obligated to sell any specific amount of
shares of the fund and will purchase shares for resale only
against orders for shares. SEE "CHARGES AND EXPENSES" IN PART I
OF THIS SAI FOR INFORMATION ON SALES CHARGES AND OTHER PAYMENTS
RECEIVED BY PUTNAM MUTUAL FUNDS.

INVESTOR SERVICING AGENT AND CUSTODIAN

Putnam Investor Services, a division of Putnam Fiduciary Trust
Company ("PFTC"), is the fund's investor servicing agent
(transfer, plan and dividend disbursing agent), for which it
receives fees which are paid monthly by the fund as an expense of
all its shareholders. The fee paid to Putnam Investor Services
is determined on the basis of the number of shareholder accounts,
the number of transactions and the assets of the fund. Putnam
Investor Services has won the DALBAR Service Award eight times in
the past nine years. In 1997 and 1998, Putnam was the only
company to win all three DALBAR Awards: for service to investors,
to financial advisors, and to variable annuity contract holders.
DALBAR, Inc. an independent research firm, presents the awards to
financial services firms that provide consistently excellent
service.

PFTC is the custodian of the fund's assets. In carrying out its
duties under its custodian contract, PFTC may employ one or more
subcustodians whose responsibilities include safeguarding and
controlling the fund's cash and securities, handling the receipt
and delivery of securities and collecting interest and dividends
on the fund's investments. PFTC and any subcustodians employed
by it have a lien on the securities of the fund (to the extent
permitted by the fund's investment restrictions) to secure
charges and any advances made by such subcustodians at the end of
any day for the purpose of paying for securities purchased by the
fund. The fund expects that such advances will exist only in
unusual circumstances. Neither PFTC nor any subcustodian
determines the investment policies of the fund or decides which
securities the fund will buy or sell. PFTC pays the fees and
other charges of any subcustodians employed by it. The fund may
from time to time pay custodial expenses in full or in part
through the placement by Putnam Management of the fund's
portfolio transactions with the subcustodians or with a third-
party broker having an agreement with the subcustodians. The
fund pays PFTC an annual fee based on the fund's assets,
securities transactions and securities holdings and reimburses
PFTC for certain out-of-pocket expenses incurred by it or any
subcustodian employed by it in performing custodial services.

SEE "CHARGES AND EXPENSES" IN PART I OF THIS SAI FOR INFORMATION
ON FEES AND REIMBURSEMENTS FOR INVESTOR SERVICING AND CUSTODY
RECEIVED BY PFTC. THE FEES MAY BE REDUCED BY CREDITS ALLOWED BY
PFTC.

DETERMINATION OF NET ASSET VALUE

The fund determines the net asset value per share of each class
of shares once each day the New York Stock Exchange (the
"Exchange") is open. Currently, the Exchange is closed
Saturdays, Sundays and the following holidays: New Year's Day,
Rev. Dr. Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, the Fourth of July, Labor Day, Thanksgiving
and Christmas. The fund determines net asset value as of the
close of regular trading on the Exchange, currently 4:00 p.m.
However, equity options held by the fund are priced as of the
close of trading at 4:10 p.m., and futures contracts on U.S.
government and other fixed-income securities and index options
held by the fund are priced as of their close of trading at 4:15
p.m.

Securities for which market quotations are readily available are
valued at prices which, in the opinion of Putnam Management, most
nearly represent the market values of such securities.
Currently, such prices are determined using the last reported
sale price or, if no sales are reported (as in the case of some
securities traded over-the-counter), the last reported bid price,
except that certain securities are valued at the mean between the
last reported bid and asked prices. Short-term investments
having remaining maturities of 60 days or less are valued at
amortized cost, which approximates market value. All other
securities and assets are valued at their fair value following
procedures approved by the Trustees. Liabilities are deducted
from the total, and the resulting amount is divided by the number
of shares of the class outstanding.

Reliable market quotations are not considered to be readily
available for long-term corporate bonds and notes, certain
preferred stocks, tax-exempt securities, and certain foreign
securities. These investments are valued at fair value on the
basis of valuations furnished by pricing services, which
determine valuations for normal, institutional-size trading units
of such securities using methods based on market transactions for
comparable securities and various relationships between
securities which are generally recognized by institutional
traders.

If any securities held by the fund are restricted as to resale,
Putnam Management determines their fair value following
procedures approved by the Trustees. The fair value of such
securities is generally determined as the amount which the fund
could reasonably expect to realize from an orderly disposition of
such securities over a reasonable period of time. The valuation
procedures applied in any specific instance are likely to vary
from case to case. However, consideration is generally given to
the financial position of the issuer and other fundamental
analytical data relating to the investment and to the nature of
the restrictions on disposition of the securities (including any
registration expenses that might be borne by the fund in
connection with such disposition). In addition, specific factors
are also generally considered, such as the cost of the
investment, the market value of any unrestricted securities of
the same class, the size of the holding, the prices of any recent
transactions or offers with respect to such securities and any
available analysts' reports regarding the issuer.

Generally, trading in certain securities (such as foreign
securities) is substantially completed each day at various times
prior to the close of the Exchange. The values of these
securities used in determining the net asset value of the fund's
shares are computed as of such times. Also, because of the
amount of time required to collect and process trading
information as to large numbers of securities issues, the values
of certain securities (such as convertible bonds, U.S. government
securities, and tax-exempt securities) are determined based on
market quotations collected earlier in the day at the latest
practicable time prior to the close of the Exchange.
Occasionally, events affecting the value of such securities may
occur between such times and the close of the Exchange which will
not be reflected in the computation of the fund's net asset
value. If events materially affecting the value of such
securities occur during such period, then these securities will
be valued at their fair value following procedures approved by
the Trustees. In addition, securities held by some of the funds
may be traded in foreign markets that are open for business on
days that a fund is not, and the trading of such securities on
those days may have an impact on the value of a shareholder's
investment at a time when the shareholder cannot buy and sell
shares of the fund.

Money market funds generally value their portfolio securities at
amortized cost according to Rule 2a-7 under the Investment
Company Act of 1940.

HOW TO BUY SHARES

GENERAL

The prospectus contains a general description of how investors
may buy shares of the fund and states whether the fund offers
more than one class of shares. This SAI contains additional
information which may be of interest to investors.

Class A shares and class M shares are generally sold with a sales
charge payable at the time of purchase (except for class A shares
and class M shares of money market funds). As used in this SAI
and unless the context requires otherwise, the term "class A
shares" includes shares of funds that offer only one class of
shares. The prospectus contains a table of applicable sales
charges. For information about how to purchase class A or class
M shares of a Putnam fund at net asset value through an employer-
sponsored retirement plan, please consult your employer. Certain
purchases of class A shares and class M shares may be exempt from
a sales charge or, in the case of class A shares, may be subject
to a contingent deferred sales charge ("CDSC"). See "General--
Sales without sales charges or contingent deferred sales
charges," "Additional Information About Class A and Class M
shares," and "Contingent Deferred Sales Charges--Class A shares."

Class B shares and class C shares are sold subject to a CDSC
payable upon redemption within a specified period after purchase.
The prospectus contains a table of applicable CDSCs.

Class B shares will automatically convert into class A shares no
later than the end of the month eight years after the purchase
date, and may, in the discretion of the Trustees, convert to
class A shares earlier. Class B shares acquired by exchanging
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
condition that such conversions will not constitute taxable
events for Federal tax purposes.

Class Y shares, which are not subject to sales charges or a CDSC,
are available only to certain defined contribution plans. See
the prospectus that offers class Y shares for more information.
Certain purchase programs described below are not available to
defined contribution plans. Consult your employer for
information on how to purchase shares through your plan.

The fund is currently making a continuous offering of its shares.
The fund receives the entire net asset value of shares sold. The
fund will accept unconditional orders for shares to be executed
at the public offering price based on the net asset value per
share next determined after the order is placed. In the case of
class A shares and class M shares, the public offering price is
the net asset value plus the applicable sales charge, if any. No
sales charge is included in the public offering price of other
classes of shares. In the case of orders for purchase of shares
placed through dealers, the public offering price will be based
on the net asset value determined on the day the order is placed,
but only if the dealer receives the order before the close of
regular trading on the Exchange. If the dealer receives the
order after the close of the Exchange, the price will be based on
the net asset value next determined. If funds for the purchase
of shares are sent directly to Putnam Investor Services, they
will be invested at the public offering price based on the net
asset value next determined after receipt. Payment for shares of
the fund must be in U.S. dollars; if made by check, the check
must be drawn on a U.S. bank.

Initial and subsequent purchases must satisfy the minimums stated
in the prospectus, except that (i) individual investments under
certain employee benefit plans or Tax Qualified Retirement Plans
may be lower, (ii) persons who are already shareholders may make
additional purchases of $50 or more by sending funds directly to
Putnam Investor Services (see "Your investing account" below),
and (iii) for investors participating in systematic investment
plans and military allotment plans, the initial and subsequent
purchases must be $25 or more. Information about these plans is
available from investment dealers or from Putnam Mutual Funds.

As a convenience to investors, shares may be purchased through a
systematic investment plan. Pre-authorized monthly bank drafts
for a fixed amount (at least $25) are used to purchase fund
shares at the applicable public offering price next determined
after Putnam Mutual Funds receives the proceeds from the draft.
A shareholder may choose any day of the month and, if a given
month (for example, February) does not contain that particular
date, or if the date falls on a weekend or holiday, the draft
will be processed on the next business day. Further information
and application forms are available from investment dealers or
from Putnam Mutual Funds.

Except for funds that declare a distribution daily, distributions
to be reinvested are reinvested without a sales charge in shares
of the same class as of the ex-dividend date using the net asset
value determined on that date, and are credited to a
shareholder's account on the payment date. Dividends for Putnam
money market funds are credited to a shareholder's account on the
payment date. Distributions for all other funds that declare a
distribution daily are reinvested without a sales charge as of
the last day of the period for which distributions are paid using
the net asset value determined on that date, and are credited to
a shareholder's account on the payment date.

PAYMENT IN SECURITIES. In addition to cash, the fund may accept
securities as payment for fund shares at the applicable net asset
value. Generally, the fund will only consider accepting
securities to increase its holdings in a portfolio security, or
if Putnam Management determines that the offered securities are a
suitable investment for the fund and in a sufficient amount for
efficient management.

While no minimum has been established, it is expected that the
fund would not accept securities with a value of less than
$100,000 per issue as payment for shares. The fund may reject in
whole or in part any or all offers to pay for purchases of fund
shares with securities, may require partial payment in cash for
such purchases to provide funds for applicable sales charges, and
may discontinue accepting securities as payment for fund shares
at any time without notice. The fund will value accepted
securities in the manner described in the section "Determination
of Net Asset Value" for valuing shares of the fund. The fund
will only accept securities which are delivered in proper form.
The fund will not accept options or restricted securities as
payment for shares. The acceptance of securities by certain
funds in exchange for fund shares is subject to additional
requirements. For federal income tax purposes, a purchase of
fund shares with securities will be treated as a sale or exchange
of such securities on which the investor will generally realize a
taxable gain or loss. The processing of a purchase of fund
shares with securities involves certain delays while the fund
considers the suitability of such securities and while other
requirements are satisfied. For information regarding procedures
for payment in securities, contact Putnam Mutual Funds.
Investors should not send securities to the fund except when
authorized to do so and in accordance with specific instructions
received from Putnam Mutual Funds.

SALES WITHOUT SALES CHARGES OR CONTINGENT DEFERRED SALES CHARGES.
The fund may sell shares without a sales charge or CDSC to:

(i) current and retired Trustees of the fund; officers of the
fund; directors and current and retired U.S. full-time
employees of Putnam Management, Putnam Mutual Funds, their
parent corporations and certain corporate affiliates; family
members of and employee benefit plans for the foregoing; and
partnerships, trusts or other entities in which any of the
foregoing has a substantial interest;

(ii) employer-sponsored retirement plans, for the repurchase
of shares in connection with repayment of plan loans made to
plan participants (if the sum loaned was obtained by
redeeming shares of a Putnam fund sold with a sales charge)
(not offered by tax-exempt funds);

(iii) clients of administrators of tax-qualified employer-
sponsored retirement plans which have entered into agreements
with Putnam Mutual Funds (not offered by tax-exempt funds);

(iv) registered representatives and other employees of broker-
dealers having sales agreements with Putnam Mutual Funds;
employees of financial institutions having sales agreements
with Putnam Mutual Funds or otherwise having an arrangement
with any such broker-dealer or financial institution with
respect to sales of fund shares; and their spouses and
children under age 21 (Putnam Mutual Funds is regarded as
the dealer of record for all such accounts);

(v) investors meeting certain requirements who sold shares of
certain Putnam closed-end funds pursuant to a tender offer by
such closed-end fund;

(vi) a trust department of any financial institution
purchasing shares of the fund in its capacity as trustee of
any trust (other than a tax-qualified retirement plan trust),
through an arrangement approved by Putnam Mutual Funds, if
the value of the shares of the fund and other Putnam funds
purchased or held by all such trusts exceeds $1 million in
the aggregate; and

(vii) "wrap accounts" maintained for clients of broker-
dealers, financial institutions or financial intermediaries
who have entered into agreements with Putnam Mutual Funds
with respect to such accounts, which in all cases shall be
subject to a wrap fee economically comparable to a sales
charge. Fund shares offered pursuant to this waiver may not
be advertised as "no load," or otherwise offered for sale at
NAV without a wrap fee.

In addition, each of the Putnam funds may issue its shares at net
asset value without an initial sales charge or a CDSC in
connection with the acquisition of substantially all of the
securities owned by other investment companies or personal
holding companies, and the CDSC will be waived on redemptions of
shares arising out of death or post-purchase disability of a
shareholder or settlor of a living trust account and on
redemptions in connection with certain withdrawals from IRA or
other retirement plans and on redemptions to pay premiums for
insurance under Putnam's insured investor program. Up to 12% of
the value of shares subject to a systematic withdrawal plan may
also be redeemed each year without a CDSC. The fund may sell
class A or class M shares at net asset value to members of
qualified groups. See "Group purchases of class A and class M
shares" below. Class A and class M shares are available without
an initial sales charge to "class A qualified benefit plans" and
"class M qualified benefit plans," respectively, as described
below. See "Qualified benefit plans; Individual account plans"
below.

PAYMENTS TO DEALERS. Putnam Mutual Funds may, at its expense,
pay concessions in addition to the payments disclosed in the
prospectus to dealers which satisfy certain criteria established
from time to time by Putnam Mutual Funds relating to increasing
net sales of shares of the Putnam funds over prior periods, and
certain other factors.

ADDITIONAL INFORMATION ABOUT CLASS A AND CLASS M SHARES

The underwriter's commission is the sales charge shown in the
prospectus less any applicable dealer discount. Putnam Mutual
Funds will give dealers ten days' notice of any changes in the
dealer discount. Putnam Mutual Funds retains the entire sales
charge on any retail sales made by it.

Putnam Mutual Funds offers several plans by which an investor may
obtain reduced sales charges on purchases of class A shares and
class M shares. The variations in sales charges reflect the
varying efforts required to sell shares to separate categories of
purchasers. These plans may be altered or discontinued at any
time.

The public offering price of class A and class M shares is the
net asset value plus a sales charge that varies depending on the
size of your purchase. The fund receives the net asset value.
The sales charge is allocated between your investment dealer and
Putnam Mutual Funds as shown in the following table, except when
Putnam Mutual Funds, in its discretion, allocates the entire
amount to your investment dealer.

For Growth Funds, Growth and Income Funds and Asset Allocation
Funds only:

CLASS A CLASS M
AMOUNT OF AMOUNT OF
SALES CHARGE SALES CHARGE SALES
CHARGE SALES CHARGE
AS A REALLOWED TO AS A
REALLOWED TO
PERCENTAGE DEALERS AS A
PERCENTAGE DEALERS AS A
AMOUNT OF TRANSACTION OF OFFERING PERCENTAGE OF OF
OFFERING PERCENTAGE OF
AT OFFERING PRICE ($) PRICE OFFERING PRICE PRICE
OFFERING PRICE
- -----------------------------------------------------------------
- -----------------------------------------------------------------
- ----
Under 50,000 5.75% 5.00% 3.50% 3.00%
50,000 but under 100,000 4.50 3.75 2.50 2.00
100,000 but under 250,000 3.50 2.75 1.50 1.00
250,000 but under 500,000 2.50 2.00 1.00 1.00
500,000 but under 1,000,000 2.00 1.75 NONE NONE
1,000,000 and above NONE NONE NONE NONE
- -----------------------------------------------------------------
- -----------------------------------------------------------------
- ----

For Income Funds only (except for Putnam Intermediate U.S.
Government Income Fund and Putnam Preferred Income Fund):

CLASS A CLASS M
AMOUNT OF AMOUNT OF
SALES CHARGE SALES CHARGE SALES
CHARGE SALES CHARGE
AS A REALLOWED TO AS A
REALLOWED TO
PERCENTAGE DEALERS AS A
PERCENTAGE DEALERS AS A
AMOUNT OF TRANSACTION OF OFFERING PERCENTAGE OF OF
OFFERING PERCENTAGE OF
AT OFFERING PRICE ($) PRICE OFFERING PRICE PRICE
OFFERING PRICE
- -----------------------------------------------------------------
- -----------------------------------------------------------------
- ---
Under 50,000 4.75% 4.25% 3.25% 3.00%
50,000 but under 100,000 4.50 4.00 2.25 2.00
100,000 but under 250,000 3.50 3.00 1.50 1.25
250,000 but under 500,000 2.50 2.25 1.00 1.00
500,000 but under 1,000,000 2.00 1.75 NONE NONE
1,000,000 and above NONE NONE NONE NONE
- -----------------------------------------------------------------
- -----------------------------------------------------------------
- ---

For Putnam Intermediate U.S. Government Income Fund and Putnam
Preferred Income Fund only:

CLASS A CLASS M
AMOUNT OF AMOUNT OF
SALES CHARGE SALES CHARGE SALES
CHARGE SALES CHARGE
AS A REALLOWED TO AS A
REALLOWED TO
PERCENTAGE DEALERS AS A
PERCENTAGE DEALERS AS A
AMOUNT OF TRANSACTION OF OFFERING PERCENTAGE OF OF
OFFERING PERCENTAGE OF
AT OFFERING PRICE ($) PRICE OFFERING PRICE PRICE
OFFERING PRICE
- -----------------------------------------------------------------
- -----------------------------------------------------------------
- ----
Under 100,000 3.25% 3.00% 2.00% 1.80%
100,000 but under 250,000 2.50 2.25 1.50 1.30
250,000 but under 500,000 2.00 1.75 1.00 1.00
500,000 but under 1,000,000 1.50 1.25 NONE NONE
1,000,000 and above NONE NONE NONE NONE
- -----------------------------------------------------------------
- -----------------------------------------------------------------
- ----

For Tax Free Funds only:

CLASS A CLASS M
AMOUNT OF AMOUNT OF
SALES CHARGE SALES CHARGE SALES
CHARGE SALES CHARGE
AS A REALLOWED TO AS A
REALLOWED TO
PERCENTAGE DEALERS AS A
PERCENTAGE DEALERS AS A
AMOUNT OF TRANSACTION OF OFFERING PERCENTAGE OF OF
OFFERING PERCENTAGE OF
AT OFFERING PRICE ($) PRICE OFFERING PRICE PRICE
OFFERING PRICE
- -----------------------------------------------------------------
- -----------------------------------------------------------------
- ----
Under 25,000 4.75% 4.50% 3.25% 3.00%
25,000 but under 50,000 4.50 4.25 3.25 3.00
50,000 but under 100,000 4.50 4.25 2.25 2.00
100,000 but under 250,000 3.75 3.50 1.50 1.25
250,000 but under 500,000 3.00 2.75 1.00 1.00
500,000 but under 1,000,000 2.00 1.85 NONE NONE
1,000,000 and above NONE NONE NONE NONE
- -----------------------------------------------------------------
- -----------------------------------------------------------------
- ----

COMBINED PURCHASE PRIVILEGE. The following persons may qualify
for the sales charge reductions or eliminations shown in the
prospectus by combining into a single transaction the purchase of
class A shares or class M shares with other purchases of any
class of shares:

(i) an individual, or a "company" as defined in Section
2(a)(8) of the Investment Company Act of 1940 (which
includes corporations which are corporate affiliates of
each other);

(ii) an individual, his or her spouse and their children
under twenty-one, purchasing for his, her or their own
account;

(iii) a trustee or other fiduciary purchasing for a single
trust estate or single fiduciary account (including a
pension, profit-sharing, or other employee benefit trust
created pursuant to a plan qualified under Section 401 of
the Internal Revenue Code of 1986, as amended (the
"Code"));

(iv) tax-exempt organizations qualifying under Section
501(c)(3) of the Internal Revenue Code (not including tax-
exempt organizations qualifying under Section 403(b)(7) (a
"403(b) plan") of the Code; and

(v) employee benefit plans of a single employer or of
affiliated employers, other than 403(b) plans.

A combined purchase currently may also include shares of any
class of other continuously offered Putnam funds (other than
money market funds) purchased at the same time through a single
investment dealer, if the dealer places the order for such shares
directly with Putnam Mutual Funds.

CUMULATIVE QUANTITY DISCOUNT (RIGHT OF ACCUMULATION). A
purchaser of class A shares or class M shares may qualify for a
cumulative quantity discount by combining a current purchase (or
combined purchases as described above) with certain other shares
of any class of Putnam funds already owned. The applicable sales
charge is based on the total of:

(i) the investor's current purchase; and

(ii) the maximum public offering price (at the close of
business on the previous day) of:

(a) all shares held by the investor in all of the
Putnam funds (except money market funds); and

(b) any shares of money market funds acquired by
exchange from other Putnam funds; and

(iii) the maximum public offering price of all shares
described in paragraph (ii) owned by another shareholder
eligible to participate with the investor in a "combined
purchase" (see above).

To qualify for the combined purchase privilege or to obtain the
cumulative quantity discount on a purchase through an investment
dealer, when each purchase is made the investor or dealer must
provide Putnam Mutual Funds with sufficient information to verify
that the purchase qualifies for the privilege or discount. The
shareholder must furnish this information to Putnam Investor
Services when making direct cash investments.

STATEMENT OF INTENTION. Investors may also obtain the reduced
sales charges for class A shares or class M shares shown in the
prospectus for investments of a particular amount by means of a
written Statement of Intention, which expresses the investor's
intention to invest that amount (including certain "credits," as
described below) within a period of 13 months in shares of any
class of the fund or any other continuously offered Putnam fund
(excluding money market funds). Each purchase of class A shares
or class M shares under a Statement of Intention will be made at
the public offering price applicable at the time of such purchase
to a single transaction of the total dollar amount indicated in
the Statement of Intention. A Statement of Intention may include
purchases of shares made not more than 90 days prior to the date
that an investor signs a Statement; however, the 13-month period
during which the Statement of Intention is in effect will begin
on the date of the earliest purchase to be included.

An investor may receive a credit toward the amount indicated in
the Statement of Intention equal to the maximum public offering
price as of the close of business on the previous day of all
shares he or she owns on the date of the Statement of Intention
which are eligible for purchase under a Statement of Intention
(plus any shares of money market funds acquired by exchange of
such eligible shares). Investors do not receive credit for
shares purchased by the reinvestment of distributions. Investors
qualifying for the "combined purchase privilege" (see above) may
purchase shares under a single Statement of Intention.

The Statement of Intention is not a binding obligation upon the
investor to purchase the full amount indicated. The minimum
initial investment under a Statement of Intention is 5% of such
amount, and must be invested immediately. Class A shares or
class M shares purchased with the first 5% of such amount will be
held in escrow to secure payment of the higher sales charge
applicable to the shares actually purchased if the full amount
indicated is not purchased. When the full amount indicated has
been purchased, the escrow will be released. If an investor
desires to redeem escrowed shares before the full amount has been
purchased, the shares will be released from escrow only if the
investor pays the sales charge that, without regard to the
Statement of Intention, would apply to the total investment made
to date.

To the extent that an investor purchases more than the dollar
amount indicated on the Statement of Intention and qualifies for
a further reduced sales charge, the sales charge will be adjusted
for the entire amount purchased at the end of the 13-month
period, upon recovery from the investor's dealer of its portion
of the sales charge adjustment. Once received from the dealer,
which may take a period of time or may never occur, the sales
charge adjustment will be used to purchase additional shares at
the then current offering price applicable to the actual amount
of the aggregate purchases. These additional shares will not be
considered as part of the total investment for the purpose of
determining the applicable sales charge pursuant to the Statement
of Intention. No sales charge adjustment will be made unless and
until the investor's dealer returns any excess commissions
previously received.

To the extent that an investor purchases less than the dollar
amount indicated on the Statement of Intention within the 13-
month period, the sales charge will be adjusted upward for the
entire amount purchased at the end of the 13-month period. This
adjustment will be made by redeeming shares from the account to
cover the additional sales charge, the proceeds of which will be
paid to the investor's dealer and Putnam Mutual Funds in
accordance with the prospectus. If the account exceeds an amount
that would otherwise qualify for a reduced sales charge, that
reduced sales charge will be applied.

Statements of Intention are not available for certain employee
benefit plans.

Statement of Intention forms may be obtained from Putnam Mutual
Funds or from investment dealers. Interested investors should
read the Statement of Intention carefully.

GROUP PURCHASES OF CLASS A AND CLASS M SHARES. Members of
qualified groups may purchase class A shares of the fund at a
group sales charge rate of 4.50% of the public offering price
(4.71% of the net amount invested). The dealer discount on such
sales is 3.75% of the offering price. Members of qualified
groups may also purchase class M shares at net asset value.

To receive the class A or class M group rate, group members must
purchase shares through a single investment dealer designated by
the group. The designated dealer must transmit each member's
initial purchase to Putnam Mutual Funds, together with payment
and completed application forms. After the initial purchase, a
member may send funds for the purchase of shares directly to
Putnam Investor Services. Purchases of shares are made at the
public offering price based on the net asset value next
determined after Putnam Mutual Funds or Putnam Investor Services
receives payment for the shares. The minimum investment
requirements described above apply to purchases by any group
member. Only shares purchased under the class A group discount
are included in calculating the purchased amount for the purposes
of these requirements.

Qualified groups include the employees of a corporation or a sole
proprietorship, members and employees of a partnership or
association, or other organized groups of persons (the members of
which may include other qualified groups) provided that: (i) the
group has at least 25 members of which, with respect to the class
A discount only, at least 10 members participate in the initial
purchase; (ii) the group has been in existence for at least six
months; (iii) the group has some purpose in addition to the
purchase of investment company shares at a reduced sales charge;
(iv) the group's sole organizational nexus or connection is not
that the members are credit card holders of a company, policy
holders of an insurance company, customers of a bank or broker-
dealer, clients of an investment adviser or security holders of a
company; (v) with respect to the class A discount only, the group
agrees to provide its designated investment dealer access to the
group's membership by means of written communication or direct
presentation to the membership at a meeting on not less
frequently than an annual basis; (vi) the group or its investment
dealer will provide annual certification in form satisfactory to
Putnam Investor Services that the group then has at least 25
members and, with respect to the class A discount only, that at
least ten members participated in group purchases during the
immediately preceding 12 calendar months; and (vii) the group or
its investment dealer will provide periodic certification in form
satisfactory to Putnam Investor Services as to the eligibility of
the purchasing members of the group.

Members of a qualified group include: (i) any group which meets
the requirements stated above and which is a constituent member
of a qualified group; (ii) any individual purchasing for his or
her own account who is carried on the records of the group or on
the records of any constituent member of the group as being a
good standing employee, partner, member or person of like status
of the group or constituent member; or (iii) any fiduciary
purchasing shares for the account of a member of a qualified
group or a member's beneficiary. For example, a qualified group
could consist of a trade association which would have as its
members individuals, sole proprietors, partnerships and
corporations. The members of the group would then consist of the
individuals, the sole proprietors and their employees, the
members of the partnerships and their employees, and the
corporations and their employees, as well as the trustees of
employee benefit trusts acquiring class A shares for the benefit
of any of the foregoing.

A member of a qualified group may, depending upon the value of
class A shares of the fund owned or proposed to be purchased by
the member, be entitled to purchase class A shares of the fund at
non-group sales charge rates shown in the prospectus which may be
lower than the group sales charge rate, if the member qualifies
as a person entitled to reduced non-group sales charges. Such a
group member will be entitled to purchase at the lower rate if,
at the time of purchase, the member or his or her investment
dealer furnishes sufficient information for Putnam Mutual Funds
or Putnam Investor Services to verify that the purchase qualifies
for the lower rate.

Interested groups should contact their investment dealer or
Putnam Mutual Funds. The fund reserves the right to revise the
terms of or to suspend or discontinue group sales at any time.

QUALIFIED BENEFIT PLANS; INDIVIDUAL ACCOUNT PLANS. The terms
"class A qualified benefit plan" and "class M qualified benefit
plan" mean any employer-sponsored plan or arrangement, whether or
not tax-qualified and whether or not Putnam Fiduciary Trust
Company or its affiliates provide recordkeeping or other
services, that initially invest at least $1 million or $500,000,
respectively, in class A shares or class M shares of the fund and
other Putnam funds.

The fund may sell class A shares at net asset value to class A
qualified benefit plans and may sell class M shares at net asset
value to class M qualified benefit plans.

The table of sales charges in the prospectus applies to sales to
employer-sponsored retirement plans that choose not to be treated
as class A qualified benefit plans, except that the fund may sell
class A shares at net asset value to employee benefit plans,
including plans with respect to which separate accounts are
maintained for each participant, of employers or of affiliated
(as defined in Section 2(a)(3)(C) of the Investment Company Act
of 1940) employers which have at least $1 million in assets to
whom such plan is made available, in connection with a payroll
deduction system of plan funding (or other system acceptable to
Putnam Investor Services) by which contributions or account
information for plan participation are transmitted to Putnam
Investor Services by methods acceptable to Putnam Investor
Services.

Additional information about qualified benefit plans is available
from investment dealers or from Putnam Mutual Funds.

CONTINGENT DEFERRED SALES CHARGES; COMMISSIONS

CLASS A SHARES. Except as described below, a CDSC of 0.50%
(0.75% in the case of plans with less than $5 million in Putnam
funds and other investments managed by Putnam Management or its
affiliates) of the total amount redeemed is imposed on
redemptions of shares purchased by class A qualified benefit
plans if, within two years of a plan's initial purchase of class
A shares, it redeems 90% or more of its cumulative purchases.
Thereafter, such plan is no longer liable for any CDSC. Class A
qualified benefit plans whose dealer of record has, with Putnam
Mutual Funds' approval, waived its commission or agreed to refund
its commission to Putnam Mutual Funds in the event a CDSC would
otherwise be applicable, are not subject to any CDSC.

Similarly, class A shares purchased at net asset value by any
investor other than a class A qualified benefit plan, including
purchases pursuant to any Combined Purchase Privilege, Right of
Accumulation or Statement of Intention, are subject to a CDSC of
1.00% or 0.50%, respectively, if redeemed within the first or
second year after purchase, unless the dealer of record waived
its commission with Putnam Mutual Funds' approval. The class A
CDSC is imposed on the lower of the cost and the current net
asset value of the shares redeemed.

Except as described below for sales to class A qualified benefit
plans, Putnam Mutual Funds pays investment dealers of record
commissions on sales of class A shares of $1 million or more,
including purchases pursuant to any Combined Purchase Privilege,
Right of Accumulation or Statement of Intention, during the one-
year period beginning with the date of the initial purchase at
net asset value. Each subsequent one-year measuring period for
these purposes will begin with the first net asset value purchase
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 class A qualified benefit plan,
Putnam Mutual Funds pays commissions to the dealer of record at
the time of the sale on net monthly purchases up to the following
rates: 1.00% of the first $1 million, 0.75% of the next $1
million and 0.50% thereafter.

Different CDSC and commission rates may apply to shares purchased
prior to April 15, 1997 and to shares purchased by investment-
only plans prior to August 1, 1999.

ALL SHARES. Investors who set up an Automatic Cash Withdrawal
Plan ("ACWP") for a share account (see "Plans available to
shareholders -- Automatic Cash Withdrawal Plan") may withdraw
through the ACWP up to 12% of the net asset value of the account
(calculated as set forth below) each year without incurring any
CDSC. Shares not subject to a CDSC (such as shares representing
reinvestment of distributions) will be redeemed first and will
count toward the 12% limitation. If there are insufficient
shares not subject to a CDSC, shares subject to the lowest CDSC
liability will be redeemed next until the 12% limit is reached.
The 12% figure is calculated on a pro rata basis at the time of
the first payment made pursuant to an ACWP and recalculated
thereafter on a pro rata basis at the time of each ACWP payment.
Therefore, shareholders who have chosen an ACWP based on a
percentage of the net asset value of their account of up to 12%
will be able to receive ACWP payments without incurring a CDSC.
However, shareholders who have chosen a specific dollar amount
(for example, $100 per month from a fund that pays income
distributions monthly) for their periodic ACWP payment should be
aware that the amount of that payment not subject to a CDSC may
vary over time depending on the net asset value of their account.
For example, if the net asset value of the account is $10,000 at
the time of payment, the shareholder will receive $100 free of
the CDSC (12% of $10,000 divided by 12 monthly payments).
However, if at the time of the next payment the net asset value
of the account has fallen to $9,400, the shareholder will receive
$94 free of any CDSC (12% of $9,400 divided by 12 monthly
payments) and $6 subject to the lowest applicable CDSC. This
ACWP privilege may be revised or terminated at any time.

No CDSC is imposed on the redemption of shares of any class
subject to a CDSC to the extent that the shares redeemed (i) are
no longer subject to the holding period therefor, (ii) resulted
from reinvestment of distributions, or (iii) were exchanged for
shares of another Putnam fund, provided that the shares acquired
in such exchange or subsequent exchanges (including shares of a
Putnam money market fund) will continue to remain subject to the
CDSC, if applicable, until the applicable holding period expires.
In determining whether the CDSC applies to each redemption,
shares not subject to a CDSC are redeemed first.

The fund will waive any CDSC on redemptions, in the case of
individual, joint or Uniform Transfers to Minors Act accounts, in
the event of death or post-purchase disability of a shareholder,
for the purpose of paying benefits pursuant to tax-qualified
retirement plans ("Benefit Payments"), or, in the case of living
trust accounts, in the event of the death or post-purchase
disability of the settlor of the trust. Benefit Payments
currently include, without limitation, (1) distributions from an
IRA due to death or disability, (2) a return of excess
contributions to an IRA or 401(k) plan, and (3) distributions
from retirement plans qualified under Section 401(a) of the Code
or from a 403(b) plan due to death, disability, retirement or
separation from service. These waivers may be changed at any
time. Additional waivers may apply to IRA accounts opened prior
to February 1, 1994.

ADDITIONAL INFORMATION ABOUT CLASS B SHARES

Except as noted below, Putnam Mutual Funds will pay a 4%
commission on sales of class B shares of a fund only to those
financial intermediaries who have entered into service agreements
with Putnam Mutual Funds. For tax-exempt funds, this commission
includes a 0.20% pre-paid service fee (except for Putnam
Municipal Income Fund, which has a 0.25% pre-paid service fee).
For Putnam Intermediate U.S. Government Income Fund, Putnam
Mutual Funds will pay a 2.75% commission to financial
intermediaries selling class B shares of the fund. For money
market funds, class B shares may only be purchased as part of an
exchange to class B shares of another Putnam fund or from class B
shares of another Putnam fund. Class B share purchases for money
market funds are not subject to a separate CDSC, but a if a
shareholder exchanges class B shares from a non-money market fund
to a money market fund and then redeems the class B shares of the
money market fund, that redemption will be subject to the CDSC
applicable to the class B shares of the non-money market fund.
Therefore no up-front commission is paid on sales of class B
shares for money market funds. Putnam Mutual Funds will retain
any contingent deferred sales charges imposed on redemptions of
class B shares to compensate it for the cost of paying the up-
front commissions paid to financial intermediaries for class B
share sales.

DISTRIBUTION PLANS

If the fund or a class of shares of the fund has adopted a
distribution plan, the prospectus describes the principal
features of the plan. This SAI contains additional information
which may be of interest to investors.

Continuance of a plan is subject to annual approval by a vote of
the Trustees, including a majority of the Trustees who are not
interested persons of the fund and who have no direct or indirect
interest in the plan or related arrangements (the "Qualified
Trustees"), cast in person at a meeting called for that purpose.
All material amendments to a plan must be likewise approved by
the Trustees and the Qualified Trustees. No plan may be amended
in order to increase materially the costs which the fund may bear
for distribution pursuant to such plan without also being
approved by a majority of the outstanding voting securities of
the fund or the relevant class of the fund, as the case may be.
A plan terminates automatically in the event of its assignment
and may be terminated without penalty, at any time, by a vote of
a majority of the Qualified Trustees or by a vote of a majority
of the outstanding voting securities of the fund or the relevant
class of the fund, as the case may be.

Putnam Mutual Funds compensates qualifying dealers (including,
for this purpose, certain financial institutions) for sales of
shares and the maintenance of shareholder accounts.

Putnam Mutual Funds may suspend or modify its payments to
dealers. The payments are also subject to the continuation of
the relevant distribution plan, the terms of the service
agreements between the dealers and Putnam Mutual Funds and any
applicable limits imposed by the National Association of
Securities Dealers, Inc.

Financial institutions receiving payments from Putnam Mutual
Funds as described above may be required to comply with various
state and federal regulatory requirements, including among others
those regulating the activities of securities brokers or dealers.

Except as otherwise agreed between Putnam Mutual Funds and a
dealer, for purposes of determining the amounts payable to
dealers for shareholder accounts for which such dealers are
designated as the dealer of record, "average net asset value"
means the product of (i) the average daily share balance in such
account(s) and (ii) the average daily net asset value of the
relevant class of shares over the quarter.

CLASS A SHARES:

Putnam Mutual Funds makes quarterly payments to dealers at the
annual rates set forth below (as a percentage of the average net
asset value of class A shares for which such dealers are
designated the dealer of record) except that payments to dealers
for shares held by class A qualified benefit plans may be made at
other rates, as described below. No payments are made during the
first year after purchase on shares purchased at net asset value
by shareholders that invest at least $1 million or that are class
A qualified benefit plans, unless the shareholder has made
arrangements with Putnam Mutual Funds and the dealer of record
has waived the sales commission.

Rate Fund

0.25% All funds currently making
payments under a
class A distribution plan, except
for those listed
below

0.50% for shares purchased on Putnam Diversified Equity
Trust
or before 7/1/95; 0.25% for
shares purchased after 7/1/95

0.20% Putnam Tax-Free High Yield Fund
Putnam Tax-Free Insured Fund

0.20% for shares purchased on Putnam Balanced
Retirement Fund
or before 12/31/89; 0.25% for Putnam Convertible Income-
Growth Trust
shares purchased after 12/31/89 The George Putnam
Fund of Boston
Putnam Global Growth Fund
Putnam Global Natural Resources
Fund
Putnam Health Sciences Trust
The Putnam Fund for Growth and
Income
Putnam Investors Fund
Putnam Vista Fund
Putnam Voyager Fund

0.20% for shares purchased on Putnam High Yield Trust
or before 3/31/90; 0.25% for Putnam U.S. Government
Income Trust
shares purchased after 3/31/90

0.20% for shares purchased on Putnam Income Fund
or before 3/31/91; 0.25% for
shares purchased after 3/31/91

0.20% for shares purchased on Putnam Municipal Income
Fund
or before 5/7/92; 0.25% for
shares purchased after 5/7/92

0.15% for shares purchased on Putnam Michigan Tax
Exempt Income Fund
or before 3/9/92; 0.20% for Putnam Minnesota Tax
Exempt Income Fund
shares purchased after 3/9/92 Putnam Ohio Tax Exempt
Income Fund

0.15% for shares purchased on Putnam Massachusetts Tax
Exempt Income Fund
or before 5/11/92; 0.20% for
shares purchased after 5/11/92

0.15% for shares purchased on Putnam New York Tax Exempt
Opportunities Fund
or before 7/13/92; 0.20% for
shares purchased after 7/13/92

0.15% for shares purchased on Putnam California Tax
Exempt Income Fund
or before 12/31/92; 0.20% for Putnam New Jersey Tax
Exempt Income Fund
shares purchased after 12/31/92 Putnam New York Tax
Exempt Income Fund
Putnam Tax Exempt Income Fund

0.15% for res purchased on Putnam Arizona Tax Exempt
Income Fund
or before 3/5/93; 0.20% for
shares purchased after 3/5/93

0.15% for shares purchased on Putnam Florida Tax Exempt
Income Fund
or before 7/8/93; 0.20% for Putnam Pennsylvania Tax
Exempt Income Fund
shares purchased after 7/8/93

0.00% Putnam California Money Market Fund
Putnam Money Market Fund
Putnam New York Money Market Fund
Putnam Preferred Income Fund
Putnam Tax Exempt Money Market Fund

Putnam Mutual Funds pays service fees to the dealer of record for
plans at the rate of up to 0.25% of average net assets, depending
on the level of service provided by Putnam Fiduciary Trust
Company or its affiliates, by the dealer of record, and by third
parties. Service fees are paid quarterly to the dealer of record
for that quarter.

CLASS B SHARES:

Putnam Mutual Funds makes quarterly payments to dealers at the
annual rates set forth below (as a percentage of the average net
asset value of class B shares for which such dealers are
designated the dealer of record).

Rate Fund

0.25% All funds currently making
payments under a
class B distribution plan, except
for those listed
below

0.25%, except that the first Putnam Municipal Income
Fund
year's service fees of 0.25%
are prepaid at time of sale

0.25%, except that the first Putnam Arizona Tax Exempt
Income Fund
year's service fees of 0.20% Putnam California Tax
Exempt Income Fund
are prepaid at time of sale Putnam Florida Tax Exempt
Income Fund
Putnam Massachusetts Tax Exempt
Income Fund
Putnam Michigan Tax Exempt Income
Fund
Putnam Minnesota Tax Exempt Income
Fund
Putnam New Jersey Tax Exempt Income
Fund
Putnam New York Tax Exempt Income
Fund
Putnam New York Tax Exempt
Opportunities Fund
Putnam Ohio Tax Exempt Income Fund
Putnam Pennsylvania Tax Exempt
Income Fund
Putnam Tax Exempt Income Fund

0.20% for shares purchased on Putnam Tax-Free Insured
Fund
or before 3/31/90; 0.25% for Putnam Tax-Free High
Yield
shares purchased after 3/31/90;
first year's service fees are prepaid
at time of sale

0.00% Putnam Money Market Fund

CLASS C SHARES:

Putnam Mutual Funds makes quarterly payments to dealers at the
annual rates set forth below (as a percentage of the average net
asset value of class C shares for which such dealers are
designated the dealer of record).

Rate Fund

1.00% All funds currently making payments
under a
class C distribution plan, except
the fund listed
below

0.50% Putnam Money Market Fund

CLASS M SHARES:

Putnam Mutual Funds makes quarterly payments to dealers at the
annual rates set forth below (as a percentage of the average net
asset value of class M shares for which such dealers are
designated the dealer of record).

Rate Fund

0.65% All growth and growth and
income funds currently making
payments under a class M
distribution plan

0.45% Putnam Diversified Income
Trust

0.40% All income and money market
funds currently
making payments under a
class M distribution
plan (except for Putnam
Diversified Income Trust, Putnam
Preferred Income Fund and Putnam
Money Market Fund)

0.25% Putnam Preferred Income Fund

0.15% Putnam Money Market Fund

INVESTOR SERVICES

SHAREHOLDER INFORMATION

Each time shareholders buy or sell shares, they will receive a
statement confirming the transaction and listing their current
share balance. (Under certain investment plans, a statement may
only be sent quarterly.) Shareholders will receive a statement
confirming reinvestment of distributions in additional fund
shares (or in shares of other Putnam funds for Dividends Plus
accounts) promptly following the quarter in which the
reinvestment occurs. To help shareholders take full advantage of
their Putnam investment, they will receive a Welcome Kit and a
periodic publication covering many topics of interest to
investors. The fund also sends annual and semiannual reports
that keep shareholders informed about its portfolio and
performance, and year-end tax information to simplify their
recordkeeping. Easy-to-read, free booklets on special subjects
such as the Exchange Privilege and IRAs are available from Putnam
Investor Services. Shareholders may call Putnam Investor
Services toll-free weekdays at 1-800-225-1581 between 8:30 a.m.
and 7:00 p.m. Boston time for more information, including account
balances.

YOUR INVESTING ACCOUNT

The following information provides more detail concerning the
operation of a Putnam Investing Account. For further information
or assistance, investors should consult Putnam Investor Services.
Shareholders who purchase shares through a defined contribution
plan should note that not all of the services or features
described below may be available to them, and they should contact
their employer for details.

A shareholder may reinvest a cash distribution without a front-
end sales charge or without the reinvested shares being subject
to a CDSC, as the case may be, by delivering to Putnam Investor
Services the uncashed distribution check, endorsed to the order
of the fund. Putnam Investor Services must receive the properly
endorsed check within 1 year after the date of the check.

The Investing Account also provides a way to accumulate shares of
the fund. In most cases, after an initial investment of $500, a
shareholder may send checks to Putnam Investor Services for $50
or more, made payable to the fund, to purchase additional shares
at the applicable public offering price next determined after
Putnam Investor Services receives the check. Checks must be
drawn on a U.S. bank and must be payable in U.S. dollars.

Putnam Investor Services acts as the shareholder's agent whenever
it receives instructions to carry out a transaction on the
shareholder's account. Upon receipt of instructions that shares
are to be purchased for a shareholder's account, shares will be
purchased through the investment dealer designated by the
shareholder. Shareholders may change investment dealers at any
time by written notice to Putnam Investor Services, provided the
new dealer has a sales agreement with Putnam Mutual Funds.

Shares credited to an account are transferable upon written
instructions in good order to Putnam Investor Services and may be
sold to the fund as described under "How do I sell fund shares?"
in the prospectus. Money market funds and certain other funds
will not issue share certificates. A shareholder may send to
Putnam Investor Services any certificates which have been
previously issued for safekeeping at no charge to the
shareholder.

Putnam Mutual Funds, at its expense, may provide certain
additional reports and administrative material to qualifying
institutional investors with fiduciary responsibilities to assist
these investors in discharging their responsibilities.
Institutions seeking further information about this service
should contact Putnam Mutual Funds, which may modify or terminate
this service at any time.

Putnam Investor Services may make special services available to
shareholders with investments exceeding $1,000,000. Contact
Putnam Investor Services for details.

The fund pays Putnam Investor Services' fees for maintaining
Investing Accounts.

REINSTATEMENT PRIVILEGE

An investor who has redeemed shares of the fund may reinvest
(within 1 year) the proceeds of such sale in shares of the same
class of the fund, or may be able to reinvest (within 1 year) the
proceeds in shares of the same class of one of the other
continuously offered Putnam funds (through the exchange privilege
described in the prospectus), including, in the case of shares
subject to a CDSC, the amount of CDSC charged on the redemption.
Any such reinvestment would be at the net asset value of the
shares of the fund(s) the investor selects, next determined after
Putnam Mutual Funds receives a Reinstatement Authorization. The
time that the previous investment was held will be included in
determining any applicable CDSC due upon redemptions and, in the
case of class B shares, the eight-year period for conversion to
class A shares. Shareholders will receive from Putnam Mutual
Funds the amount of any CDSC paid at the time of redemption as
part of the reinstated investment, which may be treated as
capital gains to the shareholder for tax purposes. Exercise of
the Reinstatement Privilege does not alter the federal income tax
treatment of any capital gains realized on a sale of fund shares,
but to the extent that any shares are sold at a loss and the
proceeds are reinvested in shares of the fund, some or all of the
loss may be disallowed as a deduction. Consult your tax adviser.
Investors who desire to exercise the Reinstatement Privilege
should contact their investment dealer or Putnam Investor
Services.

EXCHANGE PRIVILEGE

Except as otherwise set forth in this section, by calling Putnam
Investor Services, investors may exchange shares valued up to
$500,000 between accounts with identical registrations, provided
that no certificates are outstanding for such shares and no
address change has been made within the preceding 15 days.
During periods of unusual market changes and shareholder
activity, shareholders may experience delays in contacting Putnam
Investor Services by telephone to exercise the Telephone Exchange
Privilege.

Putnam Investor Services also makes exchanges promptly after
receiving a properly completed Exchange Authorization Form and,
if issued, share certificates. If the shareholder is a
corporation, partnership, agent, or surviving joint owner, Putnam
Investor Services will require additional documentation of a
customary nature. Because an exchange of shares involves the
redemption of fund shares and reinvestment of the proceeds in
shares of another Putnam fund, completion of an exchange may be
delayed under unusual circumstances if the fund were to suspend
redemptions or postpone payment for the fund shares being
exchanged, in accordance with federal securities laws. Exchange
Authorization Forms and prospectuses of the other Putnam funds
are available from Putnam Mutual Funds or investment dealers
having sales contracts with Putnam Mutual Funds. The prospectus
of each fund describes its investment objective(s) and policies,
and shareholders should obtain a prospectus and consider these
objectives and policies carefully before requesting an exchange.
Shares of certain Putnam funds are not available to residents of
all states. The fund reserves the right to change or suspend the
Exchange Privilege at any time. Shareholders would be notified
of any change or suspension. Additional information is available
from Putnam Investor Services.

Shareholders of other Putnam funds may also exchange their shares
at net asset value for shares of the fund, as set forth in the
current prospectus of each fund.

For federal income tax purposes, an exchange is a sale on which
the investor generally will realize a capital gain or loss
depending on whether the net asset value at the time of the
exchange is more or less than the investor's basis. The Exchange
Privilege may be revised or terminated at any time. Shareholders
would be notified of any such change or suspension.

DIVIDENDS PLUS

Shareholders may invest the fund's distributions of net
investment income or distributions combining net investment
income and short-term capital gains in shares of the same class
of another continuously offered Putnam fund (the "receiving
fund") using the net asset value per share of the receiving fund
determined on the date the fund's distribution is payable. No
sales charge or CDSC will apply to the purchased shares unless
the fund paying the distribution is a money market fund. The
prospectus of each fund describes its investment objective(s) and
policies, and shareholders should obtain a prospectus and
consider these objective(s) and policies carefully before
investing their distributions in the receiving fund. Shares of
certain Putnam funds are not available to residents of all
states.

The minimum account size requirement for the receiving fund will
not apply if the current value of your account in the fund paying
the distribution is more than $5,000.

Shareholders of other Putnam funds (except for money market
funds, whose shareholders must pay a sales charge or become
subject to a CDSC) may also use their distributions to purchase
shares of the fund at net asset value.

For federal tax purposes, distributions from the fund which are
reinvested in another fund are treated as paid by the fund to the
shareholder and invested by the shareholder in the receiving fund
and thus, to the extent comprised of taxable income and deemed
paid to a taxable shareholder, are taxable.

The Dividends PLUS program may be revised or terminated at any
time.

PLANS AVAILABLE TO SHAREHOLDERS

The plans described below are fully voluntary and may be
terminated at any time without the imposition by the fund or
Putnam Investor Services of any penalty. All plans provide for
automatic reinvestment of all distributions in additional shares
of the fund at net asset value. The fund, Putnam Mutual Funds or
Putnam Investor Services may modify or cease offering these plans
at any time.

AUTOMATIC CASH WITHDRAWAL PLAN ("ACWP"). An investor who owns or
buys shares of the fund valued at $10,000 or more at the current
public offering price may open an ACWP plan and have a designated
sum of money ($50 or more) paid monthly, quarterly, semi-annually
or annually to the investor or another person. (Payments from
the fund can be combined with payments from other Putnam funds
into a single check through a designated payment plan.) Shares
are deposited in a plan account, and all distributions are
reinvested in additional shares of the fund at net asset value
(except where the plan is utilized in connection with a
charitable remainder trust). Shares in a plan account are then
redeemed at net asset value to make each withdrawal payment.
Payment will be made to any person the investor designates;
however, if shares are registered in the name of a trustee or
other fiduciary, payment will be made only to the fiduciary,
except in the case of a profit-sharing or pension plan where
payment will be made to a designee. As withdrawal payments may
include a return of principal, they cannot be considered a
guaranteed annuity or actual yield of income to the investor.
The redemption of shares in connection with a plan generally will
result in a gain or loss for tax purposes. Some or all of the
losses realized upon redemption may be disallowed pursuant to the
so-called wash sale rules if shares of the same fund from which
shares were redeemed are purchased (including through the
reinvestment of fund distributions) within a period beginning 30
days before, and ending 30 days after, such redemption. In such
a case, the basis of the replacement shares will be increased to
reflect the disallowed loss. Continued withdrawals in excess of
income will reduce and possibly exhaust invested principal,
especially in the event of a market decline. The maintenance of
a plan concurrently with purchases of additional shares of the
fund would be disadvantageous to the investor because of the
sales charge payable on such purchases. For this reason, the
minimum investment accepted while a plan is in effect is $1,000,
and an investor may not maintain a plan for the accumulation of
shares of the fund (other than through reinvestment of
distributions) and a plan at the same time. The cost of
administering these plans for the benefit of those shareholders
participating in them is borne by the fund as an expense of all
shareholders. The fund, Putnam Mutual Funds or Putnam Investor
Services may terminate or change the terms of the plan at any
time. A plan will be terminated if communications mailed to the
shareholder are returned as undeliverable.

Investors should consider carefully with their own financial
advisers whether the plan and the specified amounts to be
withdrawn are appropriate in their circumstances. The fund and
Putnam Investor Services make no recommendations or
representations in this regard.

TAX QUALIFIED RETIREMENT PLANS; 403(B) AND SEP PLANS. (NOT
OFFERED BY FUNDS INVESTING PRIMARILY IN TAX-EXEMPT SECURITIES.)
Investors may purchase shares of the fund through the following
Tax Qualified Retirement Plans, available to qualified
individuals or organizations:

Standard and variable profit-sharing (including 401(k))
and money purchase pension plans; and

Individual Retirement Account Plans (IRAs).

Each of these Plans has been qualified as a prototype plan by the
Internal Revenue Service. Putnam Investor Services will furnish
services under each plan at a specified annual cost. Putnam
Fiduciary Trust Company serves as trustee under each of these
Plans.

Forms and further information on these Plans are available from
investment dealers or from Putnam Mutual Funds. In addition,
specialized professional plan administration services are
available on an optional basis; contact Putnam Defined
Contribution Plan Services at 1-800-225-2465, extension 8600.

A 403(b) Retirement Plan is available for employees of public
school systems and organizations which meet the requirements of
Section 501(c)(3) of the Internal Revenue Code. Forms and
further information on the 403(b) Plan are also available from
investment dealers or from Putnam Mutual Funds. Shares of the
fund may also be used in simplified employee pension (SEP) plans.
For further information on the Putnam prototype SEP plan, contact
an investment dealer or Putnam Mutual Funds.

Consultation with a competent financial and tax adviser regarding
these Plans and consideration of the suitability of fund shares
as an investment under the Employee Retirement Income Security
Act of 1974, or otherwise, is recommended.

SIGNATURE GUARANTEES

Redemption requests for shares having a net asset value of
$100,000 or more must be signed by the registered owners or their
legal representatives and must be guaranteed by a bank,
broker/dealer, municipal securities dealer or broker, government
securities dealer or broker, credit union, national securities
exchange, registered securities association, clearing agency,
savings association or trust company, provided such institution
is acceptable under and conforms with Putnam Fiduciary Trust
Company's signature guarantee procedures. A copy of such
procedures is available upon request. If you want your
redemption proceeds sent to an address other than your address as
it appears on Putnam's records, you must provide a signature
guarantee. Putnam Investor Services usually requires additional
documentation for the sale of shares by a corporation,
partnership, agent or fiduciary, or a surviving joint owner.
Contact Putnam Investor Services for details.

SUSPENSION OF REDEMPTIONS

The fund may not suspend shareholders' right of redemption, or
postpone payment for more than seven days, unless the Exchange is
closed for other than customary weekends or holidays, or if
permitted by the rules of the Securities and Exchange Commission
during periods when trading on the Exchange is restricted or
during any emergency which makes it impracticable for the fund to
dispose of its securities or to determine fairly the value of its
net assets, or during any other period permitted by order of the
Commission for protection of investors.

SHAREHOLDER LIABILITY

Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of
the fund. However, the Agreement and Declaration of Trust
disclaims shareholder liability for acts or obligations of the
fund and requires that notice of such disclaimer be given in each
agreement, obligation, or instrument entered into or executed by
the fund or the Trustees. The Agreement and Declaration of Trust
provides for indemnification out of fund property for all loss
and expense of any shareholder held personally liable for the
obligations of the fund. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is
limited to circumstances in which the fund would be unable to
meet its obligations. The likelihood of such circumstances is
remote.

STANDARD PERFORMANCE MEASURES

Yield and total return data for the fund may from time to time be
presented in Part I of this SAI and in advertisements. In the
case of funds with more than one class of shares, all performance
information is calculated separately for each class. The data is
calculated as follows.

Total return for one-, five- and ten-year periods (or for such
shorter periods as the fund has been in operation or shares of
the relevant class have been outstanding) is determined by
calculating the actual dollar amount of investment return on a
$1,000 investment in the fund made at the beginning of the
period, at the maximum public offering price for class A shares
and class M shares and net asset value for other classes of
shares, and then calculating the annual compounded rate of return
which would produce that amount. Total return for a period of
one year is equal to the actual return of the fund during that
period. Total return calculations assume deduction of the fund's
maximum sales charge or CDSC, if applicable, and reinvestment of
all fund distributions at net asset value on their respective
reinvestment dates.

The fund's yield is presented for a specified thirty-day period
(the "base period"). Yield is based on the amount determined by
(i) calculating the aggregate amount of dividends and interest
earned by the fund during the base period less expenses for that
period, and (ii) dividing that amount by the product of (A) the
average daily number of shares of the fund outstanding during the
base period and entitled to receive dividends and (B) the per
share maximum public offering price for class A shares or class M
shares, as appropriate, and net asset value for other classes of
shares on the last day of the base period. The result is
annualized on a compounding basis to determine the yield. For
this calculation, interest earned on debt obligations held by the
fund is generally calculated using the yield to maturity (or
first expected call date) of such obligations based on their
market values (or, in the case of receivables-backed securities
such as the Government National Mortgage Association ("GNMAs"),
based on cost). Dividends on equity securities are accrued daily
at their stated dividend rates. The amount of expenses used in
determining the fund's yield includes, in addition to expenses
actually accrued by the fund, an estimate of the amount of
expenses that the fund would have incurred if brokerage
commissions had not been used to reduce such expenses.

If the fund is a money market fund, yield is computed by
determining the percentage net change, excluding capital changes,
in the value of an investment in one share over the seven-day
period for which yield is presented (the "base period"), and
multiplying the net change by 365/7 (or approximately 52 weeks).
Effective yield represents a compounding of the yield by adding 1
to the number representing the percentage change in value of the
investment during the base period, raising that sum to a power
equal to 365/7, and subtracting 1 from the result.

If the fund is a tax-exempt fund, the tax-equivalent yield during
the base period may be presented for shareholders in one or more
stated tax brackets. Tax-equivalent yield is calculated by
adjusting the tax-exempt yield by a factor designed to show the
approximate yield that a taxable investment would have to earn to
produce an after-tax yield equal, for that shareholder, to the
tax-exempt yield. The tax-equivalent yield will differ for
shareholders in other tax brackets.

At times, Putnam Management may reduce its compensation or assume
expenses of the fund in order to reduce the fund's expenses. The
per share amount of any such fee reduction or assumption of
expenses during the fund's past five fiscal years (or for the
life of the fund, if shorter) is set forth in the footnotes to
the table in the section entitled "Financial highlights" in the
prospectus. Any such fee reduction or assumption of expenses
would increase the fund's yield and total return for periods
including the period of the fee reduction or assumption of
expenses.

All data are based on past performance and do not predict future
results.

COMPARISON OF PORTFOLIO PERFORMANCE

Independent statistical agencies measure the fund's investment
performance and publish comparative information showing how the
fund, and other investment companies, performed in specified time
periods. Three agencies whose reports are commonly used for such
comparisons are set forth below. From time to time, the fund may
distribute these comparisons to its shareholders or to potential
investors. THE AGENCIES LISTED BELOW MEASURE PERFORMANCE BASED
ON THEIR OWN CRITERIA RATHER THAN ON THE STANDARDIZED PERFORMANCE
MEASURES DESCRIBED IN THE PRECEDING SECTION.

LIPPER ANALYTICAL SERVICES, INC. distributes mutual fund
rankings monthly. The rankings are based on total return
performance calculated by Lipper, generally reflecting
changes in net asset value adjusted for reinvestment of
capital gains and income dividends. They do not reflect
deduction of any sales charges. Lipper rankings cover a
variety of performance periods, including year-to-date, 1-
year, 5-year, and 10-year performance. Lipper classifies
mutual funds by investment objective and asset category.

MORNINGSTAR, INC. distributes mutual fund ratings twice a
month. The ratings are divided into five groups:
highest, above average, neutral, below average and lowest.
They represent a fund's historical risk/reward ratio
relative to other funds in its broad investment class as
determined by Morningstar, Inc. Morningstar ratings cover
a variety of performance periods, including 1-year, 3-
year, 5-year, 10-year and overall performance. The
performance factor for the overall rating is a weighted-
average assessment of the fund's 1-year, 3-year, 5-year,
and 10-year total return performance (if available)
reflecting deduction of expenses and sales charges.
Performance is adjusted using quantitative techniques to
reflect the risk profile of the fund. The ratings are
derived from a purely quantitative system that does not
utilize the subjective criteria customarily employed by
rating agencies such as Standard & Poor's and Moody's
Investor Service, Inc.

CDA/WIESENBERGER'S MANAGEMENT RESULTS publishes mutual
fund rankings and is distributed monthly. The rankings
are based entirely on total return calculated by
Weisenberger for periods such as year-to-date, 1-year, 3-
year, 5-year and 10-year. Mutual funds are ranked in
general categories (e.g., international bond,
international equity, municipal bond, and maximum capital
gain). Weisenberger rankings do not reflect deduction of
sales charges or fees.

Independent publications may also evaluate the fund's
performance. The fund may from time to time refer to results
published in various periodicals, including Barrons, Financial
World, Forbes, Fortune, Investor's Business Daily, Kiplinger's
Personal Finance Magazine, Money, U.S. News and World Report and
The Wall Street Journal.

Independent, unmanaged indexes, such as those listed below, may
be used to present a comparative benchmark of fund performance.
The performance figures of an index reflect changes in market
prices, reinvestment of all dividend and interest payments and,
where applicable, deduction of foreign withholding taxes, and do
not take into account brokerage commissions or other costs.
Because the fund is a managed portfolio, the securities it owns
will not match those in an index. Securities in an index may
change from time to time.

THE CONSUMER PRICE INDEX, prepared by the U.S. Bureau of
Labor Statistics, is a commonly used measure of the rate
of inflation. The index shows the average change in the
cost of selected consumer goods and services and does not
represent a return on an investment vehicle.

THE DOW JONES INDUSTRIAL AVERAGE is an index of 30 common
stocks frequently used as a general measure of stock
market performance.

THE DOW JONES UTILITIES AVERAGE is an index of 15 utility
stocks frequently used as a general measure of stock
market performance.

CS FIRST BOSTON HIGH YIELD INDEX is a market-weighted
index including publicly traded bonds having a rating
below BBB by Standard & Poor's and Baa by Moody's.

THE LEHMAN BROTHERS AGGREGATE BOND INDEX is an index
composed of securities from The Lehman Brothers
Government/Corporate Bond Index, The Lehman Brothers
Mortgage-Backed Securities Index and The Lehman Brothers
Asset-Backed Securities Index and is frequently used as a
broad market measure for fixed-income securities.

THE LEHMAN BROTHERS ASSET-BACKED SECURITIES INDEX is an
index composed of credit card, auto, and home equity
loans. Included in the index are pass-through, bullet
(noncallable), and controlled amortization structured debt
securities; no subordinated debt is included. All
securities have an average life of at least one year.

THE LEHMAN BROTHERS CORPORATE BOND INDEX is an index of
publicly issued, fixed-rate, non-convertible investment-
grade domestic corporate debt securities frequently used
as a general measure of the performance of fixed-income
securities.

THE LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX is an
index of publicly issued U.S. Treasury obligations, debt
obligations of U.S. government agencies (excluding
mortgage-backed securities), fixed-rate, non-convertible,
investment-grade corporate debt securities and U.S. dollar-
denominated, SEC-registered non-convertible debt issued by
foreign governmental entities or international agencies
used as a general measure of the performance of fixed-
income securities.

THE LEHMAN BROTHERS INTERMEDIATE TREASURY BOND INDEX is an
index of publicly issued U.S. Treasury obligations with
maturities of up to ten years and is used as a general
gauge of the market for intermediate-term fixed-income
securities.

THE LEHMAN BROTHERS LONG-TERM TREASURY BOND INDEX is an
index of publicly issued U.S. Treasury obligations
(excluding flower bonds and foreign-targeted issues) that
are U.S. dollar-denominated and have maturities of 10
years or greater.

THE LEHMAN BROTHERS MORTGAGE-BACKED SECURITIES INDEX
includes 15- and 30-year fixed rate securities backed by
mortgage pools of the Government National Mortgage
Association, Federal Home Loan Mortgage Corporation, and
Federal National Mortgage Association.

THE LEHMAN BROTHERS MUNICIPAL BOND INDEX is an index of
approximately 20,000 investment-grade, fixed-rate tax-
exempt bonds.

THE LEHMAN BROTHERS TREASURY BOND INDEX is an index of
publicly issued U.S. Treasury obligations (excluding
flower bonds and foreign-targeted issues) that are U.S.
dollar denominated, have a minimum of one year to
maturity, and are issued in amounts over $100 million.

THE MORGAN STANLEY CAPITAL INTERNATIONAL WORLD INDEX is an
index of approximately 1,482 equity securities listed on
the stock exchanges of the United States, Europe, Canada,
Australia, New Zealand and the Far East, with all values
expressed in U.S. dollars.

THE MORGAN STANLEY CAPITAL INTERNATIONAL EMERGING MARKETS
INDEX is an index of approximately 1,100 securities
representing 20 emerging markets, with all values
expressed in U.S. dollars.

THE MORGAN STANLEY CAPITAL INTERNATIONAL EMERGING MARKETS
FREE INDEX is an index of approximately 1,003 securities
available to non-domestic investors representing 26
emerging markets, with all values expressed in U.S.
dollars.

THE MORGAN STANLEY CAPITAL INTERNATIONAL EAFE INDEX is an
index of approximately 1,045 equity securities issued by
companies located in 18 countries and listed on the stock
exchanges of Europe, Australia, and the Far East. All
values are expressed in U.S. dollars.

THE MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE INDEX is
an index of approximately 627 equity securities issued by
companies located in one of 13 European countries, with
all values expressed in U.S. dollars.

THE MORGAN STANLEY CAPITAL INTERNATIONAL PACIFIC INDEX is
an index of approximately 418 equity securities issued by
companies located in 5 countries and listed on the
exchanges of Australia, New Zealand, Japan, Hong Kong,
Singapore/Malaysia. All values are expressed in U.S.
dollars.

THE NASDAQ INDUSTRIAL AVERAGE is an index of stocks traded
in The Nasdaq Stock Market, Inc. National Market System.

THE RUSSELL 1000 INDEX is composed of the 1,000 largest
companies in the Russell 3000 Index, representing
approximately 89% of the Russell 3000 total market
capitalization. The Russell 3000 Index is composed of the
3,000 largest U.S. companies ranked by total market
capitalization, representing approximately 98% of the U.S.
investable equity market.

THE RUSSELL 2000 INDEX is composed of the 2,000 smallest
companies in the Russell 3000 Index, representing
approximately 11% of the Russell 3000 total market
capitalization.

THE RUSSELL 2000 GROWTH INDEX is composed of securities
with greater-than-average growth orientation within the
Russell 2000 Index. Each security's growth orientation is
determined by a composite score of the security's price-to-
book ratio and forecasted growth rate. Growth stocks tend
to have higher price-to-book ratios and forecasted growth
rates than value stocks. This index is composed of
approximately 1,310 companies from the Russell 2000 Index,
representing approximately 50% of the total market
capitalization of the Russell 2000 Index.

THE RUSSELL MIDCAP INDEX is composed of the 800 smallest
companies in the Russell 1000 Index, representing
approximately 35% of the Russell 1000 total market
capitalization.

THE RUSSELL MIDCAP GROWTH INDEX is composed of securities
with greater-than-average growth orientation within the
Russell Midcap Index. Each security's growth orientation
is determined by a composite score of the security's price-
to-book ratio and forecasted growth rate. Growth stocks
tend to have higher price-to-book ratios and forecasted
growth rates than value stocks. This index is composed of
approximately 450 companies from the Russell 1000 Growth
Index, representing 20% of the total market capitalization
of the Russell 1000 Growth Index.

THE SALOMON BROTHERS LONG-TERM HIGH-GRADE CORPORATE BOND
INDEX is an index of publicly traded corporate bonds
having a rating of at least AA by Standard & Poor's or Aa
by Moody's and is frequently used as a general measure of
the performance of fixed-income securities.

THE SALOMON BROTHERS LONG-TERM TREASURY INDEX is an index
of U.S. government securities with maturities greater than
10 years.

THE SALOMON BROTHERS WORLD GOVERNMENT BOND INDEX is an
index that tracks the performance of the 14 government
bond markets of Australia, Austria, Belgium Canada,
Denmark, France, Germany, Italy, Japan, Netherlands,
Spain, Sweden, United Kingdom and the United States.
Country eligibility is determined by market capitalization
and investability criteria.

THE SALOMON BROTHERS WORLD GOVERNMENT BOND INDEX (non
$U.S.) is an index of foreign government bonds calculated
to provide a measure of performance in the government bond
markets outside of the United States.

STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX is an
index of common stocks frequently used as a general
measure of stock market performance.

STANDARD & POOR'S 40 UTILITIES INDEX is an index of 40
utility stocks.

STANDARD & POOR'S/BARRA VALUE INDEX is an index
constructed by ranking the securities in the Standard &
Poor's 500 Composite Stock Price Index by price-to-book
ratio and including the securities with the lowest price-
to-book ratios that represent approximately half of the
market capitalization of the Standard & Poor's 500
Composite Stock Price Index.

In addition, Putnam Mutual Funds may distribute to shareholders
or prospective investors illustrations of the benefits of
reinvesting tax-exempt or tax-deferred distributions over
specified time periods, which may include comparisons to fully
taxable distributions. These illustrations use hypothetical
rates of tax-advantaged and taxable returns and are not intended
to indicate the past or future performance of any fund.

SECURITIES RATINGS

The ratings of securities in which the fund may invest will be
measured at the time of purchase and, to the extent a security is
assigned a different rating by one or more of the various rating
agencies, Putnam Management will use the highest rating assigned
by any agency. Putnam Management will not necessarily sell an
investment if its rating is reduced. The following rating
services describe rated securities as follows:

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 edged." 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 risk appear somewhat larger than
the 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.

B -- Bonds which are rated B generally lack characteristics of
the desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over
any long period of time may be small.

CAA -- Bonds which are rated CAA are of poor standing. Such
issues may be in default or there may be present elements of
danger with respect to principal or interest.

CA -- Bonds which are rated CA represent obligations which are
speculative in a high degree. Such issues are often in default
or have other marked shortcomings.

C -- Bonds which are rated C are the lowest rated class of bonds,
and issues so rated can be regarded as having extremely poor
prospects of ever attaining any real investment standing.

NOTES (FOR MONEY MARKET FUNDS ONLY)

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 (FOR MONEY MARKET FUNDS ONLY)

Issuers rated PRIME-1 (or supporting institutions) have a
superior ability for repayment of senior short-term debt
obligations. Prime-1 repayment ability will often be evidenced
by the following characteristics:

- -- Leading market positions in well established industries.
- -- High rates of return on funds employed.
- -- Conservative capitalization structure 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 supporting institutions) have a strong
ability for repayment of senior short-term debt obligations.
This will normally be evidenced by many of the characteristics
cited above to a lesser degree. Earnings trends and coverage
ratios, while sound, may 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

BONDS

AAA -- An obligation rated AAA has the highest rating assigned by
Standard & Poor's. The obligor's capacity to meet its financial
commitment on the obligation is extremely strong.

AA -- An obligation rated AA differs from the highest-rated
obligations only in small degree. The obligor's capacity to meet
its financial commitment on the obligation is very strong.

A -- An obligation rated A is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than obligations in higher-rated categories. However,
the obligor's capacity to meet its financial commitment on the
obligation is still strong.

BBB -- An obligation rated BBB exhibits adequate protection
parameters. However, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity of
the obligor to meet its financial commitment on the obligation.

Obligations rated BB, B, CCC, CC and C are regarded as having
significant speculative characteristics. BB indicates the lowest
degree of speculation and C the highest. While such obligations
will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major exposures to
adverse conditions.

BB -- An obligation rated BB is less vulnerable to nonpayment
than other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial, or
economic conditions which could lead to the obligor's inadequate
capacity to meet its financial commitment on the obligation.

B -- An obligation rated B is more vulnerable to nonpayment than
obligations rated BB, but the obligor currently has the capacity
to meet its financial commitment on the obligations. Adverse
business, financial, or economic conditions will likely impair
the obligor's capacity or willingness to meet its financial
commitment on the obligation.

CCC -- An obligation rated CCC is currently vulnerable to
nonpayment, and is dependent upon favorable business, financial,
and economic conditions for the obligor to meet its financial
commitment on the obligation. In the event of adverse business,
financial, or economic conditions, the obligor is not likely to
have the capacity to meet its financial commitment on the
obligation.

CC -- An obligation rated CC is currently highly vulnerable to
nonpayment.

C -- The C rating may be used to cover a situation where a
bankruptcy petition has been filed, or similar action has been
taken, but payments on this obligation are being continued.

D -- An obligation rated D is in payment default. The D rating
category is used when interest payments or principal payments are
not made on the date due even if the applicable grace period has
not expired, unless Standard & Poor's believes that such payments
will be made during such grace period. The D rating also will be
used upon the filing of a bankruptcy petition, or the taking of a
similar action if payments on an obligation are jeopardized.

NOTES (FOR MONEY MARKET FUNDS ONLY)

SP-1 -- Strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics
are given a plus (+) designation.

SP-2 -- Satisfactory capacity to pay principal and interest.

SP-3 -- Speculative capacity to pay principal and interest.

COMMERCIAL PAPER (FOR MONEY MARKET FUNDS ONLY)

A-1 -- This highest category indicates that the degree of safety
regarding timely payment is strong. Those issues determined to
possess extremely strong safety characteristics are denoted with
a plus sign (+) designation.

A-2 -- Capacity for timely payment on issues with this
designation is satisfactory. However, the relative degree of
safety is not as high as for issues designated `A-1'.

A-3 -- Issues carrying this designation have adequate capacity
for timely payment. They are, however, more vulnerable to the
adverse effects of changes in circumstances than obligations
carrying the higher designations.

DUFF & PHELPS CORPORATION

LONG-TERM DEBT

AAA -- Highest credit quality. The risk factors are negligible,
being only slightly more than for risk-free U.S. Treasury debt.

AA+, AA, AA- -- High credit quality. Protection factors are
strong. Risk is modest but may vary slightly from time to time
because of economic conditions.

A+, A, A- -- Protection factors are average but adequate.
However, risk factors are more variable and greater in periods of
economic stress.

BBB+, BBB, BBB- -- Below-average protection factors but still
considered sufficient for prudent investment. Considerable
variability in risk during economic cycles.

BB+, BB, BB- -- Below investment grade but deemed likely to meet
obligations when due. Present or prospective financial
protection factors fluctuate according to industry conditions or
company fortunes. Overall quality may move up or down frequently
within this category.

B+, B, B- -- Below investment grade and possessing risk that
obligations will not be met when due. Financial protection
factors will fluctuate widely according to economic cycles,
industry conditions and/or company fortunes. Potential exists
for frequent changes in the rating within this category or into a
higher or lower rating grade.

CCC -- Well below investment-grade securities. Considerable
uncertainty exists as to timely payment of principal, interest or
preferred dividends. Protection factors are narrow and risk can
be substantial with unfavorable economic/industry conditions,
and/or with unfavorable company developments.

DD -- Defaulted debt obligations. Issuer failed to meet
scheduled principal and/or interest payments.

FITCH INVESTORS SERVICE, INC.

AAA -- Bonds considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability
to pay interest and repay principal, which is unlikely to be
affected by reasonably foreseeable events.

AA -- Bonds considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay
principal is very strong, although not quite as strong as bonds
rated AAA.

A -- Bonds considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay
principal is considered to be strong, but may be more vulnerable
to adverse changes in economic conditions and circumstances than
bonds with higher ratings.

BBB -- Bonds considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay
interest and repay principal is considered to be adequate.
Adverse changes in economic conditions and circumstances,
however, are more likely to have adverse impact on these bonds,
and therefore impair timely payment. The likelihood that the
ratings of these bonds will fall below investment grade is higher
than for bonds with higher ratings.

BB -- Bonds considered to be speculative. The obligor's ability
to pay interest and repay principal may be affected over time by
adverse economic changes. However, business and financial
alternatives can be identified which could assist the obligor in
satisfying its debt service requirements.

B -- Bonds are considered highly speculative. Bonds in this class
are lightly protected as to the obligor's ability to pay interest
over the life of the issue and repay principal when due.

CCC -- Bonds have certain characteristics which, with passing of
time, could lead to the possibility of default on either
principal or interest payments.

CC -- Bonds are minimally protected. Default in payment of
interest and/or principal seems probable.

C -- Bonds are in actual or imminent default in payment of
interest or principal.

DDD -- Bonds are in default and in arrears in interest and/or
principal payments. Such bonds are extremely speculative and
should be valued only on the basis of their value in liquidation
or reorganization of the obligor.

DEFINITIONS

"Putnam Management" -- Putnam Investment
Management, Inc., the fund's
investment manager.

"Putnam Mutual Funds" -- Putnam Mutual Funds Corp.,
the fund's principal
underwriter.

"Putnam Fiduciary Trust -- Putnam Fiduciary Trust
Company,
Company" the fund's custodian.

"Putnam Investor Services" -- Putnam Investor Services, a
division of Putnam Fiduciary
Trust Company, the fund's
investor servicing agent.

PUTNAM HEALTH SCIENCES TRUST

FORM N-1A
PART C

OTHER INFORMATION

Item 23. Exhibits

1. Agreement and Declaration of Trust, dated August 13, 1982 as amended
April 7, 1989 -- Incorporated by reference to Post-Effective Amendment No.
11 to the Registrant's Registration Statement.
2. By-Laws, as amended through February 1, 1994 -- Incorporated by
reference to Post-Effective Amendment No. 13 to the Registrant's
Registration Statement.
3a. Portions of Agreement and Declaration of Trust Relating to Shareholders'
Rights -- Incorporated by reference to Post-Effective Amendment No. 12 to
the Registrant's Registration Statement.
3b. Portions of By-Laws Relating to Shareholders' Rights -- Incorporated by
reference to Post-Effective Amendment No. 13 to the Registrant's
Registration Statement.
4. Management Contract dated November 20, 1996 -- Incorporated by reference
to Post-Effective Amendment No. 15 to the Registrant's Registration
Statement.
5a. Distributor's Contract dated May 6, 1994 -- Incorporated by reference to
Post-Effective Amendment No. 13 to the Registrant's Registration Statement.
5b. Form of Specimen Dealer Sales Contract -- Incorporated by reference to
Post-Effective Amendment No. 14 to the Registrant's Registration
Statement.
5c. Form of Specimen Financial Institution Sales Contract -- Incorporated by
reference to Post-Effective Amendment No. 14 to the Registrant's
Registration Statement.
6. Trustee Retirement Plan dated October 4, 1996 -- Incorporated by reference
to Post-Effective Amendment No. 14 to the Registrant's Registration
Statement.

7. Custodian Agreement with Putnam Fiduciary Trust Company dated May 3, 1991,
as amended July 13, 1992 -- Incorporated by reference to Post-Effective
Amendment No. 12 to the Registrant's Registration Statement.
8. Investor Servicing Agreement dated June 3, 1991 with Putnam Fiduciary
Trust Company -- Incorporated by reference to Post-Effective Amendment No.
10 to the Registrant's Registration Statement.
9. Opinion of Ropes & Gray, including consent -- Incorporated by reference to
Post-Effective Amendment No. 15 to the Registrant's Registration Statement.
10. Not applicable.
11. Not applicable.
12. Not applicable.
13a. Class A Distribution Plan and Agreement, dated January 1, 1990, --
Incorporated by reference to Post-Effective Amendment No. 13 to the
Registrant's Registration Statement.
13b. Class B Distribution Plan and Agreement dated February 28, 1993 --
Incorporated by reference to Post-Effective Amendment No. 12 to the
Registrant's Registration Statement.
13c. Class C Distribution Plan and Agreement dated July 16, 1999 -- Exhibit
1.
13d. Class M Distribution Plan and Agreement dated June 30, 1995 --
Incorporated by reference to Post-Effective Amendment No. 14 to the
Registrant's Registration Statement.

13e. Form of Specimen Dealer Service Agreement -- Incorporated by reference to
Post-Effective Amendment No. 14 to the Registrant's Registration
Statement.
13f. Form of Specimen Financial Institution Service Agreement -- Incorporated
by reference to Post-Effective Amendment No. 14 to the Registrant's
Registration Statement.
14. Rule 18f-3(d) Plan -- Exhibit 2.

Item 24. Persons Controlled by or under Common Control with the Fund

None.

Item 25. Indemnification

The information required by this item is incorporated herein by reference
from the Registrant's Initial Registration Statement on Form N-1 under the
Investment Company Act of 1940 (File No. 811-3386).

C-3
10/28/99

Item 26. Business and Other Connections of Investment Adviser

Except as set forth below, the directors and officers of the
Registrant's investment adviser have been engaged during the past
two fiscal years in no business, vocation or employment of a
substantial nature other than as directors or officers of the
investment adviser or certain of its corporate affiliates.
Certain officers of the investment adviser serve as officers of
some or all of the Putnam funds. The address of the investment
adviser, its corporate affiliates and the Putnam Funds is one
Post Office Square, Boston, Massachusetts 02109.

Name Non-Putnam business and other
connections
Pankaj Aggrawal Prior to April 1998,
Vice President Quantitative Analyst, Vestek
Systems, 388 Market St., Suite
700, San Francisco, CA 94111

Michael R. Alexander Prior to February, 1998,
Vice President Director - Business Operations,
Comcast Communications, 8031
Corporate Drive, Baltimore, MD
21236

Blake Anderson Trustee, Salem Female Charitable
Managing Director Society, Salem MA 01970

Barry R. Allen Prior to December 1997,
Vice Present Analyst/Director of Research,
Harbor Capital Management, 125
High St., Boston, MA 02110

Paul A. Astbury-Aston Prior to June, 1999, Senior
Vice President Quantitative Strategist,
Santander Global Advisors, 28
State Street, Boston, MA 02109

Jeffrey B. Augustine Prior to January 1998, Vice
Senior Vice President President, Investment
Consulting, Investor Tools,
Inc., 100 Bridge St. Plaza,
Yorkville, IL 60560

Robert R. Beck Director, Charles Bridge
Senior Vice President Publishing, 85 Main St.,
Watertown, MA 02172; Board of
Overseers, Beth Israel Deaconess
Medical Center, 330 Brookline
Ave., Boston, MA 02215

Kirsten A. Bjerklie Prior to June 1998, Assistant
Assistant Vice President Vice President, Scudder, Stevens
& Clark, Two International
Place, Boston, MA 02110

Carl D. Bell Prior to January 1998,
Vice President Principal, Smith Breedon
Association, 100 Europa Drive,
Suite 200, Chapel Hill, NC
27514

Richard L. Block Prior to June 1998, Principal,
Senior Vice President Head International Equity
Trader, Morgan Stanley Asset
Management, 1221 Avenue of the
Americas, New York, NY 10036

Rob A. Bloemker Prior to September 1999,
Senior Vice President Managing Director, Lehman
Brothers, 555 California St.,
30th floor, San Francisco, CA
94104

Claudio Brocado Prior to August 1999,
Vice President independent consultant by
Stires, O'Donnell & Co. 12 East
44th St., New York, NY 10017;
Prior to January 1999,
independent consultant by Coast
Partners, 601 California St.,
San Francisco, CA 94108; Prior
to November 1997, Head of Latin
America Business Development,
Dresdner RCM Global Investors,
Four Embarcadero Center, San
Francisco, CA 94111

Anna Bulkovshteyn Prior to July 1999, Quantitative
Assistant Vice President Analyst, Sun Life Investment
Management, 200 King Street
West, Toronto, Ontario M5H 3T4
Canada

Robert W. Burke Member-Executive Committee, The
Senior Managing Director Ridge Club, Country Club Road,
Sandwich, MA 02563; Member-
Advisory Board, Cathedral High
School, 74 Union Park St., So.
Boston, MA 02118

David N. Burnham Prior to July 1998, Director -
Vice President Finance, Fidelity Investments,
82 Devonshire Street, Boston, MA
02109

Richard P. Cervone Prior to August 1998, Equity
Vice President Analyst, Loomis, Sayles & Co.,
One Financial Center, Boston,
MA, 02216.

Christopher Ceruolo Prior to July 1998, Associate,
Assistant Vice President Ropes & Gray, One International
Place, Boston, MA 02110

Mark Chameih Prior to May 1999, Vice
Vice President President, Chase Manhattan, 125
London Wall, London, UK

Bihua Chen Prior to July 1998, Research
Assistant Vice President Associate, ProNeuron, Inc., 1531
E. Jefferson St., Rockville, MD
20847

C. Beth Cotner Director, The Lyric Stage
Senior Vice President Theater, 140 Clarendon St.,
Boston, MA 02116

Stephen P. Cotto Prior to March 1998, Facilities
Assistant Vice President Supervisor, Unicco Service Co.,
4 Copley Place, Boston, MA 02116

Lindsey L. Curley Prior to June 1999, Portfolio
Assistant Vice President Analyst, Standish, Ayer & Wood,
Inc., One Financial Center,
Boston, MA 02110. Prior to
March, 1998,. Fixed-Income
Research Assistant, Invesco
Management & Research, Inc., 101
Federal St., Boston, MA 02110

Joseph F. Cushing Prior to June 1998, Investment
Assistant Vice President Analyst - Fixed Income,
Metropolitan Life Insurance
Company, 334 Madison Avenue,
Convent Station, NJ 07961

John R.S. Cutler Member, Burst Media, L.L.C., 10
Vice President New England Executive Park,
Burlington, MA 01803

Kenneth Daly President, Andover River Rd.
Managing Director TMA, River Road Transportation
Management Association, 7
Shattuck Rd., Andover, MA 01810

Donna M. Daylor Prior to April 1998, Director of
Vice President Training, UniCare Life & Health
Ins. Co., 1350 Main St.,
Springfield, MA

John C. Delano Prior to July 1998, Senior
Assistant Vice President Foreign Exchange Trader,
Nationsbank, 233 So. Wacker
Drive, Chicago, IL 60606

Edwin M. Denson Prior to November 1997, Vice
Vice President President and Senior Economist
Primark Decision Economics, 260
Franklin St., Boston, MA 02110

Ralph C. Derbyshire Prior to November 1997, Partner,
Senior Vice President Palmer & Dodge, One Beacon
Street, Boston, MA 02108; Board
Member, MSPCC, 399 Boylston St.,
Boston, MA; Board Member,
Winchester After School Program,
Skillings Rd., Winchester, MA

Stephen P. Dexter Prior to June 1999, Senior Vice
Senior Vice President President and Senior Portfolio
Manger, Scudder Kemper, Inc. One
International Place, Boston, MA

Michael G. Dolan Chairman-Finance Council, St.
Assistant Vice President Mary's Parish, 44 Myrtle St.,
Melrose, MA 02176; Member,
School Advisory Board, St.
Mary's School, 44 Myrtle St.,
Melrose, MA 02176

Edward Driscoll Prior to September 1999, Equity
Vice President Trader, Fidelity Research and
Management, 82 Devonshire St.,
Boston, MA 02109

Emily Durbin Board of Directors, Family
Vice President Service, Inc., Lawrence, MA
01840

Karnig H. Durgarian Board Member, EBRI, Suite 600,
Managing Director 2121 K St., N.W., Washington, DC
20037-1896. Trustee, American
Assembly, 122 C. St., N.W.,
Suite 350, Washington, DC 20001

Christine Durkee Prior to June 1998, Project
Assistant Vice President Manager, Foundation
Technologies, Inc., 78 4th Ave.,
Waltham, MA 02451
Nathan Eigerman Trustee, Flower Hill Trust, 298
Senior Vice President Marlborough St., #4, Boston, MA
02116

Tony H. Elavia Prior to September 1999,
Senior Vice President Executive Vice President,
Voyageur Asset Management, 90 S.
7th Street, Minneapolis, MN
55402

Lisa V. Emerick Prior to September 1998, Asian
Vice President Sales Trader, BWZ Securities
Asia, Inc., Citibank Tower, 3
Garden Road, Hong Kong

Irene M. Esteves Board of Director Member,
Managing Director American Management Association
Finance council, 1601 Broadway,
New York, NY; Board of Director
Member, First Night Boston, 20
Park Plaza, Suite 927, Boston,
MA; Board of Director Member, SC
Johnson Commercialmarkets, 8310
16th St., Stutevant, WI 53177;
Board of Director Member,
Massachusetts Taxpayers
Foundation, 24 Province St.,
Boston, MA; Board of Director
Member, Mrs. Bairds Bakeries,
515 Jones St., Suite 200, Fort
Worth, Texas 76102

Ian Ferguson Trustee, Park School, 171
Senior Managing Director Goddard Avenue, Brookline, MA
02146

John Ferry Prior to September 1998, Vice
Vice President President, Scudder Kemper
Investments, 101 California St.,
San Francisco, CA 94111.

Edward R. Finch Prior to December 1997, Managing
Senior Vice President Director, M.A. Weatherbie & Co.,
265 Franklin St., Boston, MA
02110

Kate Fleisher Prior to January 1998, Director
Vice President of Human Resources, Laura
Ashley, 6 St., James Ave. Suite
410, Boston, MA 02116

Peter M. Fleisher Prior to July 1999, Senior Vice
Senior Vice President President, Fleet National Bank,
75 State Street, Boston, MA
02109

Henrietta Fraser Prior to October, 1998, Manager,
Vice President Fleming Investment Management,
25 Copthall Ave., London EC2R
7DR

Karen T. Frost Prior to February 1998, Vice
Senior Vice President President, Morgan Stanley
Organization, 25 Cabot Square,
London, England E14 4QA

Stephen C. Gibbs Prior to June 1998, Senior
Vice President Financial Analyst, Fidelity
Investments, 82 Devonshire St.,
Boston, MA 02109

Ken S. Gordon Prior to July, 1998, Vice
Vice President President, Union Bank of
Switzerland, 2-2-2 Otemachi,
Chiyoda-Ku, Tokyo, Japan

J. Peter Grant Trustee, The Dover Church,
Senior Vice President Dover, MA 02030

Patrice Graviere Prior to March 1998, Regional
Senior Vice President Director for Latin America, MFS
International, LTD, Buenos
Aires, Brazil

Paul E. Haagensen Director, Haagensen Research
Senior Vice President Foundation, 630 West 168th St.,
New York, NY 10032

Andrew J. Hachey Prior to July 1998. Associate,
Assistant Vice President Skadden, Arps, Slate, Meagher &
Flom, LLP, One Beacon Street,
Boston, MA 02108

David E. Hamlin Prior to August 1998, Principal,
Senior Vice President The Vanguard Group, 100 Vanguard
Blvd., Valley Forge, PA 19355

Linda Harring Prior to December 1997, Senior
Senior Vice President Vice President, Oppenheimer and
Company, Inc., CIBC Oppenheimer
Tower, World Financial Center,
New York, NY 10281

Deborah R. Healey Corporator, New England Baptist
Senior Vice President Hospital, 125 Parker Hill Ave.,
Boston, MA 02120; Director, NEB
Enterprises, 125 Parket Hill
Ave., Boston, MA 02120

Jonathan S. Horwitz Prior to August 1998, Vice
Senior Vice President President - Corporate Planning,
Keystone Group, 200 Berkely St.,
Boston, MA 02116

Yoshiro Iino Prior to November 1997, Deputy
Vice President Managing Director, Nomura
International PLC, 1 St.
Martin's-le-Grand, London.

Jeffrey Kaufman Prior to July 1998, Vice
Senior Vice President President and Portfolio Manager,
MFS Investment Management, 500
Boylston St., Boston, MA 02116

Ira C. Kalus-Bystricky Prior to March 1998, Consultant,
Vice President Arthur D. Little, 25 Acorn Park,
Cambridge, MA 02114

Hiroshi Kato Prior to August 1998, Manager,
Vice President Senior Analyst, Daiwa Institute
of Research, 15-6 Fuyuki, Koutou-
ku, Tokyo, 135-8460

Kevin J. Keleher Prior to August 1998, Support
Assistant Vice President Manager, Digital Equipment Co.,
111 Powder Mill Rd., Maynard, MA
01754

William P. King Prior to November 1997,
Vice President Portfolio Manager, TSA Global
Asset Management, 700 South
Flower St., Los Angeles, CA
90017

Deborah F. Kuenstner Director, Board of Pensions,
Managing Director Presbyterian Church, 1001 Market
St., Philadelphia, PA

Leonard LaPorta, Jr. Prior to March 1998, Assistant
Vice President Vice President, State Street
Global Advisors, Two
International Place, Boston, MA
02110; Board of Overseers', USS
Constitution Museum, Charleston,
MA

Lawrence J. Lasser Director, Marsh & McLennan
President, Director and Chief Companies, Inc., 1221 Avenue of
Executive the Americas, New York, NY
10020; Board of Governors and
Executive Committee, Investment
Company Institute, 1401 H. St.,
N.W. Suite 1200, Washington, DC
20005; Board of Overseers,
Museum of Fine Arts, 465
Huntington, Ave., Boston, MA
02115; Trustee, Beth Israel
Deaconess Medical Center, 330
Brookline Ave., Boston, MA;
Member of the Council on Foreign
Relations, 58 East 68th St., New
York, NY 10021; Member of the
Board of Directors of the United
Way of Massachusetts Bay, 245
Summer St., Suite 1401, Boston,
MA 02110; Trustee of the
Vineyard Open Land Foundation,
RFD Box 319X, Vineyard Haven, MA
02568

Gordon R. Lawrence Prior to July 1999, summer
Assistant Vice President associate, J.P. Morgan
Investment Management, 522 Fifth
Ave., New York, NY 10009, Prior
to July, 1997, Associate Lehman
Brothers, 3 World Financial
Center, New York, NY 10285

Maura W. Leddy Prior to October 1998,
Vice President Bookkeeper, Davol/Taunton
Printing, 330 Winthrop Street
Taunton, MA 02780.

Richard Leibovitch Prior to February 1999, Managing
Managing Director Director, J.P. Morgan, 60 Wall
St., New York, NY 10260

Craig S. Lewis Prior to January 1998, Analyst,
Vice President Keystone Investments, 200
Berkeley Street, Boston, MA
02101

Mark G. Lohr Prior to March 1998, Senior Vice
Managing Director President, Fidelity Investmetns,
82 Devonshire St., Boston, MA
02109

Elizabeth M. MacElwee Jones Prior to January 1998,
Senior Vice President Principal, Morgan Stanley, 1155
Broadway, New York, NY 10036

Noboru Machida Prior to October 1998, Senior
Vice President Analyst, The Nikko Research
Center Ltd., Nihonbashi
Kayabacho, Chuou-ku Tokyo, Japan
103

Kevin Maloney Institutional Director,
Managing Director Financial Management
Association, University of South
Florida, College of Business
Administration, Suite 3331,
Tampa, FL 33620

Jabaz Mathai Prior to December 1997,
Assistant Vice President Associate, Deutsche Morgan
Grenfell, 31 West 52nd St., New
York, NY 10019

Sarah Marshall Prior to August 1999, Associate,
Vice President McKinsey & Company, Inc., 55 E.
52nd St., New York, NY 10010

Paul McHugh Prior to June, 1998, Principal,
Vice President Robertson Stephens & Company,
One International Place, Boston,
MA 02110

Nicholas Melhuish Prior to August 1999, Assistant
Vice President Director of Schroder Investment
Management, 31 Gresham St.,
London, England ECZV8AQ

Krishna Memani Prior to September 1998,
Managing Director Principal, Morgan Stanley & Co.,
1585 Broadway, New York, NY
10039

Peter V. Meyer Prior to July 1999, Conseco
Vice President Capital Management, 11825 N.
Pennsylvania Ave., Carmel, IN
46032

Paul K. Michaud Prior to December 1997,
Vice President Assistant Vice President, Union
Bank of Switzerland,
Bahnhofstrasse 45, 8021 Zurich,
Switzerland

Christopher G. Miller Prior to January 1998, Portfolio
Vice President Manager, Analytic TSA Global
Asset Management, 700 So. Flower
St., Los Angeles, CA 90017

Jeanne L. Mockard Trustee, The Bryn Mawr School,
Senior Vice President 109, W. Melrose Avenue,
Baltimore, MA 21210

Donald E. Mullin Corporate Representative and
Senior Vice President Board Member, Delta Dental Plan
of Massachusetts, 10 Presidents
Landing, P.O. Box 94104,
Medford, MA 02155

Jennifer P. Murphy Prior to September 1999,
Managing Director Managing Director, Morgan
Stanley, 1585 Broadway, New
York, NY 10036

Kenneth W. Murphy, Jr. Prior to May 1998, Senior
Assistant Vice President Financial Analyst, Merck & Co.,
Inc., One Merck Drive,
Whitehouse Station, NJ 08889

Philip M. Murphy Prior to June 1999, Marketing
Assistant Vice President and Client Relations
Association, GE Investments,
3003 Summer Street, Stamford, CT
06904. Prior to March 1998,
Analyst, McLagan Partners, Inc.,
Four Stamford Plaza, Suite 400,
107 Elm Street, Stamford, CT
06902

Toshio Nagashima Prior to July 1999, General
Managing Director Manager, Product Dept.,
Investment Trust Preparation,
Sumitomo Bank, 1-3-2-
Marunouchi, Chiyoda-ku, Tokyo
100-0005 Japan

Kimberly A.M. Page Nauen Prior to February 1998, Senior
Vice President Consultant, Andersen Consulting,
100 Williams St., Wellesley, MA
02181

Maria Julia Nisbet Prior to May 1999, Project
Assistant Vice President Manager, Cisalpina Gestioni, Via
Boito, 10, Milan, Italy 20121

Stephen M. Oristaglio Prior to July 1998, Managing
Senior Managing Director Director Global Head of Fixed
Income, Swiss Bank Corp/UBS
Organization, 222 Broadway, New
York, NY 10022

Margery C. Parker Prior to December 1997, Vice
Senior Vice President President and Portfolio Manager,
Keystone Investments 200
Berkeley Street, Boston, MA
02101

Carlos Pampliega Prior to March 1998, Regional
Vice President Manager, Massachusetts Financial
Services, 500 Boylston St.,
Boston, MA 02116

Jeffrey F. Peters Prior to June 1999, Principal,
Managing Director McKinsey & Company, 75 Park
Plaza, Boston, MA 02116

Joseph P. Petitti Prior to May 1998, Senior
Vice President Treasury Analyst, Liberty Mutual
Insurance Co., 175 Berkely St.,
Boston, MA 02122

Randolph Petralia Prior to May 1998, First Vice
Senior Vice President President, Lehman Brothers, 3
World Financial Center, New
York, NY 10285

Robert A. Piepenburg Prior to December 1997,
Vice President Assistant Vice President,
BankBoston Corp./Boston
Security, 100 Federal St.,
Boston, MA 02106

Keith Plapinger Chairman and Trustee, Advent
Vice President School, 17 Brimmer St., Boston,
MA 02108

James A. Polk Prior to June 1998, Investment
Vice President Officer, Massachusetts Financial
Services, 500 Boylston St.,
Boston, MA 02116

Charles E. Porter Trustee, Anatolia College, 130
Executive Vice President Bowdoin St., Suite 1201, Boston,
MA 02108; Governor, Handel &
Hayden Society, Horticulture
Hall, 300 Massachusetts Ave.,
Boston, MA 02115

Elizabeth Price Prior to January 1998,
Assistant Vice President Investment Analyst, Schroder
Investment Management Limited,
33 Gutter Lane, London, EC2V
8AS, England

Quintin R.S. Price Prior to December 1998,
Managing Director Corporate Development Director,
The Boots Company PLC, Group
Headquarters, Nottingham NG2 3AA
England; Prior to June 1998,
Managing Director of Pan
European Equities and Global
Head of Research, HSBC
Investment Bank PLC, Thames
Exchange, 10 Queen St Place,
London, EC4R 1BL

George Putnam Chairman and Director, Putnam
Chairman and Director Mutual Funds Corp.; Director,
The Boston Company, Inc., One
Boston Place, Boston, MA 02108;
Director, Boston Safe Deposit
and Trust Company, One Boston
Place, Boston, MA 02108;
Director, Freeport-McMoRan,
Inc., 200 Park Avenue, New York,
NY 10166; Director, General
Mills, Inc., 9200 Wayzata
Boulevard, Minneapolis, MN
55440; Director, Houghton
Mifflin Company, One Beacon
Street, Boston, MA 02108;
Director, Marsh & McLennan
Companies, Inc., 1221 Avenue of
the Americas, New York, NY
10020; Director, Rockefeller
Group, Inc., 1230 Avenue of the
Americas, New York, NY 10020;
Trustee, Massachusetts General
Hospital, Fruit Street, Boston,
Ma 02114; McLean Hospital 115
Mill St., Belmont, MA 02178; The
Colonial Williamsburg
Foundation, Post Office Box
1776, Williamsburg, VA 23187;
The Museum of Fine Arts, 465
Huntington Avenue, Boston, MA
02115; WGBH Foundation, 125
Western Avenue, Boston, MA
02134; The Nature Conservancy,
Post Office Square Building, 79
Milk St., Suite 300, Boston, MA
02109; Trustee, The Jackson
Laboratory, 600 Main St., Bar
Harbor, ME

Edward Qian Prior to February 1998, Back Bay
Vice President Advisors, 399 Boylston St.,
Boston, MA 02116

Keith Quinton Director, Eleazar, Inc., West
Senior Vice President Wheelock St., Hanover, NH 03755

Nadine McQueen-Reed Prior to March, 1999, Key
Assistant Vice President Account Executive, Fidelity
Investments, 130 Tonbridge Road,
Hildenborough, Kent, England,
TN11 9DZ

Thomas V. Reilly Trustee, Knox College, 2 East
Managing Director South St., Galesburg, IL 61401

Kevin J. Rogers Prior to September 1998,
Senior Vice President Managing Director- Portfolio
Manager, Invesco, NY
Organization, 1066 Avenue of the
Americas, New York, NY 10036

Michael V. Salm Prior to November 1997, Mortgage
Vice President Analyst, Blackrock Financial 345
Park Ave., New York, NY 10010

Preeti Sayana Prior to January 1998, Director,
Assistant Vice President Fidelity Investments, 82
Devonshire St., Boston, MA 02109

Saied Simozar Prior to March 1998, Manager,
Senior Vice President Portfolio Analytics, DuPont
Pension fund Investment, One
Righter Parkway, Suite 3200,
Wilmington, DE 198903

Justin M. Scott Director, DSI Proprieties (Neja)
Managing Director Ltd., Epping Rd., Reydon, Essex
CM19 5RD

Denise D. Selden Prior to June 1998, Managing
Senior Vice President Director, Lehman Brothers, 260
Franklin St., Boston, MA 02110

Raj Ken Sharma Prior to January 1998, Vice
Vice President President and Portfolio Manager,
Fleet Financial, 75 State
Street, Boston, MA 02106

Jean I. Sievert Prior to October 1998, Vice
Senior Vice President President, Salomon Smith Barney,
Seven World Trade Center, New
York, NY 10048

Gordon H. Silver Trustee, Wang Center for the
Managing Director Performing Arts, 270 Tremont
St., Boston, MA 02116

David M. Silk Member of Board of Directors,
Senior Vice President Jobs for Bay State Graduates,
451 Andover St., Suite 305,
North Andover, MA 01845

Steven Spiegel Director, Ultra Diamond and Gold
Senior Managing Director Outlet, 29 East Madison St.,
Suite 1800, Chicago, IL 60602;
Director, FACES New York
University Medical Center, 550
First Avenue, New York, NY
10016; Trustee, Babson College,
One College Drive, Wellesley, MA
02157

John Graham Spiers Prior to January 1998, Managing
Senior Vice President Director, Quantitative Financial
Strategies, Inc., 100 Fourfalls
Corporate Drive, Suite 314,
Conshohocken, PA 19428
Raman Srivastava Prior to July 1999, Market Risk
Assistant Vice President Analyst, Bank of Nova Scotia, 20
King St., W., Toronto, ON

James St. John Prior to July 1998, Investment
Assistant Vice President Analyst, University of
Rochester, Rochester, NY 14627

Loren Michael Starr Prior to February 1998, Senior
Managing Director Vice President, Lehman Brothers,
3 World Financial Center, New
York, NY 10285.

Michael P. Stack Prior to November 1997, Senior
Senior Vice President Vice President and Portfolio
Manager, Independence Investment
Associates, 53 State St.,
Boston, MA 02109

Toshifumi Sugimoto Prior to October 1998, Portfolio
Senior Vice President Manager, Deputy General Manager,
Nikko Securities Investment
Trust & Management, Fixed Income
Department, 4-3 Nihonbashi,
Hakozakicho, Chuou-ku, Tokyo,
Japan, 103-0015

William J. Sullivan Prior to June 1999, Executive
Senior Vice President Director, SBC Warburg Dillion
Read, 677 Washington Blvd,
Stamford, CT, 06901

Robert E. Sweeney Prior to February 1998, Vice
Vice President President, Corporate Research
Smith Barney, One New York
Plaza, New York, NY 10004

Judith H. Swirbalus Prior to January 1998, Alex,
Vice President Brown & Sons, One South St.,
Baltimore, MD 21202

John C. Talanian Member of Board of Directors,
Managing Director the Japan Society of Boston, One
Milk Street, Boston, MA 02109

Nicole J. Thorpe Prior to February 1999,
Assistant Vice President President/Owner, Thorpe
Resources, P.O. Box 1895,
Brockton, MA 02301

John R. Tonkin Prior to January 1998, Analyst,
Assistant Vice President Credit Suisse First Boston
Celtic Towers, The Terrace
Wellington, New Zealand

Robert J. Ullman Prior to September, 1998,
Assistant Vice President Assistant Vice President, State
Street Bank, Two International
Place, Boston, MA 02109

Vincent Vliebergh Prior to May 1998, Senior
Vice President Consultant, Garnett Consulting,
30 Monument Square, Concord, MA
01742

Christopher C. Watt Prior to July 1999, Finance
Vice President Manager, Procter & Gamble, 1
Procter & Gamble Plaza,
Cincinnati, OH 45202

Eric Wetlaufer President and Member of Board of
Managing Director Directors, The Boston Security
Analysts Society, Inc., 100
Boylston St., Suite 1050,
Boston, MA 02110

Edward F. Whalen Member of the Board of
Senior Vice President Directors, Hockomock Area YMCA,
300 Elmwood St., North
Attleboro, MA 02760

Edmund F. Wright Jr. Prior to July 1998, Controller,
Assistant Vice President CBE Technologies, Inc., 50
Redfield St., Boston, MA 02122

Richard P. Wyke Director, Salem YMCA, One Sewall
Senior Vice President St., Salem, MA 01970

Item 27. Principal Underwriter

(a) Putnam Mutual Funds Corp. is the principal underwriter for
each of the following investment companies, including the
Registrant:

Putnam American Government Income Fund, Putnam Arizona Tax Exempt
Income Fund, Putnam Asia Pacific Growth Fund, Putnam Asset
Allocation Funds, Putnam Balanced Retirement Fund, Putnam
California Tax Exempt Income Fund, Putnam California Tax Exempt
Money Market Fund, Putnam Capital Appreciation Fund, Putnam
Convertible Income-Growth Trust, Putnam Diversified Income Trust,
Putnam Equity Income Fund, Putnam Europe Growth Fund, Putnam
Florida Tax Exempt Income Fund, Putnam Funds Trust, The George
Putnam Fund of Boston, Putnam Global Equity Fund, Putnam Global
Governmental Income Trust, Putnam Global Growth Fund, Putnam
Global Natural Resources Fund, The Putnam Fund for Growth and
Income, Putnam Growth and Income Fund II, Putnam Health Sciences
Trust, Putnam High Yield Trust, Putnam High Yield Advantage Fund,
Putnam Income Fund, Putnam Intermediate U.S. Government Income
Fund, Putnam International Growth Fund, Putnam Investment Funds,
Putnam Investors Fund, Putnam Massachusetts Tax Exempt Income
Fund, Putnam Michigan Tax Exempt Income Fund, Putnam Minnesota
Tax Exempt Income Fund, Putnam Money Market Fund, Putnam
Municipal Income Fund, Putnam New Jersey Tax Exempt Income Fund,
Putnam New Opportunities Fund, Putnam New York Tax Exempt Income
Fund, Putnam New York Tax Exempt Money Market Fund, Putnam New
York Tax Exempt Opportunities Fund, Putnam Ohio Tax Exempt Income
Fund, Putnam OTC & Emerging Growth Fund, Putnam Pennsylvania Tax
Exempt Income Fund, Putnam Preferred Income Fund, Putnam
Strategic Income Fund, Putnam Tax Exempt Income Fund, Putnam Tax
Exempt Money Market Fund, Putnam Tax-Free Income Trust, Putnam
Tax Smart Funds Trust, Putnam U.S. Government Income Trust,
Putnam Utilities Growth and Income Fund, Putnam Variable Trust,
Putnam Vista Fund, Putnam Voyager Fund, Putnam Voyager Fund II.

(b) The directors and officers of the Registrant's principal
underwriter are listed below. None of the officers are officers
of the Registrant except:

Name Position and Offices with Registrant

Richard Monaghan Vice President
George Putnam Chairman and President
Gordon Silver Vice President

The principal business address of each person is One Post Office
Square, Boston, MA 02109:

Name Position and
Offices with Underwriter
Adduci,John V. Vice President
Alberts,Richard W. Asst. Vice President
Alden,Donald F. Vice President
Alexander,Michael R. Vice President
Alpaugh,Christopher S. Vice President
Amisano,Paulette C. Vice President
Arends,Michael K. Senior Vice President
Asher,Steven E. Senior Vice President
Avery,Scott A. Senior Vice President
Aymond,Christian E. Senior Vice President
Aymond,Colin C. Vice President
Barnett,William E. Asst. Vice President
Barrett,Thomas Vice President
Battit,Suzanne J Vice President
Beatty,Steven M. Senior Vice President
Bent,John J. Vice President
Beringer,Thomas C. Vice President
Berka,Sharon A. Senior Vice President
Boneparth,John F. Managing Director
Bonfilio Jr.,Peter J. Asst. Vice President
Bouchard,Keith R. Senior Vice President
Bradford Jr.,Linwood Senior Vice President
E.
Bresnahan,Leslee R. Managing Director
Brockelman,James D. Senior Vice President
Brookman,Joel S. Vice President
Brown,Timothy K. Senior Vice President
Buckner,Gail D. Senior Vice President
Burke,Robert W. Sr Managing Director
Burnham,David N. Vice President
Burrill,Gregory J. Vice President
Buzzell,Paul F. Asst. Vice President
Cabana,Susan D. Vice President
Cartwright,Patricia A. Asst. Vice President
Casey,David M. Vice President
Castle Jr.,James R. Vice President
Chamieh,Mark Vice President
Chapman,Frederick Vice President
Chapman,Thomas E. Vice President
Chase,Mary Claire Vice President
Chrostowski,Louis F. Senior Vice President
Church,Daniel J. Vice President
Clark,Richard B. Senior Vice President
Clermont,Mary Asst. Vice President
Clinton,John C. Asst. Vice President
Cohen,Jeff M. Asst. Vice President
Collman,Kathleen M. Sr Managing Director
Commane,Karen L. Asst. Vice President
Coneeny,Mark L. Senior Vice President
Connelly,Donald A. Senior Vice President
Connolly,William T. Managing Director
Cooper,John S. Vice President
Corbett,Dennis Vice President
Corvinus,F. Nicholas Senior Vice President
Cotto,Stephen P Asst. Vice President
Crane III,George H. Senior Vice President
Cristo,Chad H. Vice President
Curran,Peter J. Senior Vice President
Dahill,Jessica E. Vice President
Daly,Kenneth L. Managing Director
Daylor,Donna M. Vice President
Days,Nancy M. Asst. Vice President
Deluse,Laura R. Asst. Vice President
deMont,Lisa M. Vice President
Diaz,Roger Vice President
Dirstine,Michael T. Asst. Vice President
DiStasio,Karen E. Vice President
Divney,Kevin M. Vice President
Dolan,Michael G. Vice President
Donaldson,Scott M. Vice President
Dougherty,Thomas Vice President
Durbin,Emily J. Vice President
Durkee,Christine Asst. Vice President
Edlin,David B. Managing Director
Elder,Michael D. Vice President
Emhof,Joseph R. Vice President
English,James M. Senior Vice President
Esposito,Vincent Managing Director
Favaloro,Beth A. Vice President
Feldman,Susan H. Senior Vice President
Fisher,C. Nancy Managing Director
Fishman,Mitchell B. Senior Vice President
Fiumara,Joseph C. Vice President
Flaherty,Patricia C. Senior Vice President
Fleisher,Kate Vice President
Fleming,Ellen E. Asst. Vice President
Foley,Timothy P. Vice President
Frost,Karen T. Senior Vice President
Gaudette,Marjorie B. Vice President
Gibbs,Stephen C. Vice President
Gindel,Caroline E. Asst. Vice President
Goodfellow,Mark D. Vice President
Goodman,Robert Managing Director
Gould,Carol J. Asst. Vice President
Grace,Anthony J. Asst. Vice President
Grace,Linda K. Vice President
Graviere,Patrice Senior Vice President
Grey,Eric M. Vice President
Grossberg,Jill Asst. Vice President
Grove,Denise Vice President
Gubala,Jeffrey P. Vice President
Guerin,Donnalee Asst. Vice President
Hachey,Andrew J Asst. Vice President
Hall,Debra L. Vice President
Halloran,James E. Vice President
Halloran,Thomas W. Senior Vice President
Hansen,Christine M. Asst. Vice President
Harring,Linda Senior Vice President
Harrington,Shannon W. Vice President
Hartig,Robert Vice President
Hartigan,Craig W. Vice President
Hartley,Deborah M. Asst. Vice President
Hayes-Castro,Deanna R. Vice President
Hedstrom,Gayle A. Asst. Vice President
Heimanson,Susan M. Senior Vice President
Holmes,Maureen A. Asst. Vice President
Hooley,Daniel F Jr. Asst. Vice President
Horwitz,Jonathan S. Senior Vice President
Hotchkiss,Michael F. Senior Vice President
Hoyt,Paula J. Asst. Vice President
Hurley,William J. Managing Director & CFO
Hutchins,Robert B. Vice President
Iino,Yoshiro Vice President
Jacobsen,Dwight D. Managing Director
Kaminsky,Gregory C. Vice President
Kapinos,Peter J. Vice President
Keleher,Kevin J. Asst. Vice President
Kelley,Brian J. Vice President
Kelly,David Vice President
Kelly,Robin F. Asst. Vice President
Kennedy,Alicia C. Asst. Vice President
Kinsman,Anne Senior Vice President
Kirk,Deborah H. Senior Vice President
Koontz,Jill A. Senior Vice President
Kringdon,Joseph D. Senior Vice President
Landers,Bruce M. Vice President
Lane,Linda L. Asst. Vice President
LaPierre,Christopher W Asst. Vice President
Lathrop,James D. Senior Vice President
Lawlor,Stephanie T. Asst. Vice President
Leary,Joan M. Vice President
Ledbetter,Charles C. Vice President
Leddy,Maura W. Vice President
Leipsitz,Margaret Asst. Vice President
Lemire,Kevin Vice President
Levy,Eric S. Senior Vice President
Levy,Norman S. Vice President
Lewandowski Jr.,Edward Vice President
V.
Lewandowski,Edward V. Senior Vice President
Li,Mei Asst. Vice President
Lieberman,Samuel L. Vice President
Lifsitz,David M. Vice President
Lilien,David R. Vice President
Link,Christopher H. Asst. Vice President
Linquata,Louis K. Asst. Vice President
Litant,Lisa M. Asst. Vice President
Lockwood,Maura A. Senior Vice President
Loew,Christopher R. Asst. Vice President
Lohr,Mark G. Managing Director
Lomba,Rufino R. Senior Vice President
Lucey,Robert F. Director
Lucey,Thomas J. Director
Lyons,Robert F. Asst. Vice President
Macdonald,Richard A. Senior Vice President
Maloof,Renee L. Asst. Vice President
Mancini,Dana Asst. Vice President
Mancini,Jane M. Managing Director
Manning,George J. Vice President
Manthorne,Heather M. Asst. Vice President
Maravel,Alexi A. Asst. Vice President
Maxwell,Scott M. Managing Director
McAvoy,Bridget Asst. Vice President
McCafferty,Karen A. Vice President
McCarthy,Anne B. Asst. Vice President
McConville,Paul D. Senior Vice President
McCracken,Brian Asst. Vice President
McCutcheon,Bruce A Senior Vice President
McDermott,Robert J. Vice President
McKenna,Mark J. Senior Vice President
McNamara,Laura Vice President
McNamee,Mary G. Asst. Vice President
Meagher,Dorothy B. Asst. Vice President
Mehta,Ashok Vice President
Metelmann,Claye A. Vice President
Michejda,Marek A. Vice President
Miller,Bart D. Senior Vice President
Miller,Gregory T. Vice President
Miller,Jeffrey M. Managing Director
Mills,Ronald K. Vice President
Minsk,Judith Asst. Vice President
Monaghan,Richard A. Director
Monahan,Kimberly A. Vice President
Moody,Paul R. Vice President
Moret,Mitchell L. Senior Vice President
Morey,John P. Senior Vice President
Mosher,Barry L. Asst. Vice President
Mullen,Donald E. Senior Vice President
Munson,Brian D. Vice President
Murphy Jr.,Kenneth W. Asst. Vice President
Murphy,Paul G. Vice President
Murray,Brendan R. Vice President
Nadherny,Robert Senior Vice President
Nagashima,Toshio Managing Director
Nauen,Kimberly Page Asst. Vice President
Neary,Ellen R. Vice President
Nelson,Andrew E. Vice President
Neutra,Colleen J. Asst. Vice President
Newell,Amy Jane Vice President
Nickodemus,John P. Senior Vice President
Nickse,Gail A. Asst. Vice President
Nicolazzo,Jon C. Vice President
Nisbet,M. Julia Asst. Vice President
O'Brien,Lois C. Vice President
O'Connell,Gayle M. Asst. Vice President
O'Connor,Brian P. Vice President
Onofrio,Ellen Asst. Vice President
Orr,Kevin Vice President
Palmer,Patrick J. Vice President
Pampliega,Carlos Vice President
Panessa,Brian Vice President
Papes,Scott A. Vice President
Parker,Michael T. Asst. Vice President
Patton,Robert J. Vice President
Peters,Jeffrey F. Managing Director
Petitti,Joseph P. Vice President
Petralia,Randolph S. Senior Vice President
Phoenix,John G. Senior Vice President
Phoenix,Joseph Senior Vice President
Pilibosian,George J. Vice President
Plapinger,Keith Senior Vice President
Powers,Brian S. Asst. Vice President
Present,Howard B. Senior Vice President
Puddle,David G. Senior Vice President
Pulkrabek,Scott M. Vice President
Putnam,George Director
Reed,Nadine McQueen Asst. Vice President
Riley,Megan G. Asst. Vice President
Rodammer,Kris Vice President
Rogers,Deborah A. Vice President
Rowe,Robert B. Vice President
Ryan,Carolyn M. Asst. Vice President
Ryan,Deborah A. Vice President
Ryan,William M. Vice President
Saunders,Catherine A. Senior Vice President
Saur,Karl W. Vice President
Scanlon,Michael M. Vice President
Schlosberg,Alan R. Asst. Vice President
Schofield,Shannon D. Vice President
Schultz,Mitchell D. Managing Director
Scordato,Christine A. Senior Vice President
Segers,Elizabeth R. Senior Vice President
Selden,Denise D. Senior Vice President
Shamburg,John B. Vice President
Shanahan,Christopher Vice President
W.
Sharpless,Kathy G. Managing Director
Shelby,Robert Vice President
Short,Jonathan D. Senior Vice President
Siebold,Mark J. Asst. Vice President
Siemon Jr.,Frank E. Asst. Vice President
Silva,J. Paul Vice President
Silver,Gordon H. Sr Managing Director
Skistimas Jr,John J. Vice President
Solan,Meenakshi Asst. Vice President
Soule,Scott W. Asst. Vice President
Spiegel,Steven Sr Managing Director
Sprague,David L. Vice President
Starishevsky,Daniel Vice President
Starr,Loren M. Managing Director
Statuta,Jason M. Vice President
Steinberg,Lauren B. Asst. Vice President
Stern,Derek A. Asst. Vice President
Stickney,Paul R. Senior Vice President
Strumpf,Casey Senior Vice President
Sugimoto,Toshifumi Senior Vice President
Sullivan,Brian L. Senior Vice President
Sullivan,Donna G Vice President
Sullivan,Elaine M. Senior Vice President
Sullivan,Maryann Asst. Vice President
Suzuki,Toshimi Senior Vice President
Sweeney,Janet C. Senior Vice President
Talanian,John C. Managing Director
Tanner,B Iris Vice President
Tavares,April M. Asst. Vice President
Telling,John R. Senior Vice President
Thorpe,Nicole J. Asst. Vice President
Tibbetts,Richard B. Managing Director
Tirado,Patrice M. Vice President
Toner,Robert J. Asst. Vice President
Troped Blacker,Bonnie Senior Vice President
Trowbridge,Wendy S. Asst. Vice President
Upham,Scott E. Vice President
Walsh,Stephen R. Vice President
Washburn,Andrew O. Vice President
Waters,Mitchell J. Vice President
Watt,Christopher C. Vice President
Whalen,Brian Vice President
Whalen,Edward F. Senior Vice President
Whitaker,J. Greg Vice President
White,J. Bennett Vice President
Wolfson,Jane Senior Vice President
Woodlock,Ronald J. Asst. Vice President
Woolverton,William H. Managing Director
Wright Jr.,Edmund F. Asst. Vice President
Yan,Yanfang Asst. Vice President
Young,Jason P. Vice President
Zografos,Laura J. Vice President
Zukowski,Virginia A. Senior Vice President

Item 28. Location of Accounts and Records

Persons maintaining physical possession of accounts, books and other
documents required to be maintained by Section 31(a) of the Investment
Company Act of 1940 and the Rules promulgated thereunder are Registrant's
Associate Clerk, Judith Cohen; Registrant's investment adviser, Putnam
Investment Management, Inc.; Registrant's principal underwriter, Putnam
Mutual Funds Corp.; Registrant's custodian, Putnam Fiduciary Trust Company
("PFTC"); and Registrant's transfer and dividend disbursing agent, Putnam
Investor Services, a division of PFTC. The address of the Associate Clerk,
investment adviser, principal underwriter, custodian and transfer and
dividend disbursing agent is One Post Office Square, Boston, Massachusetts
02109.

Item 29. Management Services

None.

Item 30. Undertakings

None.

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of Post-Effective
Amendment No. 18 to the Registration Statement of Putnam Health Sciences
Trust on Form N-1A (File No. 2-75863) of our report dated October 11,
1999, on our audit of the financial statements and financial highlights of
the Fund, which report is included in the Annual Report for Putnam Health
Sciences Trust for the year ended August 31, 1999, which is incorporated by
reference in the Registration Statement.

We also consent to the references to our firm under the caption
"Independent Accountants and Financial Statements" in the Statement of
Additional Information and under the heading "Financial Highlights" in such
Prospectus.

PricewaterhouseCoopers LLP

Boston, Massachusetts

December 23, 1999

NOTICE

A copy of the Agreement and Declaration of Trust of Putnam Health Sciences
Trust is on file with the Secretary of State of The Commonwealth of
Massachusetts and notice is hereby given that this instrument is executed
on behalf of the Registrant by an officer of the Registrant as an officer
and not individually and the obligations of or arising out of this
instrument are not binding upon any of the Trustees, officers or
shareholders individually but are binding only upon the assets and property
of the Registrant.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the fund certifies that it meets all of the
requirements for effectiveness of this Registration Statement under Rule
485(b) under the Securities Act of 1933 and has duly caused this Amendment
to its Registration Statement to be signed on its behalf by the
undersigned, duly authorized, in the City of Boston, and The Commonwealth
of Massachusetts, on the 29th day of December, 1999.

PUTNAM HEALTH SCIENCES TRUST

By: Gordon H. Silver, Vice President

Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement of Putnam Health Sciences Trust has been
signed below by the following persons in the capacities and on the dates
indicated:

Signature Title

George Putnam President and Chairman of the Board;
Principal Executive Officer; Trustee

John D. Hughes Senior Vice President;
Treasurer and Principal Financial Officer

Paul G. Bucuvalas Assistant Treasurer
and Principal Accounting Officer

Jameson A. Baxter Trustee

Hans H. Estin Trustee

John A. Hill Trustee

Ronald J. Jackson Trustee

Paul L. Joskow Trustee

Elizabeth T. Kennan Trustee

Lawrence J. Lasser Trustee

John H. Mullin, III Trustee

Robert E. Patterson Trustee

William F. Pounds Trustee

George Putnam, III Trustee

A.J.C. Smith Trustee

W. Thomas Stephens Trustee

W. Nicholas Thorndike Trustee

By: Gordon H. Silver,
as Attorney-in-Fact

December 29, 1999

PUTNAM HEALTH SCIENCES TRUST
CLASS C DISTRIBUTION PLAN AND AGREEMENT

This Plan and Agreement (the "Plan") constitutes the Distribution Plan for
the Class C shares of Putnam Health Sciences Trust, a Massachusetts
business trust (the "Trust"), adopted pursuant to the provisions of Rule
12b-1 under the Investment Company Act of 1940 (the "Act") and the related
agreement between the Trust and Putnam Mutual Funds Corp. ("PMF"). During
the effective term of this Plan, the Trust may incur expenses primarily
intended to result in the sale of its Class C shares upon the terms and
conditions hereinafter set forth:

Section 1. The Trust shall pay to PMF a monthly fee at the annual rate of
1.00% of the average net asset value of the Class C shares of the Trust, as
determined at the close of each business day during the month, to
compensate PMF for services provided and expenses incurred by it in
connection with the offering of the Trust's Class C shares, which may
include, without limitation, the payment by PMF to investment dealers of
commissions on the sale of Class C shares, as set forth in the then current
Prospectus or Statement of Additional Information of the Trust and the
payment of a service fee of up to 0.25% of such net asset value for the
purposes of maintaining or improving services provided to shareholders by
PMF and investment dealers. Such fees shall be payable for each month
within 15 days after the close of such month. A majority of the Qualified
Trustees, as defined below, may, from time to time, reduce the amount of
such payments, or may suspend the operation of the Plan for such period or
periods of time as they may determine.

Section 2. This Plan shall not take effect until:

(a) it has been approved by a vote of a majority of the outstanding Class C
shares of the Fund, but only if the Plan is adopted after the commencement
of any public offering of the Fund's Class C shares or the sale of the
Fund's Class C shares to persons who are not affiliated persons of the
Fund, affiliated persons of such persons, promoters of the Fund or
affiliated persons of such promoters;

(b) it has been approved, together with any related agreements, by votes of
the majority (or whatever greater percentage may, from time to time, be
required by Section 12(b) of the Act or the rules and regulations thereunder)
of both (i) the Trustees of the Trust, and (ii) the Qualified Trustees of the
Trust, cast in person at a meeting called for the purpose of voting on this
Plan or such agreement; and

Section 3. This Plan shall continue in effect for a period of more than
one year after it takes effect only so long as such continuance is
specifically approved at least annually in the manner provided for approval
of this Plan in Section 2(b).

Section 4. PMF shall provide to the Trustees of the Trust, and the
Trustees shall review, at least quarterly, a written report of the amounts
so expended and the purposes for which such expenditures were made.

Section 5. This Plan may be terminated at any time by vote of a majority
of the Qualified Trustees or by vote of the majority of the outstanding
Class C shares of the Trust.

Section 6. All agreements with any person relating to implementation of
this Plan shall be in writing, and any agreement related to this Plan shall
provide:

(a) that such agreement may be terminated at any time, without payment of any
penalty, by vote of a majority of the Qualified Trustees or by vote of a
majority of the outstanding Class C shares of the Trust, on not more than 60
days' written notice to any other party to the agreement; and

(b) that such agreement shall terminate automatically in the event of its
assignment.

Section 7. This Plan may not be amended to increase materially the amount
of distribution expenses permitted pursuant to Section 1 hereof without the
approval of a majority of the outstanding Class C shares of the Trust and
all material amendments to this Plan shall be approved in the manner
provided for approval of this Plan in Section 2(b).

Section 8. As used in this Plan, (a) the term "Qualified Trustees" shall
mean those Trustees of the Trust who are not interested persons of the
Trust, and have no direct or indirect financial interest in the operation
of this Plan or any agreements related to it, and (b) the term "majority of
the outstanding Class C shares of the Trust" means the affirmative vote, at
a duly called and held meeting of Class C shareholders of the Trust, (i) of
the holders of 67% or more of the Class C shares of the Trust present (in
person or by proxy) and entitled to vote at such meeting, if the holders of
more than 50% of the outstanding Class C shares of the Trust entitled to
vote at such meeting are present in person or by proxy, or (ii) of the
holders of more than 50% of the outstanding Class C shares of the Trust
entitled to vote at such meeting, whichever is less, and (c) the terms
"assignment" and "interested person" shall have the
respective meanings specified in the Act and the rules and regulations
thereunder, subject to such exemptions as may be granted by the Securities
and Exchange Commission.

Section 9. A copy of the Agreement and Declaration of Trust of the Trust
is on file with the Secretary of State of The Commonwealth of Massachusetts
and notice is hereby given that this instrument is executed on behalf of
the Trustees of the Trust as Trustees and not individually, and that the
obligations of or arising out of this instrument are not binding upon any
of the Trustees, officers or shareholders individually but are binding only
upon the assets and property of the Trust.

Executed as of July 16, 1999.

PUTNAM MUTUAL FUNDS CORP. PUTNAM HEALTH SCIENCES TRUST
/s/ Richard A. Monaghan /s/ Charles E. Porter
By:----------------------- By: ------------------------
Richard A. Monaghan Charles E. Porter
Managing Director and Executive Vice President
Chief of Mutual Fund
Business

PUTNAM FUNDS

PLAN PURSUANT TO RULE 18F-3(D) UNDER THE
INVESTMENT COMPANY ACT OF 1940

EFFECTIVE NOVEMBER 1, 1999

Each of the open-end investment companies managed by Putnam
Investment Management, Inc. (each a "Fund" and, together, the
"Funds") may from time to time issue one or more of the following
classes of shares: Class A shares, Class B shares, Class C
shares, Class M shares and Class Y shares. Each class is subject
to such investment minimums and other conditions of eligibility
as are set forth in the Funds' registration statements as from
time to time in effect. The differences in expenses among these
classes of shares, and the conversion and exchange features of
each class of shares, are set forth below in this Plan. Except
as noted below, expenses are allocated among the classes of
shares of each Fund based upon the net assets of each Fund
attributable to shares of each class. This Plan is subject to
change, to the extent permitted by law and by the Agreement and
Declaration of Trust and By-laws of each Fund, by action of the
Trustees of each Fund.

CLASS A SHARES

DISTRIBUTION AND SERVICE FEES

Class A shares pay distribution and service fees pursuant to
plans (the "Class A Plans") adopted pursuant to Rule 12b-1 under
the Investment Company Act of 1940 (the "1940 Act"). Class A
shares also bear any costs associated with obtaining shareholder
approval of the Class A Plans (or an amendment to a Class A
Plan). Pursuant to the Class A Plans, Class A shares may pay up
to 0.35% of the relevant Fund's average net assets attributable
to the Class A shares* (which percentage may be less for certain
Funds, as described in the Funds' registration statements as from
time to time in effect). Amounts payable under the Class A Plans
are subject to such further limitations as the Trustees may from
time to time determine and as set forth in the registration
statement of each Fund as from time to time in effect.

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*Class A shares of Putnam Global Equity Fund may pay up to
0.65% of average net assets attributable to Class A shares.

CONVERSION FEATURES

Class A shares do not convert to any other class of shares.

EXCHANGE FEATURES

Class A shares of any Fund may be exchanged, at the holder's
option, for Class A shares of any other Fund that offers Class A
shares without the payment of a sales charge beginning 15 days
after purchase, provided that Class A shares of such other Fund
are available to residents of the relevant state. The holding
period for determining any contingent deferred sales charge (a
"CDSC") will include the holding period of the shares exchanged,
and will be calculated using the schedule of any Fund into or
from which shares have been exchanged that would result in the
highest CDSC applicable to such Class A shares.

INITIAL SALES CHARGE

Class A shares are offered at a public offering price that
is equal to their net asset value ("NAV") plus a sales charge of
up to 5.75% of the public offering price (which maximum may be
less for certain Funds, as described in each Fund's registration
statement as from time to time in effect). The sales charges on
Class A shares are subject to reduction or waiver as permitted by
Rule 22d-1 under the 1940 Act and as described in the Funds'
registration statements as from time to time in effect.

CONTINGENT DEFERRED SALES CHARGE

Purchases of Class A shares of $1 million or more that are
redeemed within two years of purchase are subject to a CDSC of up
to 1.00% of either the purchase price or the NAV of the shares
redeemed, whichever is less. Class A shares are not otherwise
subject to a CDSC.

The CDSC on Class A shares is subject to reduction or waiver
in certain circumstances, as permitted by Rule 6c-10 under the
1940 Act and as described in the Funds' registration statements
as from time to time in effect.

CLASS B SHARES

DISTRIBUTION AND SERVICE FEES

Class B shares pay distribution and service fees pursuant to
plans adopted pursuant to Rule 12b-1 under the 1940 Act (the
"Class B Plans"). Class B shares also bear any costs associated
with obtaining shareholder approval of the Class B Plans (or an
amendment to a Class B Plan). Pursuant to the Class B Plans,
Class B shares may pay up to 1.00% of the relevant Fund's average
net assets attributable to Class B shares (which percentage may
be less for certain Funds, as described in the Funds'
registration statements as from time to time in effect). Amounts
payable under the Class B Plans are subject to such further
limitations as the Trustees may from time to time determine and
as set forth in the registration statement of each Fund as from
time to time in effect.

CONVERSION FEATURES

Class B shares automatically convert to Class A shares of
the same Fund at the end of the month eight years after purchase
(or such earlier date as the Trustees of a Fund may authorize),
except that Class B shares purchased through the reinvestment of
dividends and other distributions on Class B shares convert to
Class A shares at the same time as the shares with respect to
which they were purchased are converted and Class B shares
acquired by the exchange of Class B shares of another Fund will
convert to Class A shares based on the time of the initial
purchase.

EXCHANGE FEATURES

Class B shares of any Fund may be exchanged, at the holder's
option, for Class B shares of any other Fund that offers Class B
shares without the payment of a sales charge beginning 15 days
after purchase, provided that Class B shares of such other Fund
are available to residents of the relevant state. The holding
period for determining any CDSC will include the holding period
of the shares exchanged, and will be calculated using the
schedule of any Fund into or from which shares have been
exchanged that would result in the highest CDSC applicable to
such Class B shares.

INITIAL SALES CHARGE

Class B shares are offered at their NAV, without an initial
sales charge.

CONTINGENT DEFERRED SALES CHARGE

Class B shares that are redeemed within 6 years of purchase
are subject to a CDSC of up to 5.00% of either the purchase price
or the NAV of the shares redeemed, whichever is less (which
period may be shorter and which percentage may be less for
certain Funds, as described in the Funds' registration statements
as from time to time in effect); such percentage declines the
longer the shares are held, as described in the Funds'
registration statements as from time to time in effect. Class B
shares purchased with reinvested dividends or capital gains are
not subject to a CDSC.

The CDSC on Class B shares is subject to reduction or waiver
in certain circumstances, as permitted by Rule 6c-10 under the
1940 Act and as described in the Funds' registration statements
as from time to time in effect.

CLASS C SHARES

DISTRIBUTION AND SERVICE FEES

Class C shares pay distribution and service fees pursuant to
plans adopted pursuant to Rule 12b-1 under the 1940 Act (the
"Class C Plans"). Class C shares also bear any costs associated
with obtaining shareholder approval of the Class C Plans (or an
amendment to a Class C Plan). Pursuant to the Class C Plans,
Class C shares may pay up to 1.00% of the relevant Fund's average
net assets attributable to the Class C shares (which percentage
may be less for certain Funds, as described in the Funds'
registration statements as from time to time in effect). Amounts
payable under the Class C Plans are subject to such further
limitations as the Trustees may from time to time determine and
as set forth in the registration statement of each Fund as from
time to time in effect.

CONVERSION FEATURES

Class C shares do not convert to any other class of shares.

EXCHANGE FEATURES

Class C shares of any Fund may be exchanged, at the holder's
option, for Class C shares of any other Fund that offers Class C
shares without the payment of a sales charge beginning 15 days
after purchase, provided that Class C shares of such other Fund
are available to residents of the relevant state. The holding
period for determining any CDSC will include the holding period
of the shares exchanged, and will be calculated using the
schedule of any Fund into or from which shares have been
exchanged that would result in the highest CDSC applicable to
such Class C shares.

INITIAL SALES CHARGE

Class C shares are offered at their NAV, without an initial
sales charge.

CONTINGENT DEFERRED SALES CHARGE

Class C shares are subject to a 1.00% CDSC if the shares are
redeemed within one year of purchase. The CDSC on Class C shares
is subject to reduction or waiver in certain circumstances, as
permitted by Rule 6c-10 under the 1940 Act and as described in
the Funds' registration statements as from time to time in
effect.

CLASS M SHARES

DISTRIBUTION AND SERVICE FEES

Class M shares pay distribution and service fees pursuant to
plans adopted pursuant to Rule 12b-1 under the 1940 Act (the
"Class M Plans"). Class M shares also bear any costs associated
with obtaining shareholder approval of the Class M Plans (or an
amendment to a Class M Plan). Pursuant to the Class M Plans,
Class M shares may pay up to 1.00% of the relevant Fund's average
net assets attributable to Class M shares (which percentage may
be less for certain Funds, as described in the Funds'
registration statements as from time to time in effect). Amounts
payable under the Class M Plans are subject to such further
limitations as the Trustees may from time to time determine and
as set forth in the registration statement of each Fund as from
time to time in effect.

CONVERSION FEATURES

Class M shares do not convert to any other class of shares.

EXCHANGE FEATURES

Class M shares of any Fund may be exchanged, at the holder's
option, for Class M shares of any other Fund that offers Class M
shares without the payment of a sales charge beginning 15 days
after purchase, provided that Class M shares of such other Fund
are available to residents of the relevant state.

INITIAL SALES CHARGE

Class M shares are offered at a public offering price that
is equal to their NAV plus a sales charge of up to 3.50% of the
public offering price (which maximum may be less for certain
Funds, as described in each Fund's registration statement as from
time to time in effect). The sales charges on Class M shares are
subject to reduction or waiver as permitted by Rule 22d-1 under
the 1940 Act and as described in the Funds' registration
statements as from time to time in effect.

CONTINGENT DEFERRED SALES CHARGE

Class M shares are not subject to any CDSC.

CLASS Y SHARES

DISTRIBUTION AND SERVICE FEES

Class Y shares do not pay a distribution fee.

CONVERSION FEATURES

Class Y shares do not convert to any other class of shares.

EXCHANGE FEATURES

Class Y shares of any Fund may be exchanged, at the holder's
option, for Class Y shares of any other Fund that offers Class Y
shares without the payment of a sales charge beginning 15 days
after purchase, provided that Class Y shares of such other Fund
are available to residents of the relevant state, and further
provided that shares of such other Fund are available through the
relevant employer's plan.

INITIAL SALES CHARGE

Class Y shares are offered at their NAV, without an initial
sales charge.

CONTINGENT DEFERRED SALES CHARGE

Class Y shares are not subject to any CDSC.