PUTNAM PREFERRED INCOME FUND
Prospectus Supplement dated December 1, 1995 to
Prospectus dated March 1, 1995
Effective as of the date of this Supplement, employee
benefit plans of companies with at least 200 eligible
employees may purchase shares of the Fund without a sales
charge. Also, contingent deferred sales charges may be
waived under certain circumstances. Accordingly, the
Fund's Prospectus is revised as follows:
(1) The footnote following "Examples" under the heading
"Expenses summary" is replaced with the following:
* A deferred sales charge of up to 1.00% is assessed
on certain redemptions of Class A shares that were
purchased without an initial sales charge. See
"How to buy shares -- Class A shares."
(2) The section "Class A shares" under the heading
"Alternative Sales Arrangements" is replaced with the
following:
Class A shares. An investor who purchases Class A
shares pays a sales charge at the time of
purchase. As a result, Class A shares are not
subject to any charges when they are redeemed,
except for certain sales at net asset value that
are subject to a contingent deferred sales charge
("CDSC"). Certain purchases of Class A shares
qualify for reduced sales charges. See "How to
buy shares -- Class A shares" and "Distribution
Plans."
(3) The second and third paragraphs under the heading "How
to buy shares -- Class A shares" are replaced with the
following:
There is no initial sales charge on purchases of Class
A shares of $1 million or more. However, a CDSC of
1.00% or 0.50%, respectively, will be imposed if you
redeem these shares within the first or second year
after purchase, based on the lower of the shares' cost
and current net asset value. Any shares acquired by
reinvestment of distributions will be redeemed without
a CDSC.
In addition, there are no sales charges on shares
purchased by participant-directed employee benefit
plans with at least 200 eligible employees.
Shares purchased by certain investors investing $1
million or more who have made arrangements with Putnam
Mutual Funds and whose dealer of record waived the
commission as described below are not subject to the
CDSC. In determining whether a CDSC is payable, the
Fund will first redeem shares not subject to any
charge. Putnam Mutual Funds receives the entire amount
of any CDSC you pay. See the Statement of Additional
Information for more information about the CDSC.
Except as stated below, Putnam Mutual Funds pays
investment dealers of record commissions on sales of
Class A shares of $1 million or more based on an
investor's cumulative purchases during the one-year
period beginning with the date of the initial purchase
at net asset value. 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 participant-directed
qualified retirement plan initially investing less than
$20 million in Putnam funds and other investments
managed by Putnam Management or its affiliates
(including a plan with at least 200 eligible
employees), Putnam Mutual Funds pays commissions during
each one-year measuring period, determined as described
above, at the rate of 1.00% of the first $2 million,
0.80% of the next $1 million and 0.50% thereafter. On
sales at net asset value to all other participant-
directed qualified retirement plans, Putnam Mutual
Funds pays commissions on the initial investment and on
subsequent net quarterly sales at the rate of 0.15%.
(4) The first paragraph under the heading "How to buy shares
- -- General" is replaced with the following:
You may be eligible to buy Class A shares and Class M
shares at reduced sales charges.
Consult your investment dealer or Putnam Mutual Funds
for details about Putnam's combined purchase privilege,
cumulative quantity discount, statement of intention,
group sales plan, employee benefit plans, and other
plans. Descriptions are also included in the order
form and in the Statement of Additional Information.
A participant-directed employee benefit plan
participating in a "multi-fund" program approved by
Putnam Mutual Funds may include amounts invested in
other mutual funds participating in such program for
purposes of determining whether the plan may purchase
Class A shares at net asset value. These investments
will also be included for purposes of the discount
privileges and programs described above.
Sales charges will not apply to Class M shares
purchased with redemption proceeds received within the
prior 90 days from non-Putnam mutual funds on which the
investor paid a front-end or a contingent deferred
sales charge or to Class M shares purchased by
participant-directed qualified retirement plans with at
least 50 eligible employees. The Fund may also sell
Class M shares at net asset value to members of
qualified groups.
(5) Effective December 1, 1995, any applicable contingent
deferred sales charge will be waived on redemptions of
shares following the death or post-purchase disability of a
settlor of a living trust account. Up to 12% of the value
of shares subject to a systematic withdrawal plan may also
be redeemed each year without a CDSC.
