Prospectus Supplement
dated July 26, 1999 to: 53082
7/99
Putnam Tax-Free Insured Fund
Prospectus dated November 30, 1998
The fund will offer class C shares beginning July 26, 1999.
Information about class C shares may be found in this
Supplement.
1. THE SECTION ENTITLED "EXPENSES SUMMARY" IS SUPPLEMENTED BY
THE FOLLOWING INFORMATION ABOUT CLASS C SHARES:
Expenses are one of several factors to consider when
investing. The following table summarizes your maximum
transaction costs from investing in class C shares of a fund
and expenses based on the most recent fiscal year. The
examples show the cumulative expenses attributable to a
hypothetical $1,000 investment over specified periods.
Shareholder transaction expenses
Maximum sales charge
imposed on purchases (as a
percentage
of offering price) NONE*
Deferred sales charge 1.0% in (as a percentage
of the original the first lower of year and
purchase price or eliminated redemption proceeds)
thereafter
Annual fund operating expenses
(as a percentage of average net assets)
Total
fund Management 12b-1
operating fee fees Other
fee expenses expenses
----------- ------- ---------- ------------
0.59% 1.00% 0.15% 1.74%
The figures listed under "Class C 12b-1 fees" and
"Total operating expenses" reflect estimated Class C 12b-1
fees of 1.00% and actual expenses of the fund's class
B shares for its most recent fiscal year. The table
is provided to help you understand the expenses of
investing and your share of fund operating expenses.
The expenses shown in the table do not reflect the
application of credits that reduce fund expenses.
Examples
Your investment of $1,000 in class C shares would
incur the following expenses, assuming 5% annual
return and, except as indicated, redemption at the
end of each period:
1 year 1 3 5 10
no redemption year years years years
$18 $28 $55 $94 $205
The examples do not represent past or future expense
levels. Actual expenses may be greater or less than
those shown. Federal regulations require the
examples to assume a 5% annual return, but actual
annual return varies.
The higher 12b-1 fees borne by class B, class C and
class M shares may cause long-term shareholders to
pay more than the economic equivalent of the maximum
permitted front-end sales charge on class A shares.
2. The third paragraph of the section "Organization and
history" is replaced by the following:
Any such series of shares 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. Only class A, B, C and M shares are
offered by this prospectus. The fund may also offer
other 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 any other
class of shares, contact your investment dealer or
Putnam Mutual Funds (at 1-800225-1581).
3. The section "About Your Investment alternative sales
arrangements" is replaced by the following:
Class A shares. If you purchase class A shares, you
will generally pay a sales charge at the time of
purchase and, as a result, will not have to pay any
charges when you redeem the shares. If you purchase
class A shares at net asset value you may have to pay
a contingent deferred sales charge ("CDSC") when you
redeem the shares. Certain purchases of class A
shares qualify for reduced sales charges. Class A
shares pay lower 12b-1 fees than class B, class C and
class M shares. See "How to buy shares -- Class A
shares" and "Distribution plans."
Class B shares. If you purchase class B shares, you
will not pay an initial sales charge, but you may
have to pay a CDSC if you redeem the shares within
six years. Class B shares also pay a higher 12b-1
fee than class A and class M shares. Class B shares
automatically convert into class A shares, based on
relative net asset value, approximately eight years
after purchase. For more information about the
conversion of class B shares, including information
about how shares acquired through reinvestment of
distributions are treated and certain circumstances
under which class B shares may not convert into class
A shares, see the SAI.
Class B shares provide an investor the benefit of
putting all of the investor's dollars to work from
the time the investment is made. Until conversion,
class B shares will have a higher expense ratio and
pay lower dividends than class A and class M shares
because of the higher 12b-1 fee. See "How to buy
shares - Class B shares" and "Distribution plans."
Class C shares. Like class B shares, class C shares
are sold without an initial sales charge and are
subject to a CDSC if redeemed within one year of
purchase. Class C shares also bear a higher 12b-1 fee
than class A and class M shares. Unlike class B
shares, class C shares do not convert into any other
class of shares. Like class B shares, class C shares provide
an investor the benefit of putting all of the
investor's dollars to work from the time the
investment is made. See "How to buy shares -- Class
C shares" and "Distribution plans."
Class M shares. If you purchase class M shares, you
will generally pay a sales charge at the time of
purchase that is lower than the sales charge you
would pay for class A shares. Certain purchases of
class M shares qualify for reduced sales charges.
Class M shares pay 12b-1 fees that are lower than
class B and class C shares but higher than class A
shares. You will not have to pay any charges when
you redeem class M shares, but class M shares will
not convert into any other class of shares. See "How
to buy shares -- Class M shares" and "Distribution
plans."
Which class is best for you? Which class of shares
provides the most suitable investment for you depends
on a number of factors, including the amount you
intend to invest and how long you intend to hold the
shares. If your intended purchase qualifies for
reduced sales charges, you might consider class A or
class M shares. If you prefer not to pay a sales
charge at the time of purchase, you might consider
class B or class C shares. Orders for class B shares
for $250,000 or more will be treated as orders for
class A shares or declined. In the case of class C
shares, orders of $1,000,000 or more and orders which
because of a right of accumulation or statement of
intent would qualify for the class A shares
breakpoint of $1,000,000 will be treated as orders
for class A shares or declined. See the SAI for more
information. For more information about these sales
arrangements, consult your investment dealer or
Putnam Investor Services. Shares may only be
exchanged for shares of the same class of another
Putnam fund. See "How to exchange shares."
4. The section "How to buy shares" is supplemented by the
following:
Class C shares
Class C shares are sold without an initial sales
charge, although a 1.00% CDSC is imposed if you
redeem your shares within one year of purchase.
Class C shares have no conversion feature and
therefore will be subject to a higher 12b-1 fee than
class A shares indefinitely.
Putnam Mutual Funds pays 1.00% of the amount invested
to dealers who sell class C shares which includes
prepayment of a 0.20% service fee, except on sales to
investors exempt from the CDSC.
5. The second paragraph of the section "How to buy shares
General" is replaced by the following:
The fund may sell class A, class B, class C and class
M shares at net asset value without an initial sales
charge or a CDSC to current and retired Trustees (and
their families), current and retired employees (and
their families) of Putnam Management and affiliates,
registered representatives and other employees (and
their families) of broker-dealers having sales
agreements with Putnam Mutual Funds, employees (and
their families) of financial institutions having
sales agreements with Putnam Mutual Funds (or
otherwise having an arrangement with a broker-dealer
or financial institution with respect to sales of
fund shares), financial institution trust departments
investing an aggregate of $1 million or more in
Putnam funds, clients of certain
administrators of tax-qualified plans, tax-qualified
plans when proceeds from repayments of loans to
participants are invested (or reinvested) in Putnam
funds, "wrap accounts" for the benefit of clients of
broker-dealers, financial institutions or financial
planners adhering to certain standards established by
Putnam Mutual Funds, and investors meeting certain
requirements who sold shares of certain Putnam closed-
end funds pursuant to a tender offer by the closed-
end fund.
6. The section "Distribution plans" is replaced by the
following:
The fund has adopted distribution plans to compensate
Putnam Mutual Funds for services provided and
expenses incurred by it as principal underwriter of
fund shares, including the payments to dealers
mentioned below. The plans provide for payments by
the fund to Putnam Mutual Funds at the annual rates
(expressed as a percentage of 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, class B and class M shares
to 0.20%, 0.60% and 0.50% of average net assets,
respectively.
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 makes quarterly payments to
dealers at the annual rate of 0.20% of the average
net asset value of class A shares for which such
dealers are designated as the dealer of record,
except that payments to dealers for shares held by
class A qualified benefit plans are made at reduced
rates, as described in the SAI. No payments are made
during the first year after purchase on shares
purchased at net asset value by shareholders
investing $1 million or more or by employer-sponsored
retirement plans that have at least 200 eligible
employees 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.
Putnam Mutual Funds makes quarterly payments to
dealers at the annual rates of 0.20% and 0.25% of the
average net asset value of class B shares outstanding
as of March 31, 1990 and acquired after that date,
respectively, except that the first year, for which
service fees are prepaid at the time of sale as
described above. Putnam Mutual Funds makes quarterly
payments to dealers at the annual rate of 0.40% of
the average net asset value of class M shares.
Putnam Mutual Funds makes quarterly payments to
dealers at the annual rates of 1.00% and 0.40% of the
average net asset value of class C and class M
shares, respectively, for which such dealers are
designated as the dealer of record, provided,
however, no payment will be made with respect to the
first four quarters following the sale of class C
shares.
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 service agreements between dealers
and Putnam Mutual Funds, and any applicable limits
imposed by the National Association of Securities
Dealers, Inc.
7. The fifth sentence of the section "How the fund makes
distributions to shareholders; tax information" is replaced
by the following:
Distributions paid on class A shares will generally
be greater than those paid on class B shares, class
C shares and class M shares because expenses
attributable to class B shares, class C shares and
class M shares will generally be higher.
