PUTNAM
CONVERTIBLE
INCOME-GROWTH
TRUST
ONE POST OFFICE SQUARE, BOSTON, MA 02109
CLASS A SHARES
INVESTMENT STRATEGY: GROWTH & INCOME
PROSPECTUS - MARCH 1, 1994, AS REVISED AUGUST 1, 1994
THIS PROSPECTUS EXPLAINS CONCISELY WHAT YOU SHOULD KNOW BEFORE
INVESTING IN CLASS A SHARES OF THE FUND OFFERED WITHOUT A SALES
CHARGE THROUGH ELIGIBLE EMPLOYER-SPONSORED DEFINED CONTRIBUTION
PLANS ("DEFINED CONTRIBUTION PLANS"). PLEASE READ IT CAREFULLY
AND KEEP IT FOR FUTURE REFERENCE. YOU CAN FIND MORE DETAILED
INFORMATION ABOUT THE FUND IN THE MARCH 1, 1994 STATEMENT OF
ADDITIONAL INFORMATION, AS AMENDED FROM TIME TO TIME. FOR A FREE
COPY OF THE STATEMENT OR FOR OTHER INFORMATION, INCLUDING
PROSPECTUSES REGARDING ANOTHER CLASS OF THE FUND SHARES OR CLASS
A SHARES FOR OTHER INVESTORS, CALL PUTNAM INVESTOR SERVICES AT 1-
800-752-9894. THE STATEMENT HAS BEEN FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION AND IS INCORPORATED INTO THIS PROSPECTUS
BY REFERENCE.
PUTNAM CONVERTIBLE INCOME-GROWTH TRUST (THE "FUND") SEEKS, WITH
EQUAL EMPHASIS, CURRENT INCOME AND CAPITAL APPRECIATION. THE
FUND'S SECONDARY OBJECTIVE IS CONSERVATION OF CAPITAL. THE FUND
INVESTS PRIMARILY IN CONVERTIBLE BONDS AND CONVERTIBLE PREFERRED
STOCKS, BUT MAY ALSO INVEST IN COMMON STOCKS AND OTHER
NONCONVERTIBLE SECURITIES. IT IS DESIGNED FOR INVESTORS SEEKING
A DIVERSIFIED PORTFOLIO THAT OFFERS BOTH CURRENT INCOME AND
POTENTIAL CAPITAL APPRECIATION.
THE FUND MAY INVEST MORE THAN 35% OF ITS TOTAL ASSETS IN LOWER-
RATED BONDS, COMMONLY KNOWN AS "JUNK BONDS." INVESTMENTS OF THIS
TYPE ARE SUBJECT TO A GREATER RISK OF LOSS OF PRINCIPAL AND NON-
PAYMENT OF INTEREST. INVESTORS SHOULD CAREFULLY ASSESS THE RISKS
ASSOCIATED WITH AN INVESTMENT IN THE FUND.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
PUTNAMINVESTMENTS
PUTNAM DEFINED
CONTRIBUTION PLANS
ABOUT THE FUND
EXPENSES
SUMMARY ........................................3
FINANCIAL
HIGHLIGHTS ....................................4
OBJECTIVES ..............................................4
HOW OBJECTIVES ARE
PURSUED ..............................4
HOW PERFORMANCE IS
SHOWN ...............................10
HOW THE FUND IS
MANAGED ................................11
ORGANIZATION AND HISTORY
...............................12
ABOUT YOUR INVESTMENT
HOW TO BUY
SHARES......................................13
DISTRIBUTION PLAN......................................14
HOW TO SELL
SHARES .....................................15
HOW TO EXCHANGE
SHARES .................................16
HOW THE FUND VALUES ITS
SHARES .........................16
HOW DISTRIBUTIONS ARE MADE; TAX INFORMATION............16
ABOUT PUTNAM INVESTMENTS, INC
..........................18
APPENDIX
FIXED-INCOME SECURITY RATINGS
..........................19
<PAGE>
ABOUT THE FUND
EXPENSES SUMMARY
EXPENSES ARE ONE OF SEVERAL FACTORS TO CONSIDER WHEN INVESTING IN
THE FUND. THE FOLLOWING TABLE SUMMARIZES EXPENSES
INCURRED BY
THE FUND BASED ON ITS MOST RECENT FISCAL YEAR. THE
EXAMPLE
SHOWS THE CUMULATIVE EXPENSES ATTRIBUTABLE TO A HYPOTHETICAL
$1,000 INVESTMENT IN CLASS A SHARES OF THE FUND OVER SPECIFIED
PERIODS.
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
MANAGEMENT FEES 0.62%
12B-1 FEES 0.25%
OTHER EXPENSES 0.19%
TOTAL FUND OPERATING EXPENSES 1.06%
EXAMPLE
1 3 5 10
YEAR YEARS YEARS YEARS
YOUR INVESTMENT OF $1,000
WOULD INCUR THE FOLLOWING
EXPENSES, ASSUMING 5%
ANNUAL RETURN AND REDEMPTION
AT THE END OF EACH PERIOD:
$11 $34 $58 $129
THE TABLE IS PROVIDED TO HELP YOU UNDERSTAND YOUR SHARE
OF THE
OPERATING EXPENSES WHICH THE FUND INCURS. THE ANNUAL MANAGEMENT
FEES SHOWN IN THE TABLE REFLECT AN INCREASE IN
THE MANAGEMENT
FEES PAYABLE TO PUTNAM MANAGEMENT. THE 12B-1 FEES
SHOWN IN
THE TABLE REFLECT THE AMOUNT TO WHICH THE TRUSTEES CURRENTLY
LIMIT PAYMENTS UNDER THE DISTRIBUTION PLAN. ACTUAL
MANAGEMENT
FEES, 12B-1 FEES AND TOTAL OPERATING EXPENSES FOR THE
LAST
FISCAL YEAR WERE 0.53%M 0.24% AND 0.96%, RESPECTIVELY.
THE
EXAMPLE DOES NOT REPRESENT PAST OR FUTURE EXPENSE LEVELS ,
AND
ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. FEDERAL
REGULATIONS REQUIRE THE EXAMPLE TO ASSUME A 5% ANNUAL
RETURN,
BUT ACTUAL ANNUAL RETURN HAS VARIED. THE EXAMPLE DOES
NOT
REFLECT ANY CHARGES OR EXPENSES RELATED TO YOUR EMPLOYER'S PLAN.
THE FUND ALSO OFFERS ANOTHER CLASS OF SHARES. SEE
"ORGANIZATION AND HISTORY" FOR ADDITIONAL INFORMATION.
FINANCIAL HIGHLIGHTS
THE TABLE ON THE FOLLOWING PAGE PRESENTS PER SHARE FINANCIAL
INFORMATION FOR THE FUND'S TEN MOST RECENT FISCAL YEARS. THIS
INFORMATION HAS BEEN DERIVED FROM THE FUND'S FINANCIAL
STATEMENTS, WHICH HAVE BEEN AUDITED AND REPORTED ON BY THE FUND'S
INDEPENDENT ACCOUNTANTS. THE REPORT OF INDEPENDENT ACCOUNTANTS
AND FINANCIAL STATEMENTS INCLUDED IN THE FUND'S ANNUAL REPORT TO
SHAREHOLDERS FOR THE 1993 FISCAL YEAR ARE INCORPORATED BY
REFERENCE INTO THIS PROSPECTUS. THE FUND'S ANNUAL REPORT, WHICH
CONTAINS ADDITIONAL UNAUDITED PERFORMANCE INFORMATION, WILL BE
MADE AVAILABLE WITHOUT CHARGE UPON REQUEST.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS*
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
YEAR ENDED OCTOBER 31
1993 1992 1991 1990
CLASS A
<S> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $17.60 $15.78 $12.12 $15.56
INVESTMENT OPERATIONS
NET INVESTMENT INCOME .87 .89 .88 .95
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS 2.87 1.89 3.74 (3.35)
TOTAL FROM INVESTMENT OPERATIONS 3.74 2.78 4.62 (2.40)
LESS DISTRIBUTIONS FROM:
NET INVESTMENT INCOME (A) (.96) (.96) (.96) (1.04)
NET REALIZED GAIN
ON INVESTMENTS -- -- -- --
TOTAL DISTRIBUTIONS (.96) (.96) (.96) (1.04)
NET ASSET VALUE,
END OF PERIOD $20.38 $17.60 $15.78 $12.12
TOTAL INVESTMENT RETURN
AT NET ASSET VALUE (%)(B) 21.74 18.16 39.05 (16.46)
NET ASSETS, END OF PERIOD
(IN THOUSANDS) $707,969 $599,866 $570,752 $528,648
RATIO OF EXPENSES TO AVERAGE
NET ASSETS (%) .96 1.11 1.15 1.12
RATIO OF NET INVESTMENT INCOME
TO AVERAGE NET ASSETS (%) 4.55 5.32 6.07 6.37
PORTFOLIO TURNOVER (%)** 66.63 59.89 78.72 60.03
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ELEVEN
MONTHS
ENDED YEAR ENDED
YEAR ENDED OCTOBER 31 OCTOBER 31 NOVEMBER 30
1989 1988 1987 1986 1985 1984 1983
CLASS A
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $14.42 $14.24 $16.44 $14.43 $12.73 $15.20 $14.45
INVESTMENT OPERATIONS
NET INVESTMENT INCOME .97 .88 .86 .93 .89 .91 1.01
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS 1.13 .87 (1.83) 2.47 1.68 (.90) 1.48
TOTAL FROM INVESTMENT OPERATIONS 2.10 1.75 (.97) 3.40 2.57 .01 2.49
LESS DISTRIBUTIONS FROM:
NET INVESTMENT INCOME (A) (.96) (.96) (.96) (.95) (.68) (.88) (1.00)
NET REALIZED GAIN
ON INVESTMENTS -- (.61) (.27) (.44) (.19) (1.60) (.74)
TOTAL DISTRIBUTIONS (.96) (1.57) (1.23) (1.39) (.87) (2.48) (1.74)
NET ASSET VALUE,
END OF PERIOD $15.56 $14.42 $14.24 $16.44 $14.43 $12.73 $15.20
TOTAL INVESTMENT RETURN
AT NET ASSET VALUE (%)(B) 14.90 13.40 (7.00) 24.55 22.36(C) 1.14 18.29
NET ASSETS, END OF PERIOD
(IN THOUSANDS) $820,609 $950,280 $1,070,783 $825,562 $225,272 $55,374 $41,042
RATIO OF EXPENSES TO AVERAGE
NET ASSETS (%) .93 .92 .84 .83 1.06(C) 1.01 1.08
RATIO OF NET INVESTMENT INCOME
TO AVERAGE NET ASSETS (%) 6.32 6.12 4.91 5.54 7.46(C) 7.13 6.62
PORTFOLIO TURNOVER (%)** 49.44 115.87 87.45 77.51 119.78(D) 76.22 68.59
<PAGE>
* FINANCIAL HIGHLIGHTS FOR PERIODS ENDED THROUGH OCTOBER 31, 1992 HAVE BEEN RESTATED TO CONFORM WITH REQUIREMENTS
ISSUED BY THE SEC IN APRIL 1993.
** PORTFOLIO TURNOVER CALCULATION FOR FISCAL 1985 AND THEREAFTER INCLUDES TRANSACTIONS IN U.S. GOVERNMENT SECURITIES
WITH MATURITIES GREATER THAN ONE YEAR. PRIOR PERIOD PORTFOLIO TURNOVER CALCULATIONS EXCLUDED ALL U.S. GOVERNMENT
SECURITIES.
(A) $0.017 OF DISTRIBUTIONS FROM NET INVESTMENT INCOME FOR THE YEAR ENDED OCTOBER 31, 1990 REPRESENTS RETURN OF CAPITAL
FOR FEDERAL INCOME TAX PURPOSES.
(B) TOTAL INVESTMENT RETURN ASSUMES DIVIDEND REINVESTMENT AND DOES NOT REFLECT THE EFFECT OF SALES CHARGES.
(C) ANNUALIZED.
(D) NOT ANNUALIZED.
</TABLE>
OBJECTIVES
PUTNAM CONVERTIBLE INCOME-GROWTH TRUST SEEKS, WITH EQUAL
EMPHASIS, CURRENT INCOME AND CAPITAL APPRECIATION. ITS SECONDARY
OBJECTIVE IS CONSERVATION OF CAPITAL. A PARTICULAR SECURITY
SELECTED FOR THE FUND'S PORTFOLIO NEED NOT REFLECT ALL ASPECTS OF
THE FUND'S INVESTMENT OBJECTIVES. THE FUND IS NOT INTENDED TO BE
A COMPLETE INVESTMENT PROGRAM, AND THERE IS NO ASSURANCE THAT IT
WILL ACHIEVE ITS OBJECTIVES.
HOW OBJECTIVES ARE PURSUED
BASIC INVESTMENT STRATEGY
PUTNAM CONVERTIBLE INCOME-GROWTH TRUST INVESTS PRIMARILY IN
CONVERTIBLE SECURITIES WHICH PUTNAM INVESTMENT MANAGEMENT, INC.,
THE FUND'S INVESTMENT MANAGER ("PUTNAM MANAGEMENT"), BELIEVES ARE
CONSISTENT WITH THE FUND'S INVESTMENT OBJECTIVE OF CURRENT INCOME
AND CAPITAL APPRECIATION. "CONVERTIBLE" SECURITIES INCLUDE
CORPORATE BONDS, NOTES OR PREFERRED STOCKS THAT CAN BE CONVERTED
INTO (THAT IS, EXCHANGED FOR) COMMON STOCK, AND OTHER SECURITIES,
SUCH AS WARRANTS, THAT ALSO PROVIDE AN OPPORTUNITY FOR EQUITY
PARTICIPATION. THESE SECURITIES ARE GENERALLY CONVERTIBLE AT
EITHER A STATED PRICE OR A STATED RATE (THAT IS, FOR A SPECIFIC
NUMBER OF SHARES OF COMMON STOCK OR OF ANOTHER SECURITY).
BECAUSE OF THIS CONVERSION FEATURE, THE PRICE OF THE CONVERTIBLE
SECURITY WILL NORMALLY VARY IN SOME PROPORTION TO CHANGES IN THE
PRICE OF THE UNDERLYING COMMON STOCK. A CONVERTIBLE SECURITY
WILL NORMALLY ALSO PROVIDE A HIGHER YIELD THAN THE UNDERLYING
COMMON STOCK. THIS HIGHER YIELD MAY TEND TO CUSHION THE
CONVERTIBLE SECURITY AGAINST PRICE DECLINES AS SUBSTANTIAL AS MAY
BE EXPERIENCED BY THE UNDERLYING COMMON STOCK.
THE FUND WILL NORMALLY INVEST AT LEAST 65% OF ITS TOTAL ASSETS IN
CONVERTIBLE SECURITIES. THE REMAINDER MAY BE INVESTED IN COMMON
STOCKS AND IN NONCONVERTIBLE PREFERRED STOCKS AND DEBT SECURITIES
WHICH PUTNAM MANAGEMENT BELIEVES WILL HELP THE FUND ACHIEVE ITS
INVESTMENT OBJECTIVES. THE FUND IS NOT REQUIRED TO SELL
SECURITIES TO MAINTAIN THIS 65% REQUIREMENT. THE FUND MAY ALSO
HOLD A PORTION OF ITS ASSETS IN CASH OR MONEY MARKET INSTRUMENTS.
AT TIMES PUTNAM MANAGEMENT MAY JUDGE THAT CONDITIONS IN THE
SECURITIES MARKETS MAKE PURSUING THE FUND'S BASIC INVESTMENT
STRATEGY INCONSISTENT WITH THE BEST INTERESTS OF ITS
SHAREHOLDERS. AT SUCH TIMES PUTNAM MANAGEMENT MAY TEMPORARILY
USE ALTERNATIVE STRATEGIES, PRIMARILY DESIGNED TO REDUCE
FLUCTUATIONS IN THE VALUE OF THE FUND'S ASSETS. IN IMPLEMENTING
THESE "DEFENSIVE" STRATEGIES, THE FUND MAY INCREASE THE AMOUNT OF
ITS PORTFOLIO INVESTED IN NONCONVERTIBLE DEBT SECURITIES AND
PREFERRED STOCKS, U.S. GOVERNMENT SECURITIES, AND CASH OR MONEY
MARKET INSTRUMENTS OR INVEST IN ANY OTHER SECURITIES PUTNAM
MANAGEMENT CONSIDERS CONSISTENT WITH SUCH DEFENSIVE STRATEGIES.
IT IS IMPOSSIBLE TO PREDICT WHEN, OR FOR HOW LONG, THE FUND WILL
USE SUCH ALTERNATIVE STRATEGIES.
PORTFOLIO TURNOVER
PUTNAM MANAGEMENT PURCHASES SECURITIES FOR THE FUND ON THE BASIS
OF THEIR LONG-TERM PROSPECTS. CHANGES MAY BE MADE IN THE FIXED-
INCOME PORTION OF THE FUND'S PORTFOLIO MORE OFTEN THAN IN THE
EQUITY PORTION, TO TAKE ADVANTAGE OF CHANGES IN INTEREST RATES.
THE FUND DOES NOT TRADE SECURITIES FOR THE PURPOSE OF SEEKING
SHORT-TERM PROFITS, ALTHOUGH PUTNAM MANAGEMENT WILL CHANGE THE
FUND'S INVESTMENTS WHENEVER IT BELIEVES IT IS APPROPRIATE TO DO
SO.
THE LENGTH OF TIME THE FUND HAS HELD A PARTICULAR SECURITY IS NOT
GENERALLY A CONSIDERATION IN INVESTMENT DECISIONS. A CHANGE IN
THE SECURITIES HELD BY THE FUND IS KNOWN AS "PORTFOLIO TURNOVER."
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
GENERALLY INVOLVES SOME EXPENSE TO THE FUND, INCLUDING BROKERAGE
COMMISSIONS OR DEALER MARK-UPS AND OTHER TRANSACTION COSTS ON THE
SALE OF SECURITIES AND REINVESTMENT IN OTHER SECURITIES. SUCH
TRANSACTIONS MAY RESULT IN REALIZATION OF TAXABLE CAPITAL GAINS.
PORTFOLIO TURNOVER RATES FOR THE TEN MOST RECENT FISCAL YEARS OF
THE FUND ARE SHOWN IN THE SECTION "FINANCIAL HIGHLIGHTS."
RISK FACTORS
INVESTMENTS IN FIXED-INCOME SECURITIES. THE FUND MAY INVEST IN
BOTH HIGHER-RATED AND LOWER-RATED FIXED-INCOME SECURITIES. THE
VALUES OF LOWER-RATED SECURITIES GENERALLY FLUCTUATE MORE THAN
THOSE OF HIGHER-RATED SECURITIES. IN ADDITION, 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 ECONOMIC CONDITIONS, OR BOTH, MAY IMPAIR THE
ABILITY OF AN ISSUER TO MAKE PAYMENTS OF INCOME AND PRINCIPAL.
THE FUND WILL ONLY INVEST IN NON-CONVERTIBLE DEBT SECURITIES
RATED AT LEAST CCC BY STANDARD & POOR'S CORPORATION ("S&P") OR
CAA BY MOODY'S INVESTORS SERVICE, INC. ("MOODY'S"). THE FUND MAY
INVEST UP TO 10% OF ITS NET ASSETS IN CONVERTIBLE SECURITIES
RATED CC OR C BY S&P OR CA OR C BY MOODY'S OR IN UNRATED
SECURITIES DETERMINED BY PUTNAM MANAGEMENT TO BE OF COMPARABLE
QUALITY. THE FUND MAY NOT INVEST IN SECURITIES RATED AT THE TIME
OF PURCHASE BELOW C BY S&P AND MOODY'S OR IN UNRATED SECURITIES
PUTNAM MANAGEMENT DETERMINES TO BE OF COMPARABLE QUALITY.
SECURITIES IN THE LOWER RATED CATEGORIES ARE CONSIDERED TO BE
PREDOMINANTLY SPECULATIVE AND MAY BE IN DEFAULT. THE RATING
SERVICES' DESCRIPTIONS OF SECURITIES IN THE VARIOUS RATING
CATEGORIES, INCLUDING THE SPECULATIVE CHARACTERISTICS OF
SECURITIES IN THE LOWER RATING CATEGORIES, ARE SET FORTH IN THE
APPENDIX TO THIS PROSPECTUS. THE FUND MAY INVEST IN UNRATED
SECURITIES IF PUTNAM MANAGEMENT DETERMINES THAT THEY ARE OF A
QUALITY AT LEAST EQUAL TO THE RATED SECURITIES IN WHICH THE FUND
MAY INVEST. THE FUND WILL NOT NECESSARILY DISPOSE OF A SECURITY
WHEN ITS RATING IS REDUCED BELOW ITS RATING AT THE TIME OF
PURCHASE, ALTHOUGH PUTNAM MANAGEMENT WILL MONITOR THE INVESTMENT
TO DETERMINE WHETHER CONTINUED INVESTMENT IN THE SECURITY WILL
ASSIST IN MEETING THE FUND'S INVESTMENT OBJECTIVES.
INVESTORS SHOULD CAREFULLY CONSIDER THEIR ABILITY TO ASSUME THE
RISKS OF OWNING SHARES OF A MUTUAL FUND WHICH INVESTS IN LOWER-
RATED SECURITIES MAKING AN INVESTMENT IN THE FUND. 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
PAYMENTS 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 MAY
BE UNABLE AT TIMES TO ESTABLISH THE FAIR VALUE OF SUCH
SECURITIES. THE RATING ASSIGNED TO A SECURITY BY MOODY'S OR S&P
DOES NOT REFLECT AN ASSESSMENT OF THE VOLATILITY OF THE
SECURITY'S MARKET VALUE OR OF THE LIQUIDITY OF AN INVESTMENT IN
THE SECURITY. FOR MORE INFORMATION ABOUT THE RATING SERVICES'
DESCRIPTIONS OF LOWER-RATED SECURITIES, SEE THE APPENDIX TO THIS
PROSPECTUS.
LIKE THOSE OF OTHER FIXED-INCOME SECURITIES, THE VALUES OF LOWER-
RATED SECURITIES FLUCTUATE IN RESPONSE TO CHANGES IN INTEREST
RATES. THUS, 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. IN ADDITION, THE VALUES OF SUCH
SECURITIES ARE AFFECTED BY CHANGES IN GENERAL ECONOMIC CONDITIONS
AND BUSINESS CONDITIONS AFFECTING THE SPECIFIC INDUSTRIES OF
THEIR ISSUERS. CHANGES BY RECOGNIZED RATING SERVICES IN THEIR
RATINGS OF ANY FIXED-INCOME SECURITY AND 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 SUCH SECURITIES, BUT WILL AFFECT THE FUND'S NET ASSET VALUE.
THE TABLE BELOW SHOWS THE PERCENTAGES OF THE FUND'S ASSETS
INVESTED DURING FISCAL 1993 IN SECURITIES ASSIGNED TO THE VARIOUS
RATING CATEGORIES BY MOODY'S AND S&P AND IN UNRATED SECURITIES
DETERMINED BY PUTNAM MANAGEMENT TO BE OF COMPARABLE QUALITY.
UNRATED SECURITIES OF
RATED SECURITIES, COMPARABLE QUALITY,
AS PERCENTAGE OF AS PERCENTAGE OF
RATING FUND'S NET ASSETS FUND'S NET ASSETS
"AAA"/"AAA" ---% 0.23%
"AA"/"AA" 2.19% 0.07%
"A"/"A" 6.59% 0.95%
"BBB"/"BAA" 13.46% 1.27%
"BB"/"BA" 8.29% 2.59%
"B"/"B" 18.52% 1.84%
"CCC"/"CAA" 3.92% 0.48%
"CC"/"CA" 0.28% ---%
"C"/"C" ---% ---%
------ ------
TOTAL 53.25% 7.43%
AT TIMES A SUBSTANTIAL PORTION OF AN ISSUE OF LOWER-RATED
SECURITIES THAT THE FUND OWNS MAY BE HELD BY RELATIVELY FEW
INSTITUTIONAL PURCHASERS, OR A SUBSTANTIAL PORTION OF THE FUND'S
ASSETS MAY BE INVESTED IN LOWER-RATED SECURITIES AS TO WHICH THE
FUND, BY ITSELF OR TOGETHER WITH OTHER FUNDS AND ACCOUNTS MANAGED
BY PUTNAM MANAGEMENT AND ITS AFFILIATES, HOLDS A MAJOR PORTION OR
ALL OF AN ISSUE OF SUCH SECURITIES. ALTHOUGH PUTNAM MANAGEMENT
GENERALLY CONSIDERS SUCH SECURITIES TO BE LIQUID BECAUSE OF THE
AVAILABILITY OF AN INSTITUTIONAL MARKET FOR SUCH SECURITIES,
UNDER ADVERSE MARKET OR ECONOMIC CONDITIONS OR IN THE EVENT OF
ADVERSE CHANGES IN THE FINANCIAL CONDITION OF THE ISSUER, THE
FUND MAY 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 THE
SECURITIES WERE MORE WIDELY HELD. UNDER SUCH CIRCUMSTANCES, THE
FUND MAY ALSO FIND IT MORE DIFFICULT TO DETERMINE THE FAIR VALUE
OF SUCH SECURITIES FOR PURPOSES OF COMPUTING THE FUND'S NET ASSET
VALUE. IN ORDER TO ENFORCE ITS RIGHTS IN THE EVENT OF A DEFAULT
UNDER SUCH SECURITIES, THE FUND MAY BE REQUIRED TO TAKE
POSSESSION OF AND MANAGE ASSETS SECURING THE ISSUER'S OBLIGATIONS
ON SUCH SECURITIES, WHICH MAY INCREASE THE FUND'S OPERATING
EXPENSES AND ADVERSELY AFFECT THE FUND'S NET ASSET VALUE.
CERTAIN SECURITIES HELD BY THE FUND MAY PERMIT THE ISSUER AT ITS
OPTION TO "CALL," OR REDEEM, ITS SECURITIES. IF AN ISSUER WERE
TO REDEEM SECURITIES HELD BY THE FUND DURING A TIME OF DECLINING
INTEREST RATES, THE FUND MAY NOT BE ABLE TO REINVEST THE PROCEEDS
IN SECURITIES PROVIDING THE SAME INVESTMENT RETURN AS THE
SECURITIES REDEEMED.
PUTNAM MANAGEMENT SEEKS TO MINIMIZE THE RISKS INVOLVED IN
INVESTING IN LOWER-RATED SECURITIES THROUGH DIVERSIFICATION AND
CAREFUL INVESTMENT ANALYSIS. WHEN 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.
THE FUND MAY AT TIMES INVEST IN SO-CALLED "ZERO-COUPON" BONDS AND
"PAYMENT-IN-KIND" BONDS. ZERO-COUPON BONDS ARE ISSUED AT A
SIGNIFICANT DISCOUNT FROM THEIR PRINCIPAL AMOUNT AND PAY INTEREST
ONLY AT MATURITY RATHER THAN AT INTERVALS DURING THE LIFE OF THE
SECURITY. 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. THE VALUE OF ZERO-COUPON BONDS AND PAYMENT-
IN-KIND BONDS IS SUBJECT TO GREATER FLUCTUATION IN RESPONSE TO
CHANGES IN MARKET INTEREST RATES THAN BONDS WHICH PAY INTEREST IN
CASH CURRENTLY. BOTH ZERO-COUPON BONDS 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. EVEN
THOUGH SUCH BONDS DO NOT PAY CURRENT INTEREST IN CASH, THE FUND
IS NONETHELESS REQUIRED TO ACCRUE INTEREST INCOME ON SUCH
INVESTMENTS AND TO DISTRIBUTE SUCH AMOUNTS AT LEAST ANNUALLY TO
SHAREHOLDERS. THUS, THE FUND COULD BE REQUIRED AT TIMES TO
LIQUIDATE OTHER INVESTMENTS IN ORDER TO SATISFY ITS DISTRIBUTION
REQUIREMENTS.
OTHER INVESTMENT PRACTICES
THE FUND MAY ALSO ENGAGE TO A LIMITED EXTENT IN THE FOLLOWING
INVESTMENT PRACTICES, EACH OF WHICH INVOLVES CERTAIN SPECIAL
RISKS. THE STATEMENT OF ADDITIONAL INFORMATION CONTAINS MORE
DETAILED INFORMATION ABOUT THESE PRACTICES, INCLUDING LIMITATIONS
DESIGNED TO REDUCE THESE RISKS.
FOREIGN INVESTMENTS. THE FUND MAY INVEST UP TO 10% OF ITS ASSETS
IN SECURITIES PRINCIPALLY TRADED IN FOREIGN MARKETS. THE FUND
MAY ALSO PURCHASE EURODOLLAR CERTIFICATES OF DEPOSIT WITHOUT
REGARD TO THE 10% LIMIT. FOREIGN INVESTMENTS CAN INVOLVE RISKS
NOT PRESENT IN DOMESTIC INVESTMENTS, SUCH AS CHANGES IN THE
POLITICAL OR ECONOMIC CLIMATES OF COUNTRIES IN WHICH THE FUND
INVESTS. FOREIGN SECURITIES CAN BE LESS LIQUID OR MORE VOLATILE
THAN U.S. SECURITIES, AND FOREIGN ACCOUNTING AND DISCLOSURE
STANDARDS MAY DIFFER FROM U.S. STANDARDS. THE VALUE OF FOREIGN
INVESTMENTS CAN RISE OR FALL BECAUSE OF CHANGES IN CURRENCY
EXCHANGE RATES. THE FUND MAY BUY OR SELL FOREIGN CURRENCIES,
FOREIGN CURRENCY FORWARD CONTRACTS AND CALL OPTIONS ON FOREIGN
CURRENCIES FOR HEDGING PURPOSES IN CONNECTION WITH ITS FOREIGN
INVESTMENTS.
OPTIONS. THE FUND MAY SEEK TO INCREASE ITS CURRENT RETURN BY
BUYING AND SELLING COVERED CALL AND PUT OPTIONS ON SECURITIES IT
OWNS OR IN WHICH IT MAY INVEST. THE FUND RECEIVES A PREMIUM FROM
WRITING A CALL OR PUT OPTION, WHICH INCREASES THE FUND'S RETURN
IF THE OPTION EXPIRES UNEXERCISED OR IS CLOSED OUT AT A NET
PROFIT. WHEN THE FUND WRITES A CALL OPTION, IT GIVES UP THE
OPPORTUNITY TO PROFIT FROM ANY INCREASE IN THE PRICE OF A
SECURITY ABOVE THE EXERCISE PRICE OF THE OPTION; WHEN IT WRITES A
PUT OPTION, THE FUND TAKES THE RISK THAT IT WILL BE REQUIRED TO
PURCHASE A SECURITY FROM THE OPTION HOLDER AT A PRICE ABOVE THE
CURRENT MARKET PRICE OF THE SECURITY. 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 MAY
ALSO BUY AND SELL PUT AND CALL OPTIONS ON SECURITIES AND
SECURITIES INDICES FOR HEDGING PURPOSES. THE FUND MAY ALSO FROM
TIME TO TIME BUY AND SELL COMBINATIONS OF PUT AND CALL OPTIONS ON
THE SAME UNDERLYING SECURITY TO EARN ADDITIONAL INCOME. THE
AGGREGATE VALUE OF THE SECURITIES UNDERLYING THE OPTIONS MAY NOT
EXCEED 25% OF THE FUND'S ASSETS. THE FUND'S USE OF THESE
STRATEGIES MAY BE LIMITED BY APPLICABLE LAW.
SECURITIES LOANS, REPURCHASE AGREEMENTS AND FORWARD COMMITMENTS.
THE FUND MAY LEND PORTFOLIO SECURITIES AMOUNTING TO NOT MORE THAN
25% OF ITS ASSETS TO BROKER-DEALERS AND MAY ENTER INTO REPURCHASE
AGREEMENTS ON UP TO 25% OF ITS ASSETS. THESE TRANSACTIONS MUST
BE FULLY COLLATERALIZED AT ALL TIMES. THE FUND MAY ALSO PURCHASE
SECURITIES FOR FUTURE DELIVERY, WHICH MAY INCREASE ITS OVERALL
INVESTMENT EXPOSURE AND INVOLVES A RISK OF LOSS IF THE VALUE OF
THE SECURITIES DECLINES PRIOR TO THE SETTLEMENT DATE. THESE
TRANSACTIONS INVOLVE SOME RISK TO THE FUND IF THE OTHER PARTY
SHOULD DEFAULT ON ITS OBLIGATION AND THE FUND IS DELAYED OR
PREVENTED FROM RECOVERING THE COLLATERAL OR COMPLETING THE
TRANSACTION.
LIMITING INVESTMENT RISK
SPECIFIC INVESTMENT RESTRICTIONS HELP THE FUND LIMIT INVESTMENT
RISKS FOR ITS SHAREHOLDERS. THESE RESTRICTIONS PROHIBIT THE FUND
FROM: ACQUIRING MORE THAN 10% OF ANY CLASS OF AN ISSUER'S
SECURITIES, OR MORE THAN 10% OF THE VOTING SECURITIES OF ANY
ISSUER* AND INVESTING MORE THAN: (A) 5% OF ITS TOTAL ASSETS IN
THE SECURITIES OF ANY ONE ISSUER (OTHER THAN U.S. GOVERNMENT
OBLIGATIONS);* (B) 5% OF ITS ASSETS IN COMPANIES THAT, TOGETHER
WITH ANY PREDECESSORS, HAVE BEEN IN OPERATION LESS THAN THREE
YEARS AND IN EQUITY SECURITIES (OTHER THAN SECURITIES RESTRICTED
AS TO RESALE) THAT DO NOT HAVE READILY AVAILABLE MARKET
QUOTATIONS;* (C) 15% OF ITS NET ASSETS IN SECURITIES RESTRICTED
AS TO RESALE, EXCLUDING RESTRICTED SECURITIES THAT HAVE BEEN
DETERMINED BY THE FUND'S TRUSTEES (OR THE PERSON DESIGNATED BY
THE FUND'S TRUSTEES TO MAKE SUCH DETERMINATIONS) TO BE READILY
MARKETABLE,;* (D) 25% OF ITS ASSETS IN ANY ONE INDUSTRY;* (E) 2%
OF ITS NET ASSETS IN WARRANTS (OTHER THAN WARRANTS ACQUIRED AS
PART OF A UNIT OR ATTACHED TO SECURITIES AT THE TIME OF
PURCHASE);* OR (F) 15% OF ITS NET ASSETS IN ANY COMBINATION OF
SECURITIES THAT ARE NOT READILY MARKETABLE, IN SECURITIES
RESTRICTED AS TO RESALE (EXCLUDING SECURITIES THAT HAVE BEEN
DETERMINED BY THE FUND'S TRUSTEES (OR THE PERSON DESIGNATED BY
THE FUND'S TRUSTEES TO MAKE SUCH DETERMINATIONS) TO BE READILY
MARKETABLE), AND IN REPURCHASE AGREEMENTS MATURING IN MORE THAN
SEVEN DAYS.
RESTRICTIONS MARKED WITH AN ASTERISK (*) ABOVE ARE SUMMARIES OF
FUNDAMENTAL POLICIES. SEE THE STATEMENT OF ADDITIONAL
INFORMATION FOR THE FULL TEXT OF THESE POLICIES AND THE FUND'S
OTHER FUNDAMENTAL POLICIES. EXCEPT FOR INVESTMENT POLICIES
DESIGNATED AS FUNDAMENTAL IN THIS PROSPECTUS OR THE STATEMENT,
THE INVESTMENT POLICIES DESCRIBED IN THIS PROSPECTUS AND IN THE
STATEMENT ARE NOT FUNDAMENTAL POLICIES. THE TRUSTEES MAY CHANGE
ANY NON-FUNDAMENTAL INVESTMENT POLICIES WITHOUT SHAREHOLDER
APPROVAL. AS A MATTER OF POLICY, THE TRUSTEES WOULD NOT
MATERIALLY CHANGE THE FUND'S INVESTMENT OBJECTIVES WITHOUT
SHAREHOLDER APPROVAL.
HOW PERFORMANCE IS SHOWN
YIELD AND TOTAL RETURN DATA MAY FROM TIME TO TIME BE INCLUDED IN
ADVERTISEMENTS ABOUT THE FUND. "YIELD" FOR CLASS A
SHARES IS CALCULATED BY DIVIDING THE FUND'S ANNUALIZED NET
INVESTMENT INCOME PER SHARE OF SUCH CLASS DURING A RECENT 30-DAY
PERIOD BY THE MAXIMUM PUBLIC OFFERING PRICE PER SHARE ON THE LAST
DAY OF THAT PERIOD. FOR CLASS A SHARES, THE FUND'S YIELD
REFLECTS THE DEDUCTION OF THE MAXIMUM INITIAL SALES CHARGE
. "TOTAL RETURN" FOR THE ONE-, FIVE- AND TEN-YEAR PERIODS
THROUGH THE MOST RECENT CALENDAR QUARTER REPRESENTS THE
AVERAGE ANNUAL COMPOUNDED RATE OF RETURN ON AN INVESTMENT OF
$1,000 IN THE FUND AT THE MAXIMUM PUBLIC OFFERING PRICE .
TOTAL RETURN MAY ALSO BE PRESENTED FOR OTHER PERIODS OR BASED ON
INVESTMENT AT REDUCED SALES CHARGE LEVELS OR NET ASSET VALUE.
ANY QUOTATION OF TOTAL RETURN OR YIELD NOT REFLECTING THE MAXIMUM
INITIAL SALES CHARGE WOULD BE REDUCED IF SUCH SALES
CHARGE WERE USED. QUOTATIONS OF YIELD OR TOTAL RETURN
FOR ANY PERIOD WHEN AN EXPENSE LIMITATION WAS IN EFFECT WILL BE
GREATER THAN IF THE LIMITATION HAD NOT BEEN IN EFFECT. THE
FUND'S PERFORMANCE MAY BE COMPARED TO VARIOUS INDICES. SEE THE
STATEMENT OF ADDITIONAL INFORMATION.
BECAUSE SHARES SOLD THROUGH ELIGIBLE DEFINED CONTRIBUTION PLANS
ARE SOLD WITHOUT A SALES CHARGE, QUOTATIONS OF YIELD AND TOTAL
RETURN REFLECTING THE DEDUCTION OF A SALES CHARGE WILL BE LOWER
THAN THE ACTUAL YIELD AND TOTAL RETURN ON SHARES PURCHASED
THROUGH SUCH PLANS.
ALL DATA IS BASED ON THE FUND'S PAST INVESTMENT RESULTS AND DOES
NOT PREDICT FUTURE PERFORMANCE. INVESTMENT PERFORMANCE, WHICH
WILL VARY, IS BASED ON MANY FACTORS, INCLUDING MARKET CONDITIONS,
THE COMPOSITION OF THE FUND'S PORTFOLIO, THE FUND'S OPERATING
EXPENSES AND WHICH CLASS OF SHARES YOU PURCHASE. INVESTMENT
PERFORMANCE ALSO OFTEN REFLECTS THE RISKS ASSOCIATED WITH THE
FUND'S INVESTMENT OBJECTIVES AND POLICIES. THESE FACTORS SHOULD
BE CONSIDERED WHEN COMPARING THE FUND'S INVESTMENT RESULTS TO
THOSE OF OTHER MUTUAL FUNDS AND OTHER INVESTMENT VEHICLES.
HOW THE FUND IS MANAGED
THE TRUSTEES OF THE FUND ARE RESPONSIBLE FOR GENERALLY OVERSEEING
THE CONDUCT OF THE FUND'S BUSINESS. SUBJECT TO SUCH POLICIES AS
THE TRUSTEES MAY DETERMINE, PUTNAM MANAGEMENT FURNISHES A
CONTINUING INVESTMENT PROGRAM FOR THE FUND AND MAKES INVESTMENT
DECISIONS ON ITS BEHALF. SUBJECT TO THE CONTROL OF THE TRUSTEES,
PUTNAM MANAGEMENT ALSO MANAGES THE FUND'S OTHER AFFAIRS AND
BUSINESS. HUGH MULLIN, VICE PRESIDENT OF PUTNAM MANAGEMENT AND
CHARLES G. POHL, VICE PRESIDENT OF PUTNAM MANAGEMENT, EACH OF
WHOM IS A VICE PRESIDENT OF THE FUND, ARE PRIMARILY RESPONSIBLE
FOR THE DAY-TO-DAY MANAGEMENT OF THE FUND'S PORTFOLIO. MR.
MULLIN HAS HAD THIS RESPONSIBILITY SINCE DECEMBER 1992 AND MR.
POHL HAS HAD THIS RESPONSIBILITY SINCE NOVEMBER 1992. MESSRS.
MULLIN AND POHL HAVE BEEN EMPLOYED BY PUTNAM MANAGEMENT DURING
THE PAST FIVE YEARS.
THE FUND PAYS ALL EXPENSES NOT ASSUMED BY PUTNAM MANAGEMENT,
INCLUDING TRUSTEES' FEES, AUDITING, LEGAL, CUSTODIAL, INVESTOR
SERVICING AND SHAREHOLDER REPORTING EXPENSES, AND PAYMENTS UNDER
ITS DISTRIBUTION PLANS (WHICH ARE IN TURN ALLOCATED TO THE
RELEVANT CLASS OF SHARES). THE FUND ALSO REIMBURSES PUTNAM
MANAGEMENT FOR THE COMPENSATION AND RELATED EXPENSES OF CERTAIN
OFFICERS OF THE FUND AND THEIR STAFF WHO PROVIDE ADMINISTRATIVE
SERVICES TO THE FUND. THE TOTAL REIMBURSEMENT IS DETERMINED
ANNUALLY BY THE TRUSTEES.
PUTNAM MANAGEMENT PLACES ALL ORDERS FOR PURCHASES AND SALES OF
THE FUND'S SECURITIES. IN SELECTING BROKER-DEALERS, PUTNAM
MANAGEMENT MAY CONSIDER RESEARCH AND BROKERAGE SERVICES FURNISHED
TO IT AND ITS AFFILIATES. SUBJECT TO SEEKING THE MOST FAVORABLE
PRICE AND EXECUTION AVAILABLE, PUTNAM MANAGEMENT MAY CONSIDER
SALES OF SHARES OF THE FUND (AND, IF PERMITTED BY LAW, OF THE
OTHER PUTNAM FUNDS) AS A FACTOR IN THE SELECTION OF BROKER-
DEALERS.
ORGANIZATION AND HISTORY
PUTNAM CONVERTIBLE INCOME-GROWTH TRUST IS A MASSACHUSETTS
BUSINESS TRUST ORGANIZED ON AUGUST 13, 1982 AS THE SUCCESSOR TO
PUTNAM CONVERTIBLE FUND, INC., A MASSACHUSETTS CORPORATION
ORGANIZED ON MARCH 8, 1972. 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, DIVERSIFIED MANAGEMENT INVESTMENT
COMPANY WITH AN UNLIMITED NUMBER OF AUTHORIZED SHARES OF
BENEFICIAL INTEREST. SHARES OF THE FUND MAY, WITHOUT SHAREHOLDER
APPROVAL, BE DIVIDED INTO TWO OR MORE CLASSES OF SHARES HAVING
SUCH PREFERENCES AND SPECIAL OR RELATIVE RIGHTS AND PRIVILEGES AS
THE TRUSTEES DETERMINE. THE FUND'S SHARES ARE CURRENTLY DIVIDED
INTO TWO CLASSES. ONLY THE FUND'S CLASS A SHARES ARE OFFERED BY
THIS PROSPECTUS. CLASS B SHARES ARE SOLD AT NET ASSET VALUE, BUT
ARE SUBJECT TO A CONTINGENT DEFERRED SALES CHARGE UPON REDEMPTION
AND BEAR A HIGHER 12B-1 FEE THAN CLASS A SHARES. BECAUSE CLASS A
SHARES GENERALLY BEAR LOWER EXPENSES THAN CLASS B SHARES,THE
INVESTMENT RETURN OF CLASS A SHARES WILL BE HIGHER THAN THAT OF
CLASS B SHARES. EACH SHARE HAS ONE VOTE, WITH FRACTIONAL SHARES
VOTING PROPORTIONALLY. SHARES OF EACH CLASS 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.
IF YOU OWN FEWER SHARES THAN A MINIMUM AMOUNT SET BY THE TRUSTEES
(PRESENTLY 20 SHARES), THE FUND MAY CHOOSE TO REDEEM YOUR SHARES
AND PAY YOU FOR THEM. YOU WILL RECEIVE AT LEAST 30 DAYS' WRITTEN
NOTICE BEFORE THE FUND REDEEMS YOUR SHARES, AND YOU MAY PURCHASE
ADDITIONAL SHARES AT ANY TIME TO AVOID A REDEMPTION. THE FUND
MAY ALSO REDEEM SHARES IF YOU OWN SHARES ABOVE A MAXIMUM AMOUNT
SET BY THE TRUSTEES. THERE IS PRESENTLY NO MAXIMUM, BUT THE
TRUSTEES MAY ESTABLISH ONE AT ANY TIME, WHICH COULD APPLY TO BOTH
PRESENT AND FUTURE SHAREHOLDERS.
THE FUND'S TRUSTEES: GEORGE PUTNAM,* CHAIRMAN. PRESIDENT OF THE
PUTNAM FUNDS. CHAIRMAN AND DIRECTOR OF PUTNAM MANAGEMENT AND
PUTNAM MUTUAL FUNDS CORP. ("PUTNAM MUTUAL FUNDS") DIRECTOR,
MARSH & MCLENNAN COMPANIES, INC.; WILLIAM F. POUNDS, VICE
CHAIRMAN. PROFESSOR OF MANAGEMENT, ALFRED P. SLOAN SCHOOL OF
MANAGEMENT, M.I.T.; JAMESON ADKINS BAXTER, PRESIDENT,
BAXTER ASSOCIATES, INC.; HANS H. ESTIN, VICE CHAIRMAN, NORTH
AMERICAN MANAGEMENT; JOHN A. HILL, PRINCIPAL AND MANAGING
DIRECTOR, FIRST RESERVE CORPORATION; ELIZABETH T. KENNAN,
PRESIDENT, MOUNT HOLYOKE COLLEGE; LAWRENCE J. LASSER,* VICE
PRESIDENT OF THE PUTNAM FUNDS. PRESIDENT, CHIEF EXECUTIVE
OFFICER AND DIRECTOR OF PUTNAM INVESTMENTS, INC. AND PUTNAM
MANAGEMENT. DIRECTOR, MARSH & MCLENNAN COMPANIES, INC.; ROBERT
E. PATTERSON, EXECUTIVE VICE PRESIDENT, CABOT PARTNERS LIMITED
PARTNERSHIP; DONALD S. PERKINS, DIRECTOR OF VARIOUS CORPORATIONS,
INCLUDING AT&T, K MART CORPORATION AND TIME WARNER INC.; GEORGE
PUTNAM, III,* PRESIDENT, NEW GENERATION RESEARCH, INC.; A.J.C.
SMITH,* CHAIRMAN, CHIEF EXECUTIVE OFFICER AND DIRECTOR, MARSH &
MCLENNAN COMPANIES, INC.; AND W. NICHOLAS THORNDIKE, DIRECTOR OF
VARIOUS CORPORATIONS AND CHARITABLE ORGANIZATIONS, INCLUDING
PROVIDENCE JOURNAL CO. ALSO, TRUSTEE AND PRESIDENT,
MASSACHUSETTS GENERAL HOSPITAL AND TRUSTEE OF EASTERN UTILITIES
ASSOCIATES. THE FUND'S TRUSTEES ARE ALSO TRUSTEES OF THE OTHER
PUTNAM FUNDS. THOSE MARKED WITH AN ASTERISK (*) ARE "INTERESTED
PERSONS" OF THE FUND, PUTNAM MANAGEMENT OR PUTNAM MUTUAL FUNDS.
ABOUT YOUR INVESTMENT
HOW TO BUY SHARES
ALL ORDERS TO PURCHASE SHARES MUST BE MADE THROUGH YOUR
EMPLOYER'S DEFINED CONTRIBUTION PLAN. FOR MORE INFORMATION ABOUT
HOW TO PURCHASE SHARES OF THE FUND THROUGH YOUR EMPLOYER'S PLAN
OR LIMITATIONS ON THE AMOUNT THAT MY BE PURCHASED, PLEASE CONSULT
YOUR EMPLOYER. SHARES ARE SOLD TO ELIGIBLE DEFINED CONTRIBUTION
PLANS AT THE NET ASSET VALUE PER SHARE NEXT DETERMINED AFTER
RECEIPT OF AN ORDER BY PUTNAM MUTUAL FUNDS. ORDERS MUST BE
RECEIVED BY PUTNAM MUTUAL FUNDS BEFORE THE CLOSE OF REGULAR
TRADING ON THE NEW YORK STOCK EXCHANGE IN ORDER TO RECEIVE THAT
DAY'S NET ASSET VALUE. IN ORDER TO BE ELIGIBLE TO PURCHASE
SHARES AT NET ASSET VALUE, DEFINED CONTRIBUTION PLANS MUST
INITIALLY INVEST AT LEAST $1,000,000 OR BE SPONSORED BY COMPANIES
WITH MORE THAN 750 EMPLOYEES. ELIGIBLE PLANS MAY MAKE ADDITIONAL
INVESTMENTS OF ANY AMOUNT AT ANY TIME. TO ELIMINATE THE NEED FOR
SAFEKEEPING, THE FUND WILL NOT ISSUE CERTIFICATES FOR YOUR
SHARES.
ON SALES AT NET ASSET VALUE TO A PARTICIPANT-DIRECTED QUALIFIED
RETIREMENT PLAN INITIALLY INVESTING LESS THAN $20 MILLION IN
PUTNAM FUNDS AND OTHER INVESTMENTS MANAGED BY PUTNAM MANAGEMENT
OR ITS AFFILIATES (INCLUDING A PLAN SPONSORED BY AN EMPLOYER WITH
MORE THAN 750 EMPLOYEES), PUTNAM MUTUAL FUNDS PAYS COMMISSIONS ON
CUMULATIVE PURCHASES DURING THE LIFE OF THE ACCOUNT AT THE RATE
OF 1.00% OF THE AMOUNT UNDER $3 MILLION AND 0.50% THEREAFTER. ON
SALES AT NET ASSET VALUE TO ALL OTHER PARTICIPATED-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%. PUTNAM MUTUAL FUNDS MAY, AT ITS EXPENSE,
PROVIDE ADDITIONAL PROMOTIONAL INCENTIVES OR PAYMENTS TO DEALERS
THAT SELL SHARES OF THE PUTNAM FUNDS. IN SOME INSTANCES, THESE
INCENTIVES OR PAYMENTS MAY BE OFFERED ONLY TO CERTAIN DEALERS WHO
HAVE SOLD OR MAY SELL SIGNIFICANT AMOUNTS OF SHARES.
DISTRIBUTION PLAN
THE PURPOSE OF THE CLASS A PLAN IS TO PERMIT THE FUND TO
COMPENSATE PUTNAM MUTUAL FUNDS FOR SERVICES PROVIDED AND EXPENSES
INCURRED BY IT IN PROMOTING THE SALE OF CLASS A SHARES OF THE
FUND, REDUCING REDEMPTIONS, OR MAINTAINING OR IMPROVING SERVICES
PROVIDED TO SHAREHOLDERS BY PUTNAM MUTUAL FUNDS OR DEALERS. THE
CLASS A PLAN PROVIDES FOR PAYMENTS BY THE FUND TO PUTNAM MUTUAL
FUNDS AT THE ANNUAL RATE OF UP TO 0.35% OF THE FUND'S AVERAGE NET
ASSETS ATTRIBUTABLE TO CLASS A SHARES, SUBJECT TO THE AUTHORITY
OF THE FUND'S TRUSTEES TO REDUCE THE AMOUNT OF PAYMENTS OR TO
SUSPEND THE CLASS A PLAN FOR SUCH PERIODS AS THEY MAY DETERMINE.
SUBJECT TO THESE LIMITATIONS, THE AMOUNT OF SUCH PAYMENTS AND THE
SPECIFIC PURPOSES FOR WHICH THEY ARE MADE SHALL BE DETERMINED BY
THE TRUSTEES OF THE FUND. AT PRESENT, THE TRUSTEES HAVE APPROVED
PAYMENTS UNDER THE CLASS A PLAN AT THE ANNUAL RATE OF 0.25% OF
THE FUND'S AVERAGE NET ASSETS ATTRIBUTABLE TO CLASS A SHARES FOR
THE PURPOSE OF COMPENSATING PUTNAM MUTUAL FUNDS FOR SERVICES
PROVIDED AND EXPENSES INCURRED BY IT AS PRINCIPAL UNDERWRITER OF
THE FUND'S CLASS A SHARES, INCLUDING PAYMENTS MADE BY IT TO
DEALERS UNDER THE SERVICE AGREEMENTS REFERRED TO BELOW. SHOULD
THE TRUSTEES DECIDE IN THE FUTURE TO APPROVE PAYMENTS IN EXCESS
OF THIS AMOUNT, SHAREHOLDERS WILL BE NOTIFIED AND THIS PROSPECTUS
WILL BE REVISED.
IN ORDER TO COMPENSATE INVESTMENT DEALERS (INCLUDING, FOR THIS
PURPOSE, CERTAIN FINANCIAL INSTITUTIONS) FOR SERVICES PROVIDED IN
CONNECTION WITH SALES OF CLASS A SHARES AND THE MAINTENANCE OF
SHAREHOLDER ACCOUNTS, PUTNAM MUTUAL FUNDS MAKES QUARTERLY
PAYMENTS TO QUALIFYING DEALERS BASED ON THE AVERAGE NET ASSET
VALUE OF CLASS A SHARES OF THE FUND WHICH ARE ATTRIBUTABLE TO
SHAREHOLDERS FOR WHOM THE DEALERS ARE DESIGNATED AS THE DEALER OF
RECORD. PUTNAM MUTUAL FUNDS MAKES SUCH PAYMENTS AT THE ANNUAL
RATE OF 0.20% OF SUCH AVERAGE NET ASSET VALUE FOR CLASS A SHARES
OUTSTANDING AS OF DECEMBER 31, 1989 AND 0.25% OF SUCH AVERAGE NET
ASSET VALUE OF SHARES ACQUIRED AFTER THAT DATE (INCLUDING SHARES
ACQUIRED THROUGH REINVESTMENT OF DISTRIBUTIONS).
PUTNAM MUTUAL FUNDS MAY SUSPEND OR MODIFY THE PAYMENTS
MADE TO DEALERS DESCRIBED ABOVE, AND SUCH PAYMENTS ARE SUBJECT TO
THE CONTINUATION OF THE CLASS A 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.
HOW TO SELL SHARES
SUBJECT TO ANY RESTRICTIONS IMPOSED BY YOUR EMPLOYER'S
PLAN, YOU CAN SELL YOUR SHARES THROUGH THE PLAN TO THE FUND ANY
DAY THE NEW YORK STOCK EXCHANGE IS OPEN . FOR MORE
INFORMATION ABOUT HOW TO SELL SHARES OF THE FUND THROUGH
YOUR EMPLOYER'S PLAN, INCLUDING ANY CHARGES THAT MAY BE
IMPOSED BY THE PLAN, PLEASE CONSULT WITH YOUR EMPLOYER.
YOUR PLAN ADMINISTRATOR MUST SEND A SIGNED LETTER OF
INSTRUCTION TO PUTNAM INVESTOR SERVICES . THE
PRICE YOU WILL RECEIVE IS THE NEXT NET ASSET VALUE CALCULATED
AFTER THE FUND RECEIVES YOUR REQUEST IN PROPER FORM . ALL
REQUESTS MUST BE RECEIVED BY THE FUND PRIOR TO THE CLOSE OF
REGULAR TRADING ON THE NEW YORK STOCK EXCHANGE IN ORDER TO
RECEIVE THAT DAY'S NET ASSET VALUE . IF YOU SELL SHARES
HAVING A NET ASSET VALUE OF $100,000 OR MORE, THE SIGNATURES OF
REGISTERED OWNERS OR THEIR LEGAL REPRESENTATIVES MUST BE
GUARANTEED BY A BANK, BROKER-DEALER OR CERTAIN OTHER FINANCIAL
INSTITUTIONS. SEE THE STATEMENT OF ADDITIONAL INFORMATION FOR
MORE INFORMATION ABOUT WHERE TO OBTAIN A SIGNATURE GUARANTEE.
THE FUND GENERALLY PROVIDES PAYMENT FOR YOUR
SHARES THE BUSINESS DAY AFTER THE REQUEST IS RECEIVED.
UNDER UNUSUAL CIRCUMSTANCES, THE FUND MAY SUSPEND REPURCHASES, OR
POSTPONE PAYMENT FOR MORE THAN SEVEN DAYS, AS PERMITTED BY
FEDERAL SECURITIES LAW. THE FUND WILL ONLY REPURCHASE SHARES FOR
WHICH IT HAS RECEIVED PAYMENT.
HOW TO EXCHANGE SHARES
SUBJECT TO ANY RESTRICTIONS CONTAINED IN YOUR PLAN, YOU
CAN EXCHANGE YOUR SHARES FOR SHARES OF OTHER PUTNAM FUNDS
AVAILABLE THROUGH YOUR PLAN AT NET ASSET VALUE. CONTACT YOUR
PLAN ADMINISTRATOR OR PUTNAM INVESTOR SERVICES ON HOW TO
EXCHANGE YOUR SHARES OR HOW TO OBTAIN PROSPECTUSES OF
OTHER PUTNAM FUNDS IN WHICH YOU MAY INVEST. SHARES OF CERTAIN
PUTNAM FUNDS ARE NOT AVAILABLE TO RESIDENTS OF ALL STATES.
THE EXCHANGE PRIVILEGE IS NOT INTENDED AS A VEHICLE FOR SHORT-
TERM TRADING. EXCESSIVE EXCHANGE ACTIVITY MAY INTERFERE WITH
PORTFOLIO MANAGEMENT AND HAVE AN ADVERSE EFFECT ON ALL
SHAREHOLDERS. IN ORDER TO LIMIT EXCESSIVE EXCHANGE ACTIVITY AND
IN OTHER CIRCUMSTANCES WHERE THE TRUSTEES OR PUTNAM MANAGEMENT
BELIEVES DOING SO WOULD BE IN THE BEST INTERESTS OF THE FUND, THE
FUND RESERVES THE RIGHT TO REVISE OR TERMINATE THE EXCHANGE
PRIVILEGE, LIMIT THE AMOUNT OR NUMBER OF EXCHANGES OR REJECT ANY
EXCHANGE. SHAREHOLDERS WOULD BE NOTIFIED OF ANY SUCH ACTION TO
THE EXTENT REQUIRED BY LAW. CONSULT PUTNAM INVESTOR SERVICES
BEFORE REQUESTING AN EXCHANGE. SEE THE STATEMENT OF ADDITIONAL
INFORMATION TO FIND OUT MORE ABOUT THE EXCHANGE PRIVILEGE.
HOW THE FUND VALUES ITS SHARES
THE FUND CALCULATES THE NET ASSET VALUE OF A SHARE OF THE
CLASS BY DIVIDING THE TOTAL VALUE OF ITS ASSETS, LESS
LIABILITIES, BY THE NUMBER OF ITS SHARES OUTSTANDING. SHARES ARE
VALUED AS OF THE CLOSE OF REGULAR TRADING ON THE NEW YORK STOCK
EXCHANGE EACH DAY THE EXCHANGE IS OPEN. PORTFOLIO SECURITIES FOR
WHICH MARKET QUOTATIONS ARE READILY AVAILABLE ARE STATED AT
MARKET VALUE. LONG-TERM CORPORATE BONDS AND NOTES, FOR WHICH
MARKET QUOTATIONS ARE NOT CONSIDERED READILY AVAILABLE, ARE
STATED AT FAIR VALUE ON THE BASIS OF VALUATIONS FURNISHED BY A
PRICING SERVICE APPROVED BY THE TRUSTEES WHICH DETERMINES
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. SHORT-TERM INVESTMENTS THAT WILL MATURE IN 60 DAYS OR
LESS ARE STATED AT AMORTIZED COST, WHICH APPROXIMATES MARKET
VALUE. ALL OTHER SECURITIES AND ASSETS ARE VALUED AT THEIR FAIR
VALUE FOLLOWING PROCEDURES APPROVED BY THE TRUSTEES.
HOW DISTRIBUTIONS ARE MADE; TAX INFORMATION
THE FUND DISTRIBUTES NET INVESTMENT INCOME QUARTERLY AND ANY NET
REALIZED CAPITAL GAINS AT LEAST ANNUALLY. DISTRIBUTIONS FROM
CAPITAL GAINS ARE MADE AFTER APPLYING ANY AVAILABLE CAPITAL LOSS
CARRYOVERS. A CAPITAL LOSS CARRYOVER IS CURRENTLY AVAILABLE.
THE TERMS OF YOUR PLAN WILL GOVERN HOW YOUR PLAN MAY
RECEIVE DISTRIBUTIONS FROM THE FUND. GENERALLY, PERIODIC
DISTRIBUTIONS FROM THE FUND TO YOUR PLAN ARE REINVESTED
IN ADDITIONAL FUND SHARES , ALTHOUGH YOUR PLAN MAY PERMIT
FUND DISTRIBUTIONS FROM NET INVESTMENT INCOME TO BE RECEIVED BY
YOU IN CASH WHILE REINVESTING CAPITAL GAINS DISTRIBUTIONS IN
ADDITIONAL SHARES OR ALL FUND DISTRIBUTIONS TO BE
RECEIVED IN CASH. IF ANOTHER OPTION IS NOT
SELECTED, ALL DISTRIBUTIONS WILL BE REINVESTED
IN ADDITIONAL FUND SHARES .
THE FUND INTENDS TO QUALIFY AS A "REGULATED INVESTMENT COMPANY"
FOR FEDERAL INCOME TAX PURPOSES AND TO MEET ALL OTHER
REQUIREMENTS THAT ARE NECESSARY FOR IT TO BE RELIEVED OF FEDERAL
TAXES ON INCOME AND GAINS IT DISTRIBUTES TO SHAREHOLDERS. THE
FUND WILL DISTRIBUTE SUBSTANTIALLY ALL OF ITS ORDINARY INCOME AND
CAPITAL GAIN NET INCOME ON A CURRENT BASIS. GENERALLY,
FUND DISTRIBUTIONS ARE TAXABLE AS ORDINARY
INCOME, EXCEPT THAT ANY DISTRIBUTIONS OF NET LONG-TERM CAPITAL
GAINS WILL BE TAXED AS SUCH. HOWEVER, DISTRIBUTIONS
BY THE FUND TO EMPLOYER-SPONSORED DEFINED
CONTRIBUTION PLANS THAT QUALIFY FOR TAX-EXEMPT TREATMENT UNDER
FEDERAL INCOME TAX LAWS WILL NOT BE TAXABLE. SPECIAL TAX RULES
APPLY TO INVESTMENTS THROUGH SUCH PLANS. YOU SHOULD CONSULT YOUR
TAX ADVISER TO DETERMINE THE SUITABILITY OF THE FUND AS AN
INVESTMENT THROUGH SUCH A PLAN AND THE TAX TREATMENT OF
DISTRIBUTIONS (INCLUDING DISTRIBUTIONS OF AMOUNTS
ATTRIBUTABLE TO AN INVESTMENT IN THE FUND) FROM SUCH A PLAN.
THE FOREGOING IS A SUMMARY OF CERTAIN FEDERAL INCOME TAX
CONSEQUENCES OF INVESTING IN THE FUND. YOU SHOULD CONSULT YOUR
TAX ADVISER TO DETERMINE THE PRECISE EFFECT OF AN INVESTMENT IN
THE FUND ON YOUR PARTICULAR TAX SITUATION (INCLUDING POSSIBLE
LIABILITY FOR STATE AND LOCAL TAXES).
ABOUT PUTNAM INVESTMENTS, INC.
PUTNAM MANAGEMENT HAS BEEN MANAGING MUTUAL FUNDS SINCE 1937.
PUTNAM MUTUAL FUNDS IS THE PRINCIPAL UNDERWRITER OF THE FUND AND
OF OTHER PUTNAM FUNDS. PUTNAM FIDUCIARY TRUST COMPANY IS THE
FUND'S CUSTODIAN. PUTNAM INVESTOR SERVICES, A DIVISION OF PUTNAM
FIDUCIARY TRUST COMPANY, IS THE FUND'S INVESTOR SERVICING AND
TRANSFER AGENT.
PUTNAM MANAGEMENT, PUTNAM MUTUAL FUNDS, AND PUTNAM FIDUCIARY
TRUST COMPANY ARE SUBSIDIARIES OF PUTNAM INVESTMENTS, INC., WHICH
IS WHOLLY-OWNED BY MARSH & MCLENNAN COMPANIES, INC., A PUBLICLY
OWNED HOLDING COMPANY WHOSE PRINCIPAL BUSINESSES ARE
INTERNATIONAL INSURANCE AND REINSURANCE BROKERAGE, EMPLOYEE
BENEFIT CONSULTING AND INVESTMENT MANAGEMENT.
<PAGE>
APPENDIX
FIXED-INCOME SECURITY RATINGS
THE RATING SERVICES' DESCRIPTIONS OF CORPORATE DEBT SECURITIES
ARE:
MOODY'S INVESTORS SERVICE, INC.:
AAA -- SECURITIES WHICH ARE RATED AAA ARE JUDGED TO BE OF THE
BEST QUALITY. THEY CARRY THE SMALLEST DEGREE OF INVESTMENT RISK
AND ARE GENERALLY REFERRED TO AS "GILT-EDGE." INTEREST PAYMENTS
ARE PROTECTED BY A LARGE OR BY AN EXCEPTIONALLY STABLE MARGIN AND
PRINCIPAL IS SECURE. WHILE THE VARIOUS PROTECTIVE ELEMENTS ARE
LIKELY TO CHANGE, SUCH CHANGES AS CAN BE VISUALIZED ARE MOST
UNLIKELY TO IMPAIR THE FUNDAMENTALLY STRONG POSITION OF SUCH
ISSUES.
AA -- SECURITIES 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 SECURITIES. THEY
ARE RATED LOWER THAN THE BEST SECURITIES BECAUSE MARGINS OF
PROTECTION MAY NOT BE AS LARGE AS IN AAA SECURITIES OR
FLUCTUATION OF PROTECTIVE ELEMENTS MAY BE OF GREATER AMPLITUDE OR
THERE MAY BE OTHER ELEMENTS PRESENT WHICH MAKE THE LONG-TERM
RISKS APPEAR SOMEWHAT LARGER THAN IN AAA SECURITIES.
A -- SECURITIES 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 -- SECURITIES 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 SECURITIES LACK OUTSTANDING INVESTMENT
CHARACTERISTICS AND IN FACT HAVE SPECULATIVE CHARACTERISTICS AS
WELL.
BA -- SECURITIES 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 SECURITIES IN THIS CLASS.
B -- SECURITIES 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 -- SECURITIES 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 -- SECURITIES RATED CA REPRESENT OBLIGATIONS WHICH ARE
SPECULATIVE IN A HIGH DEGREE. SUCH ISSUES ARE OFTEN IN DEFAULT
OR HAVE OTHER MARKED SHORT COMINGS.
C -- SECURITIES RATED C ARE THE LOWEST RATED CLASS OF SECURITIES
AND ISSUES SO RATED CAN BE REGARDED AS HAVING EXTREMELY POOR
PROSPECTS OF EVER ATTAINING ANY REAL INVESTMENT STANDING.
STANDARD & POOR'S CORPORATION:
AAA -- SECURITIES RATED AAA HAVE THE HIGHEST RATING ASSIGNED BY
STANDARD & POOR'S. CAPACITY TO PAY INTEREST AND REPAY PRINCIPAL
IS EXTREMELY STRONG.
AA -- SECURITIES RATED AA HAVE A VERY STRONG CAPACITY TO PAY
INTEREST AND REPAY PRINCIPAL AND DIFFER FROM THE HIGHEST RATED
ISSUES ONLY IN SMALL DEGREE.
A -- SECURITIES RATED A HAVE A STRONG CAPACITY TO PAY INTEREST
AND REPAY PRINCIPAL ALTHOUGH THEY ARE SOMEWHAT MORE SUSCEPTIBLE
TO THE ADVERSE EFFECTS OF CHANGES IN CIRCUMSTANCES AND ECONOMIC
CONDITIONS THAN SECURITIES IN HIGHER RATED CATEGORIES.
BBB -- SECURITIES RATED BBB ARE REGARDED AS HAVING AN ADEQUATE
CAPACITY TO PAY INTEREST AND REPAY PRINCIPAL. WHEREAS THEY
NORMALLY EXHIBIT ADEQUATE PROTECTION PARAMETERS, ADVERSE ECONOMIC
CONDITIONS OR CHANGING CIRCUMSTANCES ARE MORE LIKELY TO LEAD TO A
WEAKENED CAPACITY TO PAY INTEREST AND REPAY PRINCIPAL FOR
SECURITIES IN THIS CATEGORY THAN FOR SECURITIES IN HIGHER RATED
CATEGORIES.
BB-B-CCC-CC-C -- SECURITIES RATED BB, B, CCC, CC AND C ARE
REGARDED, ON BALANCE, AS PREDOMINANTLY SPECULATIVE WITH RESPECT
TO THE ISSUER'S CAPACITY TO PAY INTEREST AND REPAY PRINCIPAL IN
ACCORDANCE WITH THE TERMS OF THE OBLIGATION. BB INDICATES THE
LOWEST DEGREE OF SPECULATION AND C THE HIGHEST DEGREE OF
SPECULATION. WHILE SUCH SECURITIES WILL LIKELY HAVE SOME QUALITY
AND PROTECTIVE CHARACTERISTICS, THESE ARE OUTWEIGHED BY LARGE
UNCERTAINTIES OR MAJOR RISK EXPOSURES TO ADVERSE CONDITIONS.
<PAGE>
DIFFERENCES BETWEEN THE TYPESET DEFINED CONTRIBUTION AND CLASS Y
(PRINTED)
PROSPECTUS AND THE EDGAR FILING VERSION.
1. PAGINATION IS DIFFERENT IN PRINTED PROSPECTUS
2. SECTION HEADINGS AND SUBHEADINGS IN THE PRINTED PROSPECTUS
ARE PRINTED IN BOLDFACE TYPE
3. THE FIRST FEW DESCRIPTIVE LINES OF CERTAIN PARAGRAPHS, AND
CERTAIN OTHER EMPHASIZED PHRASES, ARE PRINTED IN BOLDFACE
TYPE
4. IN THE PRINTED PROSPECTUS, THE DASHES AT THE BEGINNING OF
CERTAIN SENTENCES ARE REPLACED BY A SOLID BOX
5. THE FIRST PAGE OF THE PRINTED PROSPECTUS CONTAINS A BOX
WITH AN ILLUSTRATION OF THE BALANCE SCALES, THE PUTNAM
LOGO
<PAGE>
