PROSPECTUS
NOVEMBER 30, 1996 , as
revised MAY 30, 1997
THE GEORGE PUTNAM FUND OF BOSTON
CLASS A, B AND M SHARES
INVESTMENT STRATEGY: GROWTH AND INCOME
This prospectus explains concisely what you should know before
investing in The George Putnam Fund of Boston (the "fund").
Please read it carefully and keep it for future reference. You
can find more detailed information in the November 30, 1996
statement of additional information (the "SAI"), as amended from
time to time. For a free copy of the SAI or other information,
call Putnam Investor Services at 1-800-225-1581. The SAI has
been filed with the Securities and Exchange Commission (the
"Commission") and is incorporated into this prospectus by
reference. The Commission maintains a Web site
(http://www.sec.gov) that contains the SAI, material incorporated
by reference into this prospectus and the SAI, and other
information regarding registrants that file electronically with
the Commission.
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.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY FINANCIAL INSTITUTION, ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY, AND INVOLVE RISK, INCLUDING
THE POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
BOSTON * LONDON * TOKYO
<PAGE>
ABOUT THE FUND
EXPENSES SUMMARY
..................................... ..................
........
This section describes the sales charges, management fees, and
annual operating expenses that apply to the fund's various
classes of shares. Use it to help you estimate the impact of
transaction costs on your investment over time.
FINANCIAL HIGHLIGHTS
............................. ..........................
........
Study this table to see, among other things, how the fund
performed each year for the past 10 years or since it began
investment operations if it has been in operation for less than
10 years.
OBJECTIVE
....................... ................................
........
Read this section to make sure the fund's objective is consistent
with your own.
HOW THE FUND PURSUES ITS OBJECTIVE
....................... ................................
........
This section explains in detail how the fund seeks its investment
objective.
RISK FACTORS
..........................................................
All investments entail some risk. Read this section to
make sure you understand the risks that are associated with
an investment in the fund.
HOW PERFORMANCE IS SHOWN
. .............................................................
This section describes and defines the measures used to assess
fund performance. All data are based on past investment results
and do not predict future performance.
HOW THE FUND IS MANAGED
. .............................................................
Consult this section for information about the fund's management,
allocation of its expenses, and how purchases and sales of
securities are made.
ORGANIZATION AND HISTORY
. .............................................................
In this section, you will learn when the fund was introduced, how
it is organized, how it may offer shares, and who its Trustees
are.
<PAGE>
ABOUT YOUR INVESTMENT
ALTERNATIVE SALES ARRANGEMENTS
. .............................................................
Read this section for descriptions of the classes of shares this
prospectus offers and for points you should consider when making
your choice.
HOW TO BUY SHARES
. .............................................................
This section describes the ways you may purchase shares and tells
you the minimum amounts required to open various types of
accounts. It explains how sales charges are determined and how
you may become eligible for reduced sales charges on each class
of shares.
DISTRIBUTION PLANS
. .............................................................
This section tells you what distribution fees are charged against
each class of shares.
HOW TO SELL SHARES
. .............................................................
In this section you can learn how to sell fund shares directly to
the fund or through an investment dealer.
HOW TO EXCHANGE SHARES
. .............................................................
Find out in this section how you may exchange fund shares for
shares of other Putnam funds. The section also explains how
exchanges can be made without sales charges and the conditions
under which sales charges may be required.
HOW THE FUND VALUES ITS SHARES
. .............................................................
This section explains how the fund determines the value of its
shares.
HOW THE FUND MAKES DISTRIBUTIONS TO SHAREHOLDERS; TAX
INFORMATION
. .............................................................
This section describes the various options you have in choosing
how to receive fund dividends. It also discusses the tax status
of the payments and counsels you to seek specific advice about
your own situation.
<PAGE>
ABOUT PUTNAM INVESTMENTS, INC.
Read this section to learn more about the companies that provide
marketing, investment management, and shareholder account
services to Putnam funds and their shareholders.
APPENDIX
Securities ratings
<PAGE>
ABOUT THE FUND
EXPENSES SUMMARY
Expenses are one of several factors to consider when investing.
The following table summarizes your maximum transaction costs
from investing in the 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.
CLASS A CLASS B CLASS M
SHARES SHARES SHARES
SHAREHOLDER TRANSACTION
EXPENSES
Maximum sales charge
imposed on purchases
(as a percentage of
offering price) 5.75% NONE* 3.50%*
Deferred sales charge 5.0% in the first
(as a percentage year, declining
of the lower of to 1.0% in the
original purchase sixth year, and
price or redemption eliminated
proceeds) NONE** thereafter NONE
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Total fund
Management 12b-1 Other operating
fees fees expenses expenses
---------- ----- -------- ---------
Class A 0.55% 0.25% 0.34% 1.14%
Class B 0.55% 1.00% 0.35% 1.90%
Class M 0.55% 0.75% 0.39% 1.69%
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. The annual management fees
shown in the table have been restated to reflect an increase in
the management fees payable to Putnam Investment Management,
Inc., the fund's investment manager ("Putnam Management").
Actual management fees were 0.36% for all classes of shares and
total fund operating expenses were 0.95%, 1.71% and 1.50% for
class A, B and M shares, respectively.
EXAMPLES
Your investment of $1,000 would incur the following expenses,
assuming 5% annual return and, except as indicated, redemption at
the end of each period:
1 3 5 10
year years years years
CLASS A $68 $92 $117 $188
CLASS B $69 $90 $123 $202***
CLASS B (NO REDEMPTION) $19 $60 $103 $202***
CLASS M $52 $86 $124 $228
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 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.
** 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."
*** Reflects conversion of class B shares to class A shares
(which pay lower ongoing expenses) approximately eight years
after purchase. See "Alternative sales arrangements."
FINANCIAL HIGHLIGHTS
The following table presents per share financial information for
class A, B and M shares. This information has been derived from
the fund's financial statements, which have been audited and
reported on by the independent accountants. The "Report of
independent accountants" and financial statements included in the
fund's annual report to shareholders for the 1996 fiscal year are
incorporated by reference into this prospectus. The fund's
annual report, which contains additional unaudited performance
information, is available without charge upon request.
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
DECEMBER 1, 1994
YEAR (COMMENCEMENT
ENDED OF OPERATIONS)
JULY 31 TO JULY 31 YEAR ENDED JULY 31
1996 1995 1996 1995 1994 1993
CLASS M CLASS B
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $14.84 $12.77 $14.83 $13.46 $14.19 $14.22
INVESTMENT OPERATIONS:
NET INVESTMENT INCOME .55 .31 .51 .52 .50 .56
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS 1.50 2.03 1.50 1.63 (.12) .48
TOTAL FROM INVESTMENT OPERATIONS 2.05 2.34 2.01 2.15 .38 1.04
LESS DISTRIBUTIONS FROM:
NET INVESTMENT INCOME (.52) (.27) (.47) (.46) (.49) (.59)
NET REALIZED GAIN
ON INVESTMENTS (.63) -- (.63) (.32) (.62) (.48)
<PAGE>
TOTAL DISTRIBUTIONS (1.15) (.27) (1.10) (.78) (1.11) (1.07)
NET ASSET VALUE, END OF PERIOD $15.74 $14.84 $15.74 $14.83 $13.46 $14.19
TOTAL INVESTMENT RETURN AT
NET ASSET VALUE (%)(A) 14.26 18.52(C) 13.97 16.87 2.70 7.87
NET ASSETS, END OF PERIOD
(IN THOUSANDS) $49,541 $8,164 $435,278 $224,166 $151,327 $81,983
RATIO OF EXPENSES TO
AVERAGE NET ASSETS (%)(B) 1.50 .93(C) 1.71 1.66 1.71 1.66
RATIO OF NET INVESTMENT
INCOME TO AVERAGE
NET ASSETS (%) 3.50 2.53(C) 3.31 3.81 3.39 3.43
PORTFOLIO TURNOVER (%) 119.44 102.57 119.44 102.57 100.69 89.22
<FN>
(A) TOTAL INVESTMENT RETURN ASSUMES DIVIDEND REINVESTMENT AND DOES NOT REFLECT THE EFFECT OF SALES CHARGES.
(B) THE RATIO OF EXPENSES TO AVERAGE NET ASSETS FOR THE YEAR ENDED JULY 31, 1996 INCLUDES AMOUNTS PAID THROUGH BROKERAGE
SERVICE
AND EXPENSE OFFSET ARRANGEMENTS. PRIOR PERIOD RATIOS EXCLUDE THESE AMOUNTS.
(C) NOT ANNUALIZED.
(D) PER SHARE NET INVESTMENT INCOME HAS BEEN DETERMINED ON THE BASIS OF THE WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING DURING
THE PERIOD.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS (CONTINUED)
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
APRIL 27, 1992
(COMMENCEMENT
OF OPERATIONS)
TO JULY 31 YEAR ENDED JULY 31
1992 1996 1995 1994 1993 1992 1991
CLASS B CLASS A
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $13.73 $14.90 $13.52 $14.24 $14.24 $13.52 $13.39
INVESTMENT OPERATIONS:
NET INVESTMENT INCOME .13(D) .63 .63 .59 .62 .64 .69
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS .53 1.50 1.63 (.11) .52 1.12 .64
TOTAL FROM INVESTMENT OPERATIONS .66 2.13 2.26 .48 1.14 1.76 1.33
LESS DISTRIBUTIONS FROM:
NET INVESTMENT INCOME (.17) (.58) (.56) (.58) (.66) (.68) (.68)
NET REALIZED GAIN
ON INVESTMENTS -- (.63) (.32) (.62) (.48) (.36) (.52)
TOTAL DISTRIBUTIONS (.17) (1.21) (.88) (1.20) (1.14) (1.04) (1.20)
<PAGE>
NET ASSET VALUE, END OF PERIOD $14.22 $15.82 $14.90 $13.52 $14.24 $14.24 $13.52
TOTAL INVESTMENT RETURN AT
NET ASSET VALUE (%) (A) 4.99(C) 14.75 17.73 3.46 8.64 13.68 11.28
NET ASSETS, END OF PERIOD
(IN THOUSANDS) $11,946 $1,515,260 $1,036,674 $913,171 $772,540 $622,129 $479,287
RATIO OF EXPENSES TO
AVERAGE NET ASSETS (%)(B) .55(C) .95 .91 .95 .90 1.06 .94
RATIO OF NET INVESTMENT
INCOME TO AVERAGE
NET ASSETS (%) .84(C) 4.07 4.58 4.15 4.34 4.62 5.42
PORTFOLIO TURNOVER (%) 78.90 119.44 102.57 100.69 89.22 78.90 64.98
/TABLE
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS (CONTINUED)
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
SEVEN
YEAR MONTHS
ENDED ENDED
JULY 31 JULY 31 YEAR ENDED DECEMBER 31
1990 1989 1988 1987
CLASS A
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $14.32 $12.32 $11.91 $14.66
INVESTMENT OPERATIONS:
NET INVESTMENT INCOME .75 .45 .73 .71
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS .02 1.88 .68 (.03)
TOTAL FROM INVESTMENT OPERATIONS .77 2.33 1.41 .68
LESS DISTRIBUTIONS FROM:
NET INVESTMENT INCOME (.82) (.33) (.72) (.80)
NET REALIZED GAIN
ON INVESTMENTS (.88) -- (.28) (2.63)
TOTAL DISTRIBUTIONS (1.70) (.33) (1.00) (3.43)
NET ASSET VALUE, END OF PERIOD $13.39 $14.32 $12.32 $11.91
TOTAL INVESTMENT RETURN AT
NET ASSET VALUE (%)(A) 5.86 19.21(C) 12.10 3.72
NET ASSETS, END OF PERIOD
(IN THOUSANDS) $442,964 $430,568 $387,186 $384,213
RATIO OF EXPENSES TO
AVERAGE NET ASSETS (%)(B) .84 .48(C) .73 .71
RATIO OF NET INVESTMENT
INCOME TO AVERAGE
NET ASSETS (%) 5.52 3.41(C) 5.82 4.86
PORTFOLIO TURNOVER (%) 70.54 52.82(C) 139.28 129.94
</TABLE>OBJECTIVE<PAGE>
THE GEORGE PUTNAM FUND OF BOSTON SEEKS TO PROVIDE A BALANCED
INVESTMENT COMPOSED OF A WELL-DIVERSIFIED PORTFOLIO OF STOCKS AND
BONDS WHICH WILL PRODUCE BOTH CAPITAL GROWTH AND CURRENT INCOME.
The fund is not intended to be a complete investment program, and
there is no assurance it will achieve its objective.
HOW THE FUND PURSUES ITS OBJECTIVE
BASIC INVESTMENT STRATEGY
IN SEEKING ITS OBJECTIVE, THE FUND MAY INVEST IN ALMOST ANY TYPE
OF SECURITY OR NEGOTIABLE INSTRUMENT, INCLUDING CASH OR MONEY
MARKET INSTRUMENTS. The fund's portfolio will include some
securities selected primarily to provide for capital protection,
others selected for dependable income and still others for growth
in value. The proportion invested in each type of security is
not fixed, although ordinarily no more than 75% of the fund's
assets consist of common stocks and that portion of convertible
securities attributable to conversion rights. The fund may,
however, at times invest more than 75% of its assets in such
securities if Putnam Management determines that unusual market or
economic conditions make it appropriate to do so.
ALTERNATIVE INVESTMENT STRATEGIES
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 fund assets.
In implementing these defensive strategies, the fund may
concentrate its investments in debt securities, preferred stocks,
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, these
alternative strategies will be used.
FOREIGN INVESTMENTS
The fund may invest in securities of foreign issuers
that are not actively traded in U.S. markets.
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.
The fund may engage in a variety of foreign currency
exchange transactions in connection with its foreign investments,
including transactions involving futures contracts, forward
contracts and options.
Investments in foreign securities may subject the fund to
other risks as well. For example, 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 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 are typically increased in connection
with investments in less developed and developing nations, which
are sometimes referred to as "emerging markets." For example,
political and economic structures in these countries may be in
their infancy and developing rapidly, causing instability. 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 fund expects that its investments in foreign securities
generally will not exceed 20% of its total assets, although the
fund's investments in foreign securities may exceed this
amount from time to time. 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.
For more information about foreign securities and the risks
associated with investment in such securities, see
the SAI.
PORTFOLIO TURNOVER
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 its portfolio turnover rate may be higher than
that of other mutual funds.
Portfolio turnover generally involves some expense, including
brokerage commissions or dealer markups and other transaction
costs on the sale of securities and reinvestment in other
securities. These transactions may result in realization of
taxable capital gains. Portfolio turnover rates 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 fixed-income 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
fixed-income securities. Conversely, during periods of rising
interest rates, the value of the fund's fixed-income securities
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
a 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 such securities, but will affect the fund's net asset value.
INVESTORS SHOULD CONSIDER CAREFULLY THEIR ABILITY TO ASSUME
THE RISKS OF OWNING SHARES OF A MUTUAL FUND THAT MAY INVEST
IN SECURITIES IN THE LOWER RATING CATEGORIES .
The fund will invest in securities rated at least B by
a nationally recognized securities rating agency, such as
Standard & Poor's ("S&P") or Moody's Investors Service, Inc.
("Moody's") , or unrated securities that Putnam
Management determines are of comparable quality. The
foregoing investment limitations will be measured at the time of
purchase and, to the extent that 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. Securities rated B (and comparable unrated
securities) are predominantly speculative and have large
uncertainties or major risk exposures to adverse conditions.
Securities rated lower than Baa or BBB (and comparable
unrated securities) are sometimes referred to as "junk
bonds." The rating services' descriptions of securities in the
various rating categories, including the speculative
characteristics of securities in the lower rating categories, are
included in the appendix to this prospectus.
The table below shows the percentages of fund assets
invested during fiscal 1996 in securities assigned to the various
rating categories by S&P, or, if unrated by S&P, assigned to
comparable rating categories by another rating agency , and
in unrated securities determined by Putnam Management to be of
comparable quality.
UNRATED SECURITIES
RATED SECURITIES, OF COMPARABLE QUALITY,
AS PERCENTAGE OF AS PERCENTAGE OF
RATING NET ASSETS NET ASSETS
"AAA" 23.65% 0.14%
"AA" 1.54% --
"A" 1.88% 0.08%
"BBB" 3.55% 0.11%
"BB" 2.63% 0.51%
"B" 2.38% --
"CCC" 0.08% --
------ -----
Total 35.71% 0.84%
======= =====
Putnam Management seeks to minimize the risks of investing in
lower-rated securities through careful investment analysis. When
the fund invests in securities in the lower rating categories,
the achievement of its goals is more dependent on Putnam
Management's ability than would be the case if it were investing
in securities in the higher rating categories.
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 continued investment in the security
will assist in meeting the fund's investment objective.
At times, a substantial portion of fund assets may be invested in
securities as to which the fund, by itself or together with other
funds and accounts managed by Putnam Management and its
affiliates, holds all or a major portion. Under adverse market
or economic conditions or in the event of adverse changes in the
financial condition of the issuer, it may be more difficult to
sell these securities when Putnam Management believes it
advisable to do so or the fund 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 these
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 the securities. This could
increase fund operating expenses and adversely affect its 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.
The fund at times may 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. 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 in cash
currently. The values of zero-coupon bonds and payment-in-kind
bonds are also subject to greater fluctuation in response to
changes in market interest rates than bonds that pay interest in
cash currently.
Even though such bonds do not pay current interest in cash, the
fund nonetheless is required to accrue interest income on these
investments and to distribute the interest income on a current
basis. Thus, the fund could be required at times to liquidate
other investments in order to satisfy its distribution
requirements.
Certain investment grade securities share some of the risk
factors discussed above with respect to lower-rated securities.
FOR ADDITIONAL INFORMATION CONCERNING THE RISKS ASSOCIATED WITH
INVESTING IN SECURITIES IN THE LOWER RATING CATEGORIES, SEE THE
SAI.
FUTURES AND OPTIONS
THE FUND MAY BUY AND SELL STOCK INDEX FUTURES CONTRACTS. An
"index future" is a contract to buy or sell units of a particular
stock index at an agreed price on a specified future date.
Depending on the change in value of the index between the time
the fund enters into and terminates an index future transaction,
the fund realizes a gain or loss. In addition to or as an
alternative to purchasing or selling index futures, the fund may
buy and sell call and put options on index futures or stock
indexes. The fund may engage in index futures and options
transactions for hedging purposes and for nonhedging purposes,
such as to adjust its exposure to relevant markets or as a
substitute for direct investment.
THE USE OF INDEX FUTURES AND RELATED OPTIONS INVOLVES CERTAIN
SPECIAL RISKS. FUTURES AND OPTIONS TRANSACTIONS INVOLVE COSTS
AND MAY RESULT IN LOSSES.
Certain risks arise from the possibility of imperfect
correlations among movements in the prices of financial futures
and options purchased or sold by the fund, of the underlying
stock index and, in the case of hedging transactions, of the
securities that are the subject of the hedge. The successful use
of the strategies described above further depends on Putnam
Management's ability to forecast market movements correctly.
Other risks arise from the potential inability to close out index
futures or options positions. There can be no assurance that a
liquid secondary market will exist for any index future or option
at any particular time. The fund's ability to terminate option
positions established in the over-the-counter market may be more
limited than for exchange-traded options and may also involve the
risk that securities dealers participating in such transactions
would fail to meet their obligations to the fund. Certain
provisions of the Internal Revenue Code and certain regulatory
requirements may limit the use of index futures and options
transactions.
A MORE DETAILED EXPLANATION OF INDEX FUTURES AND OPTIONS
TRANSACTIONS, INCLUDING THE RISKS ASSOCIATED WITH THEM, IS
INCLUDED IN THE SAI.
OTHER INVESTMENT PRACTICES
THE FUND MAY ALSO ENGAGE IN THE FOLLOWING INVESTMENT PRACTICES,
EACH OF WHICH INVOLVES CERTAIN SPECIAL RISKS. THE SAI CONTAINS
MORE DETAILED INFORMATION ABOUT THESE PRACTICES, INCLUDING
LIMITATIONS DESIGNED TO REDUCE THESE RISKS.
<PAGE>
OPTIONS. The fund may seek to increase its current return by
writing 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 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, it
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, including
combinations of put and call options on the same underlying
security. The aggregate value of the securities underlying the
options may not exceed 25% of fund assets. The use of these
strategies may be limited by applicable law.
SECURITIES LOANS, REPURCHASE AGREEMENTS AND FORWARD COMMITMENTS.
The fund may lend portfolio securities to broker-dealers and may
enter into repurchase agreements without limit. 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.
DIVERSIFICATION
The fund is a "diversified" investment company under the
Investment Company Act of 1940. This means that with respect to
75% of its total assets, the fund may not invest more than 5% of
its total assets in the securities of any one issuer (except U.S.
government securities). The remaining 25% of its total assets is
not subject to this restriction. To the extent the fund invests
a significant portion of its assets in the securities of a
particular issuer, it will be subject to an increased risk of
loss if the market value of such issuer's securities declines.
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 this prospectus and in the
SAI.
LIMITING INVESTMENT RISK
SPECIFIC INVESTMENT RESTRICTIONS HELP TO LIMIT INVESTMENT RISKS
FOR THE FUND'S SHAREHOLDERS. These restrictions prohibit the
fund from acquiring, with respect to 75% of its total assets,
more than 10% of the voting securities of any one issuer.* They
also prohibit the fund from investing more than:
(a) (with respect to 75% of its total assets) 5% of its total
assets in securities of any one issuer other than the U.S.
government;*
(b) 25% of its total assets in any one industry (other
than securities of the U.S. government, its agencies or
instrumentalities);* or
(c) 15% of its net assets in any combination of securities
that are not readily marketable, in securities restricted as to
resale (excluding securities determined by the Trustees (or the
person designated by the 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 SAI for the full text of these
policies and other fundamental policies. Except for investment
policies designated as fundamental in this prospectus or the SAI,
the investment policies described in this prospectus and in the
SAI are not fundamental policies. The Trustees may change any
non-fundamental investment policy without shareholder approval.
As a matter of policy, the Trustees would not materially change
the fund's investment objective without shareholder approval.
HOW PERFORMANCE IS SHOWN
FUND ADVERTISEMENTS MAY, FROM TIME TO TIME, INCLUDE PERFORMANCE
INFORMATION. "Yield" for each class of shares is calculated by
dividing the annualized net investment income per share during a
recent 30-day period by the maximum public offering price per
share of the class on the last day of that period.
Yield is based on the price of the shares, including the maximum
initial sales charge in the case of class A and class M shares,
but does not reflect any contingent deferred sales charge in the
case of class B shares.
"Total return" for the one-, five- and ten-year periods (or for
the life of a class, if shorter) through the most recent calendar
quarter represents the average annual compounded rate of return
on an investment of $1,000 in the fund invested at the maximum
public offering price (in the case of class A and class M shares)
or reflecting the deduction of any applicable contingent deferred
sales charge (in the case of class B shares). Total return may
also be presented for other periods or based on investment at
reduced sales charge levels. Any quotation of investment
performance not reflecting the maximum initial sales charge or
contingent deferred sales charge would be reduced if the sales
charge were used.
ALL DATA ARE BASED ON PAST INVESTMENT RESULTS AND DO NOT PREDICT
FUTURE PERFORMANCE. Investment performance, which will vary, is
based on many factors, including market conditions, portfolio
composition, fund operating expenses and which class of shares
the investor purchases. Investment performance also often
reflects the risks associated with the fund's investment
objective and policies. These factors should be considered when
comparing the fund's investment results with those of other
mutual funds and other investment vehicles.
Quotations of investment performance for any period when an
expense limitation was in effect will be greater than if the
limitation had not been in effect. Fund performance may be
compared to that of various indexes. See the SAI.
HOW THE FUND IS MANAGED
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.
The fund pays Putnam Management a quarterly fee for these
services based on average net assets. See "Expenses summary" and
the SAI.
The following officers of Putnam Management have had primary
responsibility for the day-to-day management of the fund's
portfolio since the years stated below:
<PAGE>
Business experience
Year (at least 5 years)
---- ----------------------------
Edward P. Bousa Employed as an investment
Senior Vice President 1994 professional by Putnam
Management since October,
1992. Prior to October,
1992, Mr. Bousa was Vice
President and Portfolio
Manager at Fidelity
Investments.
Robert M. Paine Employed as an investment
Senior Vice President
1996 professional by Putnam
Management since
1987.
Kenneth J. Taubes Employed as an investment
Senior Vice President
1993 professional by Putnam
Management since
1991 .
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
fund officers and their staff who provide administrative
services. The total reimbursement is determined annually by the
Trustees.
Putnam Management places all orders for purchases and sales of
fund 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 fund
shares (and, if permitted by law, of the other Putnam funds) as a
factor in the selection of broker-dealers.
ORGANIZATION AND HISTORY
The George Putnam Fund of Boston is a Massachusetts business
trust organized on November 1, 1937. 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, $1.00 par value, 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. Only class A, B 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 1-800-225-1581).
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.
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, Massachusetts Institute of Technology; JAMESON ADKINS
BAXTER, President, Baxter Associates, Inc.; HANS H. ESTIN, Vice
Chairman, North American Management Corp.; JOHN A. HILL, Chairman
and Managing Director, First Reserve Corporation; RONALD J.
JACKSON, Former Chairman, President and Chief Executive Officer
of Fisher-Price, Inc., Director of Safety 1st, Inc., Trustee of
Salem Hospital and the Peabody Essex Museum; ELIZABETH T. KENNAN,
President Emeritus and Professor, 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 and Director of
Acquisitions, Cabot Partners Limited Partnership; DONALD S.
PERKINS,* Director of various corporations, including Cummins
Engine Company, Lucent Technologies, Inc., Springs
Industries, Inc. and Time Warner Inc.; GEORGE PUTNAM, III,*
President, New Generation Research, Inc. ; A.J.C. SMITH,*
Chairman and Chief Executive Officer, Marsh & McLennan Companies,
Inc.; and W. NICHOLAS THORNDIKE, Director of various corporations
and charitable organizations, including Data General Corporation,
Bradley Real Estate, Inc. and Providence Journal Co. Also,
Trustee of Massachusetts General Hospital and Eastern Utilities
Associates. The Trustees are also Trustees of the other Putnam
funds. Those marked with an asterisk (*) are or may be deemed to
be "interested persons" of the fund, Putnam Management or Putnam
Mutual Funds.
ABOUT YOUR INVESTMENT
ALTERNATIVE SALES ARRANGEMENTS
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. Class A shares
bear a lower 12b-1 fee than class B and class M shares. See "How
to buy shares - Class A shares" and "Distribution plans."
CLASS B SHARES. Class B shares are sold without an initial sales
charge, but are subject to a CDSC if redeemed within a specified
period after purchase. Class B shares also bear 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, see the SAI.
This discussion includes information about how shares acquired
through reinvestment of distributions are treated for conversion
purposes. The discussion also notes certain circumstances under
which a conversion may not occur. 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 M SHARES. An investor who purchases class M shares pays a
sales charge at the time of purchase that is lower than the sales
charge applicable to class A shares. Certain purchases of class
M shares qualify for reduced sales charges. Class M shares bear
a 12b-1 fee that is lower than class B shares but higher than
class A shares. Class M shares are not subject to any CDSC and
do not convert into any other class of shares. See "How to buy
shares -- Class M shares" and "Distribution plans."
WHICH ARRANGEMENT IS BEST FOR YOU? The decision as to which
class of shares provides a more suitable investment for an
investor depends on a number of factors, including the amount and
intended length of the investment. Investors making investments
that qualify for reduced sales charges might consider class A or
class M shares. Investors who prefer not to pay an initial sales
charge might consider class B shares. Orders for class B shares
for $250,000 or more will be treated as orders for class A shares
or declined. 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."
HOW TO BUY SHARES
You can open a fund account with as little as $500 and make
additional investments at any time with as little as $50. You
can buy fund shares three ways - through most investment dealers,
through Putnam Mutual Funds (at 1-800-225-1581), or through a
systematic investment plan. If you do not have a dealer, Putnam
Mutual Funds can refer you to one.
BUYING SHARES THROUGH PUTNAM MUTUAL FUNDS. Complete an order
form and write a check for the amount you wish to invest, payable
to the fund. Return the completed form and check to Putnam
Mutual Funds, which will act as your agent in purchasing shares
through your designated investment dealer.
BUYING SHARES THROUGH SYSTEMATIC INVESTING. You can make regular
investments of $25 or more per month through automatic deductions
from your bank checking or savings account. Application forms
are available from your investment dealer or through Putnam
Investor Services.
Shares are sold at the public offering price based on the net
asset value next determined after Putnam Investor Services
receives your order. In most cases, in order to receive that
day's public offering price, Putnam Investor Services must
receive your order before the close of regular trading on the New
York Stock Exchange. If you buy shares through your investment
dealer, the dealer must receive your order before the close of
regular trading on the New York Stock Exchange to receive that
day's public offering price.
CLASS A SHARES
The public offering price of class A shares is the net asset
value plus a sales charge that varies depending on the size of
your purchase. The fund receives the net asset value. The sales
charge is allocated between your investment dealer and Putnam
Mutual Funds as shown in the following table, except when Putnam
Mutual Funds, in its discretion, allocates the entire amount to
your investment dealer.
<PAGE>
SALES CHARGE AMOUNT OF
AS A PERCENTAGE OF: SALES CHARGE
------------------- REALLOWED TO
NET DEALERS AS A
AMOUNT OF TRANSACTION AMOUNT OFFERING PERCENTAGE OF
AT OFFERING PRICE ($) INVESTED PRICE OFFERING PRICE
- -----------------------------------------------------------------
Under 50,000 6.10% 5.75% 5.00%
50,000 but under 100,000 4.71 4.50 3.75
100,000 but under 250,000 3.63 3.50 2.75
250,000 but under 500,000 2.56 2.50 2.00
500,000 but under 1,000,000 2.04 2.00 1.75
- -----------------------------------------------------------------
No initial sales charge applies to purchases of
class A shares of $1 million or more , or to
purchases by employer-sponsored retirement plans that
have at least 200 eligible employees. However, a
CDSC of 1.00% or 0.50%, respectively, is imposed on
redemptions of these shares within the first or second year
after purchase , unless the dealer of record waived
its commission with Putnam Mutual Funds' approval, or
unless the purchaser is a class A qualified benefit plan (a
retirement plan for which Putnam Fiduciary Trust Company provides
recordkeeping or other services in connection with the
purchase of class A shares ).
Class A qualified benefit plans may purchase class A shares with
no initial sales charge. However, a CDSC of 1.00% is imposed on
redemptions of these shares if, within two years of the
plan's initial purchase of class A shares, it redeems 90%
or more of its cumulative purchases. Thereafter, such a plan is
no longer liable for any CDSC. Class A qualified benefit plans
that initially invest at least $20 million in Putnam
funds and other investments managed by Putnam Management
and its affiliates and that received a proposal
from Putnam Mutual Funds on or before April 15, 1997
are not subject to any CDSC.
A class A qualified 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 elsewhere in this prospectus and in the SAI.
As decided in the SAI, Putnam Mutual Funds pays the dealer of
record a commission of up to 1% on 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 and sales of class A shares to employer-sponsored retirement
plans that have at least 200 eligible employees 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 $47 million and 0.25% thereafter.
CLASS B SHARES
Class B shares are sold without an initial sales charge, although
a CDSC will be imposed if you redeem shares within a specified
period after purchase, as shown in the table below.
YEAR 1 2 3 4 5 6 7+
- -------------------------------------------------------------
CHARGE 5% 4% 3% 3% 2% 1% 0%
Putnam Mutual Funds pays a sales commission equal to 4.00% of
the amount invested to dealers who sell class B shares. These
commissions are not paid on exchanges from other Putnam funds or
on sales to investors exempt from the CDSC.
CLASS M SHARES
The public offering price of class M shares is the net asset
value plus a sales charge that varies depending on the size of
your purchase. The fund receives the net asset value. The sales
charge is allocated between your investment dealer and Putnam
Mutual Funds as shown in the following table, except when Putnam
Mutual Funds, at its discretion, allocates the entire amount to
your investment dealer.
SALES CHARGE AMOUNT OF
AS A PERCENTAGE OF: SALES CHARGE
------------------- REALLOWED TO
NET DEALERS AS A
AMOUNT OF TRANSACTION AMOUNT OFFERING PERCENTAGE OF
AT OFFERING PRICE ($) INVESTED PRICE OFFERING PRICE
- -----------------------------------------------------------------
Under 50,000 3.63% 3.50% 3.00%
50,000 but under 100,000 2.56 2.50 2.00
100,000 but under 250,000 1.52 1.50 1.00
250,000 but under 500,000 1.01 1.00 1.00
500,000 and above None None None
- -----------------------------------------------------------------
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. Class M qualified benefit plans
(retirement plans for which Putnam Fiduciary Trust Company
provides recordkeeping or other services in connection with the
purchase of class M shares) and members of qualified groups may
also purchase class M shares without a sales charge.
GENERAL
YOU MAY BE ELIGIBLE TO BUY FUND SHARES AT REDUCED SALES CHARGES
OR TO SELL SHARES WITHOUT A CDSC .
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, qualified
benefit plans and other plans. Descriptions are also
included in the order form and in the SAI.
The fund may sell class A, class B 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, employee benefit plans of
companies with more than 750 employees, 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.
In addition, the fund may sell shares at net asset value without
an initial sales charge or a CDSC in connection with the
acquisition by the fund of assets of an investment company or
personal holding company. The CDSC will be waived on redemptions
of shares arising out of the 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. Up to 12% of the value of shares subject
to a systematic withdrawal plan may also be redeemed each year
without a CDSC. The SAI contains additional information about
purchasing shares at reduced sales charges.
Shareholders of other Putnam funds may be entitled to exchange
their shares for, or reinvest distributions from their funds in,
fund shares at net asset value.
If you are considering redeeming shares or transferring
shares to another person shortly after purchase, you should pay
for those shares with a certified check to avoid any delay in
redemption or transfer. Otherwise, payment may be delayed
until the purchase price of those shares has been collected or,
if you redeem by telephone, until 15 calendar days after the
purchase date. To eliminate the need for safekeeping,
certificates will not be issued for your shares unless you
request them.
In determining whether a CDSC is payable on any redemption,
shares not subject to any charge will be redeemed first, followed
by shares held longest during the CDSC period. Any CDSC will be
based on the lower of the shares' cost and net asset value. For
this purpose, the amount of any increase in a share's value above
its initial purchase price is not regarded as a share exempt from
the CDSC. Thus, when you redeem a share that has appreciated in
value during the CDSC period, a CDSC is assessed on its initial
purchase price. Any shares acquired by reinvestment of
distributions will be redeemed without a CDSC. For information on
how sales charges are calculated if you exchange your shares, see
"How to exchange shares." Putnam Mutual Funds receives the
entire amount of any CDSC you pay. See the SAI for more
information about the CDSC.
Putnam Mutual Funds will from time to time, at its expense,
provide additional promotional incentives or payments to dealers
that sell shares of the Putnam funds. These incentives or
payments may include payments for travel expenses, including
lodging, incurred in connection with trips taken by invited
registered representatives and their guests to locations within
and outside the United States for meetings or seminars of a
business nature. In some instances, these incentives or payments
may be offered only to certain dealers who have sold or may sell
significant amounts of shares. Certain dealers may not sell all
classes of shares.
DISTRIBUTION PLANS
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 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 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.
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 up to 0.25% of the average net asset
value of class A shares . The payments to dealers for shares
held by class A qualified benefit plans are made at reduced
rates, as described in the SAI. Putnam Mutual Funds makes
quarterly payments on all other shares at the annual rate of
0.20% of the average net asset value of class A shares
outstanding as of December 31, 1989 and 0.25% of the average net
asset value of shares acquired after that date (including shares
acquired through reinvestment of distributions). 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 0.25% and 0.65% of
the average net asset value of class B and class M
shares, respectively .
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.
HOW TO SELL SHARES
You can sell your shares to the fund any day the New York Stock
Exchange is open, either directly to the fund or through your
investment dealer. The fund will only redeem shares for which it
has received payment.
SELLING SHARES DIRECTLY TO YOUR FUND. Send a signed letter of
instruction or stock power form to Putnam Investor Services,
along with any certificates that represent shares you want to
sell. The price you will receive is the next net asset value
calculated after the fund receives your request in proper form
less any applicable CDSC. In order to receive that day's net
asset value, Putnam Investor Services must receive your request
before the close of regular trading on the New York Stock
Exchange.
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 SAI for more
information about where to obtain a signature guarantee. Stock
power forms are available from your investment dealer, Putnam
Investor Services and many commercial banks.
If you want your redemption proceeds sent to an address other
than your address as it appears on Putnam's records, a signature
guarantee is required. 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.
YOUR 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.
You may use Putnam's Telephone Redemption Privilege to redeem
shares valued up to $100,000 unless you have notified
Putnam Investor Services of an address change within the
preceding 15 days. Unless an investor indicates otherwise on the
account application, Putnam Investor Services will be authorized
to act upon redemption and transfer instructions received by
telephone from a shareholder, or any person claiming to act as
his or her representative, who can provide Putnam Investor
Services with his or her account registration and address as it
appears on Putnam Investor Services' records.
Putnam Investor Services will employ these and other reasonable
procedures to confirm that instructions communicated by telephone
are genuine; if it fails to employ reasonable procedures, Putnam
Investor Services may be liable for any losses due to
unauthorized or fraudulent instructions. For information,
consult Putnam Investor Services.
During periods of unusual market changes and shareholder
activity, you may experience delays in contacting Putnam Investor
Services by telephone. In this event, you may wish to submit a
written redemption request, as described above, or contact your
investment dealer, as described below. The Telephone Redemption
Privilege is not available if you were issued certificates for
shares that remain outstanding. The Telephone Redemption
Privilege may be modified or terminated without notice.
SELLING SHARES THROUGH YOUR INVESTMENT DEALER. Your dealer must
receive your request before the close of regular trading on the
New York Stock Exchange to receive that day's net asset value.
Your dealer will be responsible for furnishing all necessary
documentation to Putnam Investor Services, and may charge you for
its services.
HOW TO EXCHANGE SHARES
You can exchange your shares for shares of the same class of
certain other Putnam funds at net asset value. Not all Putnam
funds offer all classes of shares. If you exchange shares
subject to a CDSC, the transaction will not be subject to the
CDSC. However, when you redeem the shares acquired through the
exchange, the redemption may be subject to the CDSC, depending
upon when you originally purchased the shares. The CDSC 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 CDSC applicable to your class of shares. For purposes of
computing the CDSC, 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, simply complete an Exchange
Authorization Form and send it to Putnam Investor Services. The
form is available from Putnam Investor Services. For federal
income tax purposes, an exchange is treated as a sale of shares
and generally results in a capital gain or loss. A Telephone
Exchange Privilege is currently available for amounts up to
$500,000. Putnam Investor Services' procedures for telephonic
transactions are described above under "How to sell shares." The
Telephone Exchange Privilege is not available if you were issued
certificates for shares that remain outstanding. Ask your
investment dealer or Putnam Investor Services for prospectuses of
other Putnam funds. 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 Putnam Management or the Trustees
believe doing so would be in the best interests of your fund, the
fund reserves the right to revise or terminate the exchange
privilege, limit the amount or number of exchanges or reject any
exchange. Consult Putnam Investor Services before requesting an
exchange. See the SAI 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 EACH 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.
Securities quoted in foreign currencies are translated into U.S.
dollars at current exchange rates or at such other rates as the
Trustees may determine in computing net asset value. As a
result, fluctuations in the value of such currencies in relation
to the U.S. dollar will affect the net asset value of fund shares
even though there has not been any change in the values of such
securities as quoted in such foreign currencies.
HOW THE FUND MAKES DISTRIBUTIONS TO SHAREHOLDERS; 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. Distributions paid on class A shares will generally
be greater than those paid on class B and class M shares because
expenses attributable to class B and class M shares will
generally be higher.
YOU CAN CHOOSE FROM THREE DISTRIBUTION OPTIONS:
- - Reinvest all distributions in additional shares without a
sales charge;
- - Receive distributions from net investment income in cash
while reinvesting net capital gains distributions in
additional shares without a sales charge; or
- - Receive all distributions in cash.
You can change your distribution option by notifying Putnam
Investor Services in writing. If you do not select an option
when you open your account, all distributions will be reinvested.
All distributions not paid in cash will be reinvested in shares
of the class on which the distributions are paid. You will
receive a statement confirming reinvestment of distributions in
additional shares (or in shares of other Putnam funds for
Dividends Plus accounts) promptly following the quarter in which
the reinvestment occurs.
If a check representing a fund distribution is not cashed within
a specified period, Putnam Investor Services will notify you that
you have the option of requesting another check or reinvesting
the distribution in the fund or in another Putnam fund. If
Putnam Investor Services does not receive your election, the
distribution will be reinvested in the fund. Similarly, if
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.
The fund intends to qualify as a "regulated investment company"
for federal income tax purposes and to meet all other
requirements 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.
Fund distributions will be taxable to you as ordinary income,
except that any distributions of net long-term capital gains will
be taxable as such, regardless of how long you have held the
shares. Distributions will be taxable as described above whether
received in cash or in shares through the reinvestment of
distributions.
Early in each year Putnam Investor Services will notify you of
the amount and tax status of distributions paid to you for the
preceding year.
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
custodian of the fund. Putnam Investor Services, a division of
Putnam Fiduciary Trust Company, is the investor servicing and
transfer agent for the fund.
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
SECURITIES RATINGS
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.
STANDARD & POOR'S
BONDS
AAA -- Debt rated 'AAA' has the highest rating assigned by
Standard & Poor's. Capacity to pay interest and repay principal
is extremely strong.
AA -- Debt rated 'AA' has a very strong capacity to pay interest
and repay principal and differ from the higher rated issues only
in small degree.
A -- Debt rated 'A' has a strong capacity to pay interest and
repay principal although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories.
BBB -- Debt rated 'BBB' is regarded as having an adequate
capacity to pay interest and repay principal. Whereas it
normally exhibits 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 debt in this category than in higher rated categories.
BB-B-CCC -- Debt rated 'BB', 'B' and 'CCC' is regarded, on
balance, as predominantly speculative with respect to capacity
to pay interest and repay principal in accordance with the terms
of the obligation. 'BB' indicates the lowest degree of
speculation. While such debt will likely have some quality and
protective characteristics, these are outweighed by large
uncertainties or major exposures to adverse conditions.
BB -- Debt rated `BB' has less near-term vulnerability to default
than other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial, or
economic conditions which could lead to inadequate capacity to
meet timely interest and principal payments. The `BB' rating
category is also used for debt subordinated to senior debt that
is assigned an actual or implied `BBB-' rating.
<PAGE>
B -- Debt rated `B' has a greater vulnerability to default but
currently has the capacity to meet interest payments and
principal repayments. Adverse business, financial, or economic
conditions will likely impair capacity or willingness to pay
interest and repay principal. The `B' rating category is also
used for debt subordinated to senior debt that is assigned an
actual or implied `BB' or `BB-' rating.
CCC -- Debt rated `CCC' has a currently identifiable
vulnerability to default, and is dependent upon favorable
business, financial, and economic conditions to meet timely
payment of interest and repayment of principal. In the event of
adverse business, financial, or economic conditions, it is not
likely to have the capacity to pay interest and repay principal.
The `CCC' rating category is also used for debt subordinated to
senior debt that is assigned an actual or implied `B' or `B-'
rating.
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.
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.
<PAGE>
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 that a Statement of Intention is in
effect.
<PAGE>
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.
<PAGE>
PUTNAM FAMILY OF FUNDS*
PUTNAM GROWTH FUNDS
Putnam Asia Pacific Growth Fund
Putnam Capital Appreciation Fund
Putnam Diversified Equity Trust
Putnam Emerging Markets Fund
Putnam Europe Growth Fund
Putnam Global Growth Fund
Putnam Global Natural Resources Fund
Putnam Health Sciences Trust
Putnam International Growth Fund
Putnam International New Opportunities Fund
Putnam International Voyager Fund
Putnam Investors Fund
Putnam New Opportunities Fund
Putnam OTC & Emerging Growth 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
The Putnam Fund for Growth and Income
Putnam Growth and Income Fund II
Putnam International Growth and Income Fund
Putnam New Value Fund
Putnam Utilities Growth and Income Fund
PUTNAM INCOME FUNDS
Putnam American Government Income Fund
Putnam Diversified Income Trust
Putnam Diversified Income Trust II
Putnam Federal Income Trust
Putnam Global Governmental Income Trust
Putnam High Yield Advantage Fund
Putnam High Yield Total Return Fund
Putnam High Yield Trust++
Putnam Income Fund
Putnam Intermediate U.S. Government Income Fund
Putnam Preferred Income Fund
Putnam U.S. Government Income Trust
<PAGE>
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 funds+++
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 FUNDS**
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
*As of 1/1/97.
+Formerly Putnam OTC Emerging Growth Fund.
++Closed to new investors.
+++Not available in all states.
**Investments in money market funds are neither insured nor
guaranteed by the U.S. government. These funds are managed to
maintain a steady net asset value of $1.00 per share, although
there is no assurance this net asset value will be maintained in
the future.
Please call your financial advisor or Putnam 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.
<PAGE>
GLOSSARY OF TERMS
BOND An IOU issued by a government or corporation that
usually pays interest.
- -----------------------------------------------------------------
CAPITAL A rise in an investment's principal value. Also
APPRECIATION used to describe the investment objective of a
mutual fund whose primary criterion for choosing
securities is the potential to rise in value rather
than to provide dividend income.
- -----------------------------------------------------------------
CAPITAL A profit or loss on the sale of securities
GAIN/LOSS (generally stocks or bonds).
- -----------------------------------------------------------------
CLASS A, B, Types of shares, each class offering investors a
M SHARES different way to pay sales charges and distribution
fees. A fund's prospectus explains the availability
and attributes of each type.
- -----------------------------------------------------------------
COMMON A unit of ownership of a corporation.
STOCK
- -----------------------------------------------------------------
CONTINGENT A charge applied at the time of redemption of
DEFERRED certain mutual fund shares, rather than at
SALES the time of purchase. A fund's CDSC generally
CHARGE declines each year after purchase, until it no
(CDSC) longer applies.
- -----------------------------------------------------------------
DECLARATION The date on which the Trustees approve the amount
DATE of a mutual fund's next distribution.
- -----------------------------------------------------------------
DISTRIBUTION A payment from a mutual fund to shareholders. It
may include interest from bonds and dividends from
stocks (dividend distributions). It may also
include profits from the sale of securities from
the fund's portfolio (capital gains distributions).
- -----------------------------------------------------------------
DIVIDEND For mutual fund shares, a payment derived solely
from dividends or interest paid on securities held
in the portfolio (i.e. not including capital
gains).
- -----------------------------------------------------------------
EQUITY Securities representing ownership in a corporation.
SECURITIES Common stock and preferred stock are equity
securities.
- -----------------------------------------------------------------
EX-DIVIDEND The date on or after which a new shareholder will
DATE not receive the fund's next distribution. For
Putnam funds, it is the same as the record date.
- -----------------------------------------------------------------<PAGE>
NET ASSET The value of one share of a mutual fund
VALUE (NAV) without regard to sales charges. Some bond funds
aim for a steady NAV, representing stability; most
stock funds aim to raise NAV, representing growth
in the value of an investment.
- -----------------------------------------------------------------
PAYABLE DATE The date on which a mutual fund pays its
distributions to shareholders.
- -----------------------------------------------------------------
PUBLIC The purchase price of one class A share or class M
OFFERING share of a mutual fund, including the applicable
PRICE up-front sales charge.
(POP)
- -----------------------------------------------------------------
RECORD DATE The date used to determine which shareholders are
entitled to a distribution. After the record date,
shares are sold "ex-dividend," or without the
dividend. For Putnam funds, the ex-dividend date is
the same as the record date.
- -----------------------------------------------------------------
TOTAL RETURN A measure of performance showing the change in the
value of an investment over a given period,
assuming all earnings are reinvested.
- -----------------------------------------------------------------
YIELD The percentage rate at which a fund has earned
income from its investments over the indicated
period. "Dividend rate" is a current return that
includes interest and dividend income, net of all
fund expenses. "Distribution rate" is a current
return that includes short-term capital gains, as
well as net investment income. "SEC yield" is a
current return based on net investment income over
a recent 30-day period, computed on a yield-to-
maturity basis, which may differ from net
investment income as determined for financial
reporting purposes. All of these returns are
calculated by annualizing the dividends or
distributions over the indicated period and
dividing by the price of a share at the end of the
period.
<PAGE>
THE GEORGE PUTNAM FUND OF BOSTON
One Post Office Square
Boston, MA 02109
FUND INFORMATION:
INVESTMENT MANAGER
Putnam Investment Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
INVESTOR SERVICING AGENT
Putnam Investor Services
Mailing address:
P.O. Box 41203
Providence, RI 02940-1203
CUSTODIAN
Putnam Fiduciary Trust Company
One Post Office Square
Boston, MA 02109
LEGAL COUNSEL
Ropes & Gray
One International Place
Boston, MA 02110
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110
PUTNAMINVESTMENTS
One Post Office Square
Boston, Massachusetts 02109
Toll-free 1-800-225-1581
<PAGE>
THE GEORGE PUTNAM FUND OF BOSTON
ONE POST OFFICE SQUARE, BOSTON, MA 02109
CLASS A SHARES
INVESTMENT STRATEGY: GROWTH AND INCOME
PROSPECTUS - NOVEMBER 30, 1996
, AS REVISED MAY 30, 1997
This prospectus explains concisely what you should know before
investing in class A shares of The George Putnam Fund of Boston
(the "fund") which are offered without a sales charge through
eligible employer-sponsored qualified benefit
plans. Please read it carefully and keep it for future
reference. You can find more detailed information about the fund
in the November 30, 1996 statement of additional information (the
"SAI"), as amended from time to time. For a free copy of the
SAI, or for other information, including a prospectus regarding
class A shares for other investors, call Putnam Investor Services
at 1-800-752-9894. The SAI has been filed with the Securities
and Exchange Commission (the "Commission") and is
incorporated into this prospectus by reference. The
Commission maintains a Web site (http://www.sec.gov) that
contains the SAI, material incorporated by reference into this
prospectus and the SAI, and other information regarding
registrants that file electronically with the Commission.
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
<PAGE>
ABOUT THE FUND
Expenses summary.....................................
Financial highlights.................................
Objective............................................
How the fund pursues its objective...................
Risk factors....................................
How performance is shown.............................
How the fund is managed..............................
Organization and history.............................
ABOUT YOUR INVESTMENT
How to buy shares....................................
Distribution plan....................................
How to sell shares...................................
How to exchange shares...............................
How the fund values its shares.......................
How the fund makes distributions to shareholders; tax
information.........................................
ABOUT PUTNAM INVESTMENTS, INC.............................
APPENDIX
Securities ratings........................................
ABOUT THE FUND
EXPENSES SUMMARY
Expenses are one of several factors to consider when investing.
The following table summarizes expenses attributable to class A
shares based on the fund's most recent fiscal year. The example
shows the cumulative expenses attributable to a hypothetical
$1,000 investment in class A shares over specified periods.
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management fees 0.55%
12b-1 fees 0.25%
Other expenses 0.34%
Total fund operating expenses 1.14%
The table is provided to help you understand the expenses of
investing in the fund and your share of the operating expenses
that the fund incurs. The expenses shown in the table do not
reflect the application of credits that reduce fund expenses.
The annual management fees shown in the table have been restated
to reflect an increase in the management fees payable to Putnam
Investment Management, Inc., the fund's investment manager
("Putnam Management"). Actual management fees were 0.36% and
total fund operating expenses were 0.95%.
<PAGE>
EXAMPLE
Your investment of $1,000 would incur the following expenses,
assuming 5% annual return and redemption at the end of each
period:
1 3 5 10
year years years years
$12 $36 $63 $139
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 varies. The example does not reflect any
charges or expenses related to your employer's plan.
FINANCIAL HIGHLIGHTS
The following table presents per share financial information for
class A shares. 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 1996 fiscal year are
incorporated by reference into this prospectus. The fund's
annual report, which contains additional unaudited performance
information, is 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 JULY 31
1996 1995
1994 1993 1992 1991
CLASS A
<S> <C> <C>
<C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $14.90 $13.52
$14.24 $14.24 $13.52 $13.39
INVESTMENT OPERATIONS:
NET INVESTMENT INCOME .63 .63
.59 .62 .64 .69
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS 1.50 1.63
(.11) .52 1.12 .64
TOTAL FROM INVESTMENT OPERATIONS 2.13 2.26
.48 1.14 1.76 1.33
LESS DISTRIBUTIONS FROM:
NET INVESTMENT INCOME (.58) (.56)
(.58) (.66) (.68) (.68)
NET REALIZED GAIN
ON INVESTMENTS (.63) (.32)
(.62) (.48) (.36) (.52)
TOTAL DISTRIBUTIONS (1.21) (.88)
(1.20) (1.14) (1.04) (1.20)
<PAGE>
NET ASSET VALUE, END OF PERIOD $15.82 $14.90
$13.52 $14.24 $14.24 $13.52
TOTAL INVESTMENT RETURN AT
NET ASSET VALUE (%)(A) 14.75 17.73
3.46 8.64 13.68 11.28
NET ASSETS, END OF PERIOD
(IN THOUSANDS) $1,515,260 $1,036,674
$913,171 $772,540 $622,129 $479,287
RATIO OF EXPENSES TO
AVERAGE NET ASSETS (%)(B) .95 .91
.95 .90 1.06 .94
RATIO OF NET INVESTMENT
INCOME TO AVERAGE
NET ASSETS (%) 4.07 4.58
4.15 4.34 4.62 5.42
PORTFOLIO TURNOVER (%) 119.44 102.57
100.69 89.22 78.90 64.98
<FN>
(A) TOTAL INVESTMENT RETURN ASSUMES DIVIDEND REINVESTMENT AND
DOES NOT REFLECT THE EFFECT OF SALES CHARGES.
(B) THE RATIO OF EXPENSES TO AVERAGE NET ASSETS FOR THE YEAR
ENDED JULY 31, 1996 INCLUDES AMOUNTS PAID THROUGH BROKERAGE
SERVICE AND EXPENSE OFFSET ARRANGEMENTS. PRIOR PERIOD RATIOS
EXCLUDE THESE AMOUNTS.
(C) NOT ANNUALIZED.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS (CONTINUED)
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
SEVEN
YEAR MONTHS
ENDED ENDED
JULY 31 JULY 31
YEAR ENDED DECEMBER 31
1990 1989
1988 1987
CLASS A
<S> <C> <C>
<C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $14.32 $12.32
$11.91 $14.66
INVESTMENT OPERATIONS:
NET INVESTMENT INCOME .75 .45
.73 .71
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS .02 1.88
.68 (.03)
TOTAL FROM INVESTMENT OPERATIONS .77 2.33
1.41 .68
LESS DISTRIBUTIONS FROM:
NET INVESTMENT INCOME (.82) (.33)
(.72) (.80)
NET REALIZED GAIN
ON INVESTMENTS (.88) --
(.28) (2.63)
TOTAL DISTRIBUTIONS (1.70) (.33)
(1.00) (3.43)
NET ASSET VALUE, END OF PERIOD $13.39 $14.32
$12.32 $11.91
TOTAL INVESTMENT RETURN AT
NET ASSET VALUE (%)(A) 5.86 19.21(C)
12.10 3.72
NET ASSETS, END OF PERIOD
(IN THOUSANDS) $442,964 $430,568
$387,186 $384,213
RATIO OF EXPENSES TO
AVERAGE NET ASSETS (%)(B) .84 .48(C)
.73 .71
RATIO OF NET INVESTMENT
INCOME TO AVERAGE
NET ASSETS (%) 5.52 3.41(C)
5.82 4.86
PORTFOLIO TURNOVER (%) 70.54 52.82(C)
139.28 129.94
</TABLE>
OBJECTIVE
THE GEORGE PUTNAM FUND OF BOSTON SEEKS TO PROVIDE A BALANCED
INVESTMENT COMPOSED OF A WELL-DIVERSIFIED PORTFOLIO OF STOCKS AND
BONDS WHICH WILL PRODUCE BOTH CAPITAL GROWTH AND CURRENT INCOME.
The fund is not intended to be a complete investment program, and
there is no assurance it will achieve its objective.
HOW THE FUND PURSUES ITS OBJECTIVE
BASIC INVESTMENT STRATEGY
IN SEEKING ITS OBJECTIVE, THE FUND MAY INVEST IN ALMOST ANY TYPE
OF SECURITY OR NEGOTIABLE INSTRUMENT, INCLUDING CASH OR MONEY
MARKET INSTRUMENTS. The fund's portfolio will include some
securities selected primarily to provide for capital protection,
others selected for dependable income and still others for growth
in value. The proportion invested in each type of security is
not fixed, although ordinarily no more than 75% of the fund's
assets consist of common stocks and that portion of convertible
securities attributable to conversion rights. The fund may,
however, at times invest more than 75% of its assets in such
securities if Putnam Management determines that unusual market or
economic conditions make it appropriate to do so.
ALTERNATIVE INVESTMENT STRATEGIES
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 fund assets.
In implementing these defensive strategies, the fund may
concentrate its investments in debt securities, preferred stocks,
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, these
alternative strategies will be used.
FOREIGN INVESTMENTS
The fund may invest in securities of foreign issuers
that are not actively traded in U.S. markets.
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.
The fund may engage in a variety of foreign currency
exchange transactions in connection with its foreign investments,
including transactions involving futures contracts, forward
contracts and options.
Investments in foreign securities may subject the fund to
other risks as well. For example, 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 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 are typically increased in connection
with investments in less developed and developing nations, which
are sometimes referred to as "emerging markets." For example,
political and economic structures in these countries may be in
their infancy and developing rapidly, causing instability. 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 fund expects that its investments in foreign securities
generally will not exceed 20% of its total assets, although the
fund's investments in foreign securities may exceed this
amount from time to time. 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.
For more information about foreign securities and the risks
associated with investment in such securities, see
the SAI.
PORTFOLIO TURNOVER
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 its portfolio turnover rate may be higher than
that of other mutual funds.
Portfolio turnover generally involves some expense, including
brokerage commissions or dealer markups and other transaction
costs on the sale of securities and reinvestment in other
securities. These transactions may result in realization of
taxable capital gains. Portfolio turnover rates 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 fixed-income 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
fixed-income securities. Conversely, during periods of rising
interest rates, the value of the fund's fixed-income securities
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
a 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 such securities, but will affect the fund's net asset value.
INVESTORS SHOULD CONSIDER CAREFULLY THEIR ABILITY TO ASSUME
THE RISKS OF OWNING SHARES OF A MUTUAL FUND THAT MAY INVEST
IN SECURITIES IN THE LOWER RATING CATEGORIES .
The fund will invest in securities rated at least B by
a nationally recognized securities rating agency, such as
Standard & Poor's ("S&P") or Moody's Investors Service, Inc.
("Moody's") , or unrated securities that Putnam
Management determines are of comparable quality. The
foregoing investment limitations will be measured at the time of
purchase and, to the extent that 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. Securities rated B (and comparable unrated
securities) are predominantly speculative and have large
uncertainties or major risk exposures to adverse conditions.
Securities rated lower than Baa or BBB (and comparable
unrated securities) are sometimes referred to as "junk
bonds." The rating services' descriptions of securities in the
various rating categories, including the speculative
characteristics of securities in the lower rating categories, are
included in the appendix to this prospectus.
The table below shows the percentages of fund assets
invested during fiscal 1996 in securities assigned to the various
rating categories by S&P, or, if unrated by S&P, assigned to
comparable rating categories by another rating agency , and
in unrated securities determined by Putnam Management to be of
comparable quality.
<PAGE>
UNRATED SECURITIES
RATED SECURITIES, OF COMPARABLE QUALITY,
AS PERCENTAGE OF AS PERCENTAGE OF
RATING NET ASSETS NET ASSETS
"AAA" 23.65% 0.14%
"AA" 1.54% --
"A" 1.88% 0.08%
"BBB" 3.55% 0.11%
"BB" 2.63% 0.51%
"B" 2.38% --
"CCC" 0.08% --
------ -----
Total 35.71% 0.84%
======= =====
Putnam Management seeks to minimize the risks of investing in
lower-rated securities through careful investment analysis. When
the fund invests in securities in the lower rating categories,
the achievement of its goals is more dependent on Putnam
Management's ability than would be the case if it were investing
in securities in the higher rating categories.
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 continued investment in the security
will assist in meeting the fund's investment objective.
At times, a substantial portion of fund assets may be invested in
securities as to which the fund, by itself or together with other
funds and accounts managed by Putnam Management and its
affiliates, holds all or a major portion. Under adverse market
or economic conditions or in the event of adverse changes in the
financial condition of the issuer, it may be more difficult to
sell these securities when Putnam Management believes it
advisable to do so or the fund 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 these
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 the securities. This could
increase fund operating expenses and adversely affect its 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.
The fund at times may 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. 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 in cash
currently. The values of zero-coupon bonds and payment-in-kind
bonds are also subject to greater fluctuation in response to
changes in market interest rates than bonds that pay interest in
cash currently.
Even though such bonds do not pay current interest in cash, the
fund nonetheless is required to accrue interest income on these
investments and to distribute the interest income on a current
basis. Thus, the fund could be required at times to liquidate
other investments in order to satisfy its distribution
requirements.
Certain investment grade securities share some of the risk
factors discussed above with respect to lower-rated securities.
FOR ADDITIONAL INFORMATION CONCERNING THE RISKS ASSOCIATED WITH
INVESTING IN SECURITIES IN THE LOWER RATING CATEGORIES, SEE THE
SAI.
FUTURES AND OPTIONS
THE FUND MAY BUY AND SELL STOCK INDEX FUTURES CONTRACTS. An
"index future" is a contract to buy or sell units of a particular
stock index at an agreed price on a specified future date.
Depending on the change in value of the index between the time
the fund enters into and terminates an index future transaction,
the fund realizes a gain or loss. In addition to or as an
alternative to purchasing or selling index futures, the fund may
buy and sell call and put options on index futures or stock
indexes. The fund may engage in index futures and options
transactions for hedging purposes and for nonhedging purposes,
such as to adjust its exposure to relevant markets or as a
substitute for direct investment.
THE USE OF INDEX FUTURES AND RELATED OPTIONS INVOLVES CERTAIN
SPECIAL RISKS. FUTURES AND OPTIONS TRANSACTIONS INVOLVE COSTS
AND MAY RESULT IN LOSSES.
Certain risks arise from the possibility of imperfect
correlations among movements in the prices of financial futures
and options purchased or sold by the fund, of the underlying
stock index and, in the case of hedging transactions, of the
securities that are the subject of the hedge. The successful use
of the strategies described above further depends on Putnam
Management's ability to forecast market movements correctly.
Other risks arise from the potential inability to close out index
futures or options positions. There can be no assurance that a
liquid secondary market will exist for any index future or option
at any particular time. The fund's ability to terminate option
positions established in the over-the-counter market may be more
limited than for exchange-traded options and may also involve the
risk that securities dealers participating in such transactions
would fail to meet their obligations to the fund. Certain
provisions of the Internal Revenue Code and certain regulatory
requirements may limit the use of index futures and options
transactions.
A MORE DETAILED EXPLANATION OF INDEX FUTURES AND OPTIONS
TRANSACTIONS, INCLUDING THE RISKS ASSOCIATED WITH THEM, IS
INCLUDED IN THE SAI.
OTHER INVESTMENT PRACTICES
THE FUND MAY ALSO ENGAGE IN THE FOLLOWING INVESTMENT PRACTICES,
EACH OF WHICH INVOLVES CERTAIN SPECIAL RISKS. THE SAI CONTAINS
MORE DETAILED INFORMATION ABOUT THESE PRACTICES, INCLUDING
LIMITATIONS DESIGNED TO REDUCE THESE RISKS.
OPTIONS. The fund may seek to increase its current return by
writing 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 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, it
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 including,
combinations of put and call options on the same underlying
security. The aggregate value of the securities underlying the
options may not exceed 25% of fund assets. The use of these
strategies may be limited by applicable law.
SECURITIES LOANS, REPURCHASE AGREEMENTS AND FORWARD COMMITMENTS.
The fund may lend portfolio securities to broker-dealers and may
enter into repurchase agreements without limit. 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.
DIVERSIFICATION
The fund is a "diversified" investment company under the
Investment Company Act of 1940. This means that with respect to
75% of its total assets, the fund may not invest more than 5% of
its total assets in the securities of any one issuer (except U.S.
government securities). The remaining 25% of its total assets is
not subject to this restriction. To the extent the fund invests
a significant portion of its assets in the securities of a
particular issuer, it will be subject to an increased risk of
loss if the market value of such issuer's securities declines.
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 this prospectus and in the
SAI.
LIMITING INVESTMENT RISK
SPECIFIC INVESTMENT RESTRICTIONS HELP TO LIMIT INVESTMENT RISKS
FOR THE FUND'S SHAREHOLDERS. These restrictions prohibit the
fund from acquiring, with respect to 75% of its total assets,
more than 10% of the voting securities of any one issuer.* They
also prohibit the fund from investing more than:
(a) (with respect to 75% of its total assets) 5% of its total
assets in securities of any one issuer other than the U.S.
government;*
(b) 25% of its total assets in any one industry (other
than securities of the U.S. government, its agencies or
instrumentalities);* or
(c) 15% of its net assets in any combination of securities
that are not readily marketable, in securities restricted as to
resale (excluding securities determined by the Trustees (or the
person designated by the 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 SAI for the full text of these
policies and other fundamental policies. Except for investment
policies designated as fundamental in this prospectus or the SAI,
the investment policies described in this prospectus and in the
SAI are not fundamental policies. The Trustees may change any
non-fundamental investment policy without shareholder approval.
As a matter of policy, the Trustees would not materially change
the fund's investment objective without shareholder approval.
HOW PERFORMANCE IS SHOWN
FUND ADVERTISEMENTS MAY, FROM TIME TO TIME, INCLUDE PERFORMANCE
INFORMATION. "Yield" for each class of shares is calculated by
dividing the annualized net investment income per share during a
recent 30-day period by the maximum public offering price per
share of the class on the last day of that period.
"Total return" for the one-, five- and ten-year periods (or for
the life of class A shares, if shorter) through the most recent
calendar quarter represents the average annual compounded rate of
return on an investment of $1,000 in the fund invested at the
maximum public offering price. Total return may also be
presented for other periods or based on investment at reduced
sales charge levels. Any quotation of investment performance not
reflecting the maximum initial sales charge would be reduced if
the sales charge were used.
ALL DATA ARE BASED ON THE FUND'S PAST INVESTMENT RESULTS AND DO
NOT PREDICT FUTURE PERFORMANCE.
Investment performance, which will vary, is based on many
factors, including market conditions, portfolio composition, fund
operating expenses and which class of shares the investor
purchases. Investment performance also often reflects the risks
associated with the fund's investment objective and policies.
These factors should be considered when comparing the fund's
investment results with those of other mutual funds and other
investment vehicles.
Quotations of investment performance 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 that of various indexes. See the SAI. Because
shares sold through eligible qualified benefit
plans are sold without a sales charge, quotations of investment
performance reflecting the deduction of a sales charge will be
lower than the actual investment performance of shares purchased
through such plans.
HOW THE FUND IS MANAGED
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.
The fund pays Putnam Management a quarterly fee for these
services based on average net assets. See "Expenses summary" and
the SAI.
The following officers of Putnam Management have had primary
responsibility for the day-to-day management of the fund's
portfolio since the years stated below:
Business experience
Year (at least 5 years)
---- ----------------------------
Edward P. Bousa Employed as an investment
Senior Vice President 1994 professional by Putnam
Management since October,
1992. Prior to October,
1992, Mr. Bousa was Vice
President and Portfolio
Manager at Fidelity
Investments.
Robert M. Paine Employed as an investment
Senior Vice President
1996 professional by Putnam
Management since
1987.
Kenneth J. Taubes Employed as an investment
Senior Vice President
1993 professional by Putnam
Management since
1991 .
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
fund officers and their staff who provide administrative
services. The total reimbursement is determined annually by the
Trustees.
Putnam Management places all orders for purchases and sales of
fund 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 fund
shares (and, if permitted by law, of the other Putnam funds) as a
factor in the selection of broker-dealers.
ORGANIZATION AND HISTORY
The George Putnam Fund of Boston is a Massachusetts business
trust organized on November 1, 1937. 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, $1.00 par value, 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. Only class A shares are
offered by this prospectus. The fund also offers 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 1-800-
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.
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, Massachusetts Institute of Technology; JAMESON ADKINS
BAXTER, President, Baxter Associates, Inc.; HANS H. ESTIN, Vice
Chairman, North American Management Corp.; JOHN A. HILL, Chairman
and Managing Director, First Reserve Corporation; RONALD J.
JACKSON, Former Chairman, President and Chief Executive Officer
of Fisher-Price, Inc., Director of Safety 1st, Inc., Trustee of
Salem Hospital and the Peabody Essex Museum; ELIZABETH T. KENNAN,
President Emeritus and Professor, 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 and Director of
Acquisitions, Cabot Partners Limited Partnership; DONALD S.
PERKINS,* Director of various corporations, including Cummins
Engine Company, Lucent Technologies, Inc., Springs
Industries, Inc. and Time Warner Inc.; GEORGE PUTNAM, III,*
President, New Generation Research, Inc. ; A.J.C. SMITH,*
Chairman and Chief Executive Officer, Marsh & McLennan Companies,
Inc.; and W. NICHOLAS THORNDIKE, Director of various corporations
and charitable organizations, including Data General Corporation,
Bradley Real Estate, Inc. and Providence Journal Co. Also,
Trustee of Massachusetts General Hospital and Eastern Utilities
Associates. The Trustees are also Trustees of the other Putnam
funds. Those marked with an asterisk (*) are or may be deemed to
be "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 retirement
plan. For more information about
how to purchase shares of the fund through your employer's plan
or limitations on the amount that may be purchased, please
consult your employer. Shares are sold to eligible employer-
sponsored retirement 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. A class A qualified
benefit plan (an employer-sponsored retirement plan for
which Putnam Fiduciary Trust Company provides recordkeeping or
other services) is eligible to purchase fund shares at net
asset value beginning two years after the plan's initial
purchase of class A shares. A class A qualified benefit plan
that initially invested at least $20 million in Putnam funds
and other investments managed by Putnam Management or its
affiliates and that received a proposal from Putnam Mutual
Funds
on or before
April 15, 1997 may purchase fund shares at
net asset value without regard to this two-year period. An
employer-sponsored retirement plan, other than a class A
qualified benefit plan, is eligible to purchase fund shares at
net asset value if its investment in class A shares is at
least $1 million , or it has at least 200 eligible
employees, and the dealer of record waives its commission
with the consent of Putnam Mutual Funds. Employer-
sponsored retirement plans 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. Employer-sponsored 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 to class A qualified benefit plans , Putnam
Mutual Funds makes payments to the dealer of record on net
monthly purchases at rates of up to 1.00%. See the SAI for more
information about the rates at which sales commissions are
paid.
DISTRIBUTION PLAN
The fund has adopted a distribution plan 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 plan provides for payments by
the fund to Putnam Mutual Funds at the annual rate (expressed
as a percentage of average net assets ) of up to 0.35%
on class A shares. The Trustees currently limit payments
under the plan to the annual rate of 0.25% .
Putnam Mutual Funds compensates qualifying dealers
(including, for this purpose, certain financial institutions)
for sales of shares and the maintenance of
shareholder accounts at the annual rate of up to 0.25% of
the average net asset value of class A shares . The payments
to dealers for shares held by class A qualified benefit plans are
made at reduced rates, as described in the SAI.
Putnam Mutual Funds makes quarterly payments on
all other shares at the annual rate of 0.20% of the
average net asset value of class A shares outstanding as
of December 31, 1989 and 0.25% of the average net asset
value of shares acquired after that date (including shares
acquired through reinvestment of distributions).
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.
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 the
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
your plan sells shares having a net asset value of $100,000 or
more, signatures of registered owners or their legal
representatives must be guaranteed by a bank, broker-dealer or
certain other financial institutions. See the SAI for more
information about where to obtain a signature guarantee.
THE FUND GENERALLY PROVIDES PAYMENT FOR REDEEMED SHARES THE
BUSINESS DAY AFTER THE 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. The fund will only redeem 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 for more information on
how to exchange your shares or how to obtain prospectuses of
other Putnam funds in which you may invest.
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 Putnam Management or the Trustees
believe doing so would be in the best interests of your fund, the
fund reserves the right to revise or terminate the exchange
privilege, limit the amount or number of exchanges or reject any
exchange. Consult Putnam Investor Services before requesting an
exchange. See the SAI 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 EACH 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.
Securities quoted in foreign currencies are translated into U.S.
dollars at current exchange rates or at such other rates as the
Trustees may determine in computing net asset value. As a
result, fluctuations in the value of such currencies in relation
to the U.S. dollar will affect the net asset value of fund shares
even though there has not been any change in the values of such
securities as quoted in such foreign currencies.
HOW THE FUND MAKES DISTRIBUTIONS TO SHAREHOLDERS; 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.
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 you to receive fund
distributions from net investment income in cash while
reinvesting capital gains distributions in additional shares or
to receive all fund distributions 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 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 taxable as
such regardless of how long you have held your shares. However,
distributions by the fund to employer-sponsored qualified
benefit 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 Defined Contribution Plans is a
division of Putnam Mutual 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 located at One Post Office Square, Boston,
Massachusetts 02109 and 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.
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APPENDIX
SECURITIES RATINGS
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.
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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.
STANDARD & POOR'S
BONDS
AAA -- Debt rated 'AAA' has the highest rating assigned by
Standard & Poor's. Capacity to pay interest and repay principal
is extremely strong.
AA -- Debt rated 'AA' has a very strong capacity to pay interest
and repay principal and differ from the higher rated issues only
in small degree.
A -- Debt rated 'A' has a strong capacity to pay interest and
repay principal although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories.
BBB -- Debt rated 'BBB' is regarded as having an adequate
capacity to pay interest and repay principal. Whereas it
normally exhibits 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 debt in this category than in higher rated categories.
BB-B-CCC -- Debt rated 'BB', 'B' and 'CCC' is regarded, on
balance, as predominantly speculative with respect to capacity
to pay interest and repay principal in accordance with the terms
of the obligation. 'BB' indicates the lowest degree of
speculation. While such debt will likely have some quality and
protective characteristics, these are outweighed by large
uncertainties or major exposures to adverse conditions.
BB -- Debt rated `BB' has less near-term vulnerability to default
than other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial, or
economic conditions which could lead to inadequate capacity to
meet timely interest and principal payments. The `BB' rating
category is also used for debt subordinated to senior debt that
is assigned an actual or implied `BBB-' rating.
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B -- Debt rated `B' has a greater vulnerability to default but
currently has the capacity to meet interest payments and
principal repayments. Adverse business, financial, or economic
conditions will likely impair capacity or willingness to pay
interest and repay principal. The `B' rating category is also
used for debt subordinated to senior debt that is assigned an
actual or implied `BB' or `BB-' rating.
CCC -- Debt rated `CCC' has a currently identifiable
vulnerability to default, and is dependent upon favorable
business, financial, and economic conditions to meet timely
payment of interest and repayment of principal. In the event of
adverse business, financial, or economic conditions, it is not
likely to have the capacity to pay interest and repay principal.
The `CCC' rating category is also used for debt subordinated to
senior debt that is assigned an actual or implied `B' or `B-'
rating.
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.
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.
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