37722 10/97
Prospectus Supplement
dated October 6, 1997 to:
PUTNAM UTILITIES GROWTH AND INCOME FUND
Prospectus dated February 28, 1997
1. The following replaces the third sentence of the first
paragraph of the section entitled "Basic investment strategy":
The fund may invest up to 20% of its total assets in
securities that are rated below BBB or Baa by a nationally
recognized securities rating agency, such as Standard &
Poor's ("S&P") or Moody's Investors Service, Inc.
("Moody's"), or, if unrated, are determined by Putnam
Investment Management, Inc., the fund's investment manager,
to be of comparable quality. The fund is not subject to any
other restrictions based on securities ratings. Securities
rated below BBB and Baa (and comparable unrated securities)
are commonly know as "junk bonds."
2. The following replaces the fifth and sixth paragraphs of the
section entitled "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. A decrease in
interest rates will generally result in an increase in the
value of fund assets. Conversely, during periods of rising
interest rates, the value of the fund's assets will
generally decline. The magnitude of these fluctuations
generally is greater for securities with longer maturities.
However, the yields on such securities are also generally
higher. The values of lower-rated securities generally
fluctuate more than those of higher-rated securities.
Securities in the lower rating categories may have large
uncertainties or major exposure to adverse conditions.
Securities in the lowest rating categories are in default.
The rating services' descriptions of securities in the
various rating categories, including the speculative
characteristics of securities in the lower rating
categories, are set forth in the SAI.
The securities in the lower rating categories are subject to
greater risk that adverse changes in the financial condition
of their issuers, or in general economic conditions, or
both, or an unanticipated rise in interest rates, may impair
the ability of their issuers to make payments of interest
and principal. In addition, under such circumstances the
values of such securities may be more volatile, and the
markets for such securities may be less liquid, than those
for higher-rated securities, and the fund may as a result
find it more difficult to determine the fair value of such
securities. When the fund invests in securities in the
lower rating categories, the achievement of the fund's goals
is more dependent on Putnam Management's ability than would
be the case if the fund were investing in securities in the
higher rating categories.
For additional information regarding the risks associated
with investing in securities in the lower rating categories,
see the SAI.
3. Effective October 31, 1997, the paragraph under the table in
the section "How to buy shares - Class M shares" is replaced with
the following:
Class M qualified benefit plans (retirement plans for which
Putnam Fiduciary Trust Company or its affiliates provide
recordkeeping or other services in connection with the
purchase of class M shares) and members of qualified groups
may purchase class M shares without a sales charge.
