PUTNAM VOYAGER FUND II, 497, 1999-04-30

PUTNAM VOYAGER FUND II
497, 1999-04-30

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Prospectus
APRIL 30, 1999

Putnam Voyager Fund II Class A, B, C and M shares Investment Category: Growth
This prospectus explains what you should know about
this mutual fund before you invest. Please read it
carefully.
Putnam Investment Management, Inc. (Putnam Management),
which has managed mutual funds since 1937, manages the fund.
These securities have not been approved or
disapproved by the Securities and Exchange Commission
nor has the Commission passed upon the accuracy or
adequacy of this prospectus. Any statement to the contrary is a crime.

CONTENTS
2 Fund summary
2 Goal
2 Main investment strategies
2 Main risks
2 Performance information
4 Fees and expenses
5 What are the fund's main investment strategies and related risks?
7 Who manages the fund?
8 How does the fund price its shares?
8 How do I buy fund shares?
12 How do I sell fund shares?
13 How do I exchange fund shares?
14 Fund distributions and taxes
15 Financial highlights

LOGO
BOSTON ( LONDON ( TOKYO

Fund summary
GOAL
The fund seeks long term growth of capital. MAIN
INVESTMENT STRATEGIES - GROWTH STOCKS
The fund invests mainly in "growth" stocks. Growth
stocks are common stocks that are issued by companies
whose earnings Putnam Management believes are likely
to grow faster than the economy as a whole. Growth in
earnings may lead to an increase in the price of the
stock. The fund invests mainly in small and medium-
sized companies, although the fund may invest
in companies of any size.
MAIN RISKS
The main risks that could adversely affect the
value of this fund's shares and the total return
on your investment include
* The risk that the stock price of one or more of the
companies in the fund's portfolio will
fall , or will fail to appreciate as anticipated
by Putnam Management. Many factors can adversely
affect a stock's performance , including factors
related to a specific company or industry or general
financial market conditions . This risk is greater
for small and medium- sized companies .
They tend to be more vulnerable to adverse
developments because they may have limited product
lines, markets or financial resources or inexperienced
managers .
* The risk that movements in the securities markets
will adversely affect the value of the fund's investments, regardless
of how well the companies in the fund's portfolio
perform.
You can lose money by investing in the fund. The fund
may not achieve its goals, and is not intended as a
complete investment program. An investment in the fund
is NOT a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
PERFORMANCE INFORMATION
The following information provides some indication of
the fund's risks. The chart shows year-to-year
changes in the performance of one of the fund's
classes of shares, class A shares. The table following
the chart compares the fund's performance to that of
two broad measures of market performance. Of course,
the fund's past performance is not an indication of
future performance.

CALENDAR YEAR TOTAL RETURNS FOR CLASS A SHARES
1998 23.52%
1997 23.42%
1996 7.71%
1995 50.14%
1994 0.34%
Performance figures in the bar chart do not reflect
the impact of sales charges. If they did, performance
would be less than that shown. During the periods
shown in the bar chart, the highest return for a
quarter was 28.43% (quarter ending 12/31/98) and the
lowest return for a quarter was -17.65% (quarter
ending 9/30/98). Average Annual Total Returns (for periods ending 12/31/98)
Past Past Since
1 year 5 years Inception (4/14/93)

Class A 16.40% 18.44% 20.26%
Class B 17.66% 18.76% 20.53%
Class C 21.59% 18.96% 20.61%
Class M 18.60% 18.43% 20.17%
Russell Midcap
Growth Index 17.86% 17.34% 16.86%

Unlike the bar chart, this performance information
reflects the impact of sales charges. Class A and
class M share performance reflects the current maximum
initial sales charges; class B and
class C share performance reflects the maximum
applicable deferred sales charges if shares had been
redeemed on 12/31/98 . For periods before the
inception of class B shares (10/2/95), class C shares
(2/1/99) and class M shares (10/2/95), performance
shown for these classes in the table
is based on the performance of the fund's
class A shares, adjusted to reflect the appropriate
sales charge and the higher 12b-1 fees paid by class
B, class C and class M shares. The fund's performance
is compared to the Russell Midcap Growth
Index, an unmanaged index of common stocks composed
of the 800 smallest companies in the Russell 1000 Index which have greater-than-
average growth. The Russell 1000 Index represents
approximately 87% of the U.S. investable equity market .
FEES AND EXPENSES
This table summarizes the fees and expenses you may
pay if you invest in the fund. Expenses are based on
the fund's last fiscal year.
Shareholder Fees (fees paid directly from your investment)

Class A Class B Class C Class M
Maximum Sales Charge (Load)
Imposed on Purchases (as a
percentage of the offering
price) 5.75% NONE* NONE* 3.50%*

Maximum Deferred Sales Charge
(Load) (as a percentage of the
original purchase price or redemption
proceeds, whichever is lower) NONE** 5.00% 1.00% NONE

Annual Fund Operating Expenses
(expenses that are deducted from fund assets)

Total
Annual Fund
Management Distribution Other Operating
Fees (12b-1) Fees Expenses Expenses

Class A 0.63% 0.25% 0.24% 1.12%
Class B 0.63% 1.00% 0.24% 1.87%
Class C 0.63% 1.00% 0.24% 1.87%
Class M 0.63% 0.75% 0.24% 1.62%

*The higher 12b-1 fees borne by class B, class C and
class M shares may cause long-term class B, class C
and class M shareholders to pay more than the total
sales charges paid by class A shareholders.

** A deferred sales charge of up to 1% may be imposed
on certain redemptions of class A shares bought
without an initial sales charge.

EXAMPLE
This example translates the "total annual fund
operating expenses" shown in the preceding table into
dollar amounts. By doing this, you can more easily
compare the cost of investing in the fund to the cost
of investing in other mutual funds. The example makes
certain assumptions. It assumes that you invest
$10,000 in the fund for the time periods shown and
then, except as shown for class B and class C shares,
redeem all your shares at the end of those periods.
It also assumes a 5% return on your investment each
year and that the fund's operating expenses remain the
same. The example is hypothetical; your actual costs
and returns may be higher or lower.
1 year 3 years 5 years 10 years
Class A $683 $911 $1,156 $1,860
Class B $690 $888 $1,211 $1,995*
Class B $190 $588 $1,011 $1,995*
(no redemption)
Class C $290 $588 $1,011 $2,190
Class C $190 $588 $1,011 $2,190
(no redemption)
Class M $509 $843 $1,200 $2,205

* Reflects the conversion of class B shares to class
A shares, which pay lower 12b-1 fees. Conversion
occurs no more than eight years after purchase.

What are the fund's main investment strategies and
related risks? Any investment carries with it some
level of risk that generally reflects its potential
for reward. The fund pursues its goal by investing
mainly in growth stocks. Putnam Management
will consider, among other things, a company's
financial strength, competitive position in its
industry and projected future earnings and dividends
when deciding whether to buy or sell investments. A
description of the risks associated with the fund's
main investment strategies follows.
* Common stocks. Common stocks represent ownership
interests in companies. The value of a company's
stock may fall as a result of factors directly
relating to that company, such as decisions made by
its management or lower demand for the company's
products or services. A stock's value may also fall
because of factors affecting multiple companies in a
number of different industries, such as increases in
production costs. The value of a company's stock may
also be affected by changes in financial market
conditions that are relatively unrelated to the
company or its industry, such as changes in interest
rates or currency exchange rates. In addition, a
company's stock generally pays dividends only after
the company makes required payments to holders of its
bonds and other debt. For this reason, the value of
the stock will usually react more strongly than the
bonds and other debt to actual or perceived changes in
the company's financial condition or prospects.
* Growth stocks. The fund mainly invests in stocks of
companies Putnam Management believes have earnings
that are likely to grow faster than the economy as a
whole. These growth stocks typically trade at higher
multiples of current earnings than other stocks.
Therefore, the values of growth stocks may be more
sensitive to changes in current or expected earnings
than the values of other stocks. If Putnam
Management's assessment of the prospects for the
company's earnings growth is wrong, or if its judgment
about how other investors will value the company's
earnings growth is wrong, then the price of the
company's stock may fall or not approach the value
that Putnam Management has placed on it.
* Smaller companies. The fund invests a substantial
portion of its assets in small and medium-sized
companies, including companies with market
capitalization of less than $1 billion. There
is no minimum market capitalizations for the fund's
investments. These companies are more likely than
larger companies to have limited product lines,
markets or financial resources, or to depend on a
small, inexperienced management group. Stocks of
these companies may trade less frequently and in
limited volume, and their prices may fluctuate more
than stocks of other companies. Stocks of these
companies may therefore be more vulnerable to adverse
developments than those of larger companies. * Foreign
investments. The fund may invest in securities of
foreign issuers. Foreign investments involve
certain special risks. For example, their values may
decline in response to changes in currency
exchange rates, unfavorable political and legal
developments, unreliable or untimely information, and
economic and financial instability. In addition, the
liquidity of these investments may be more limited
than domestic investments, which means the fund may at
times be unable to sell them at desirable prices.
Foreign settlement procedures may also involve
additional risks. These risks are generally greater in
the case of developing (also known as emerging)
markets that typically have less developed
legal and financial systems.
Certain of these risks may also apply to some extent
to domestic investments that are denominated in
foreign currencies or that are traded in foreign
markets, or to securities of U.S. companies that
have significant foreign operations.
* Other investments. In addition to the main
investment strategies described above, the fund may
also make other types of investments, such as
investments in preferred stocks, convertible
securities , derivative instruments or fixed-
income securities, and therefore may be subject to
other risks, as described in the fund's statement of
additional information (SAI). * Alternative
strategies. At times Putnam Management may judge that
market conditions make pursuing the fund's investment
strategies inconsistent with the best interests of its
shareholders. Putnam Management may then temporarily
use alternative strategies that are mainly designed to
limit the fund's losses. Although Putnam Management
has the flexibility to use these strategies, it may
choose not to for a variety of reasons, even in very
volatile market conditions. These strategies may
cause the fund to miss out on investment
opportunities, and may prevent the fund from achieving
its goal.
> Changes in policies. The fund's Trustees may
change the fund's goal, investment strategies and
other policies without shareholder approval, except as
otherwise indicated.

Who manages the fund?
The fund's Trustees oversee the general conduct of the
fund's business. The Trustees have retained Putnam
Management to be the fund's investment manager,
responsible for making investment decisions for the
fund and managing the fund's other affairs and
business. The fund pays Putnam Management a quarterly
management fee for these services based on the fund's
average net assets. The fund paid Putnam Management a
management fee of 0.63% of average net assets for the
fund's last fiscal year. Putnam Management's address
is One Post Office Square, Boston, MA 02109.
The following officers of Putnam Management have had
primary responsibility for the day-to-day management
of the fund's portfolio since the years shown below.
Their experience as portfolio managers or investment
analysts over at least the last five years is also
shown.

Manager Since Experience
Roland W. Gillis 1995 Employed by Putnam
Managing Director Management since 1995. Prior to March, 1995,
Mr. Gillis was employed at Keystone
Custodian Funds, Inc.

Jeffrey R. Lindsey 1998 Employed by Putnam
Senior Vice President Management since 1994. Prior to April, 1994,
Mr. Lindsey was employed at
Strategic Portfolio Management, Inc.

Charles H. Swanberg 1993 Employed by Putnam
Senior Vice President Management since 1984.
_____________________________________________________

How does the fund price its shares?
The price of the fund's shares is based on its net
asset value (NAV). The NAV per share of each class
equals the total value of its assets, less its
liabilities, divided by the number of its
outstanding shares. Shares are only valued as of the
close of regular trading on the New York Stock
Exchange each day the exchange is open.
The fund values its investments for which market
quotations are readily available at market value. It
values short-term investments that will mature within
60 days at amortized cost, which approximates market
value. It values all other investments and assets at
their fair value.
The fund translates prices for its investments quoted
in foreign currencies into U.S. dollars at current
exchange rates. As a result, changes in the value of
those currencies in relation to the U.S. dollar may
affect the fund's NAV. Because foreign markets may be
open at different times than the New York Stock
Exchange, the value of the fund's shares may change on
days when shareholders are not able to buy or sell
them. If events materially affecting the values of the
fund's foreign investments occur between the close of
foreign markets and the close of regular trading on
the New York Stock Exchange, these investments will be
valued at their fair value.
How do I buy fund shares?
You can open a fund account with as little as $500 and
make additional investments at any time with as little
as $50. The fund sells its shares at the offering
price, which is the NAV plus any applicable sales
charge. Your financial advisor or Putnam Investor
Services generally must receive your completed buy
order before the close of regular trading on the New
York Stock Exchange for your shares to be bought at
that day's offering price.
You can buy shares
* Through a financial advisor. Your advisor will be
responsible for furnishing all necessary documents to
Putnam Investor Services, and may charge you for his
or her services.
* 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 through your advisor
or Putnam Investor Services at 1-800-2251581.
You may also complete an order form and write a check
for the amount you wish to invest, payable to the
fund. Return the check and completed form to Putnam
Mutual Funds.
The fund may periodically close to new purchases of
shares or refuse any order to buy shares if the fund
determines that doing so would be in the best
interests of the fund and its shareholders.
WHICH CLASS OF SHARES IS BEST FOR ME?
This prospectus offers you a choice of four classes of
fund shares: A, B, C and M. This allows you to
choose among different types of sales charges and
different levels of ongoing operating expenses, as
illustrated in the "Fees and expenses" section. The
class of shares that is best for you depends on a
number of factors, including the amount you plan to
invest and how long you plan to hold the shares. Here
is a summary of the differences among the classes of
shares:
Class A shares
* Initial sales charge of up to 5.75%
* Lower sales charge for investments of $50,000 or more
* No deferred sales charge (except on certain
redemptions of shares bought without an initial sales charge)
* Lower annual expenses, and higher dividends, than
class B, C or M shares because of lower 12b-1 fee

Class B shares
* No initial sales charge; your entire investment goes to work for you
* Deferred sales charge of up to 5.00% if you
sell shares within 6 years after you bought them
* Higher annual expenses, and lower dividends, than class A or M
shares because of higher 12b-1 fee
* Convert automatically to class A shares after 8
years, reducing the future 12b-1 fee (may convert
sooner in some cases)
* Orders for class B shares for more than $250,000 are
treated as orders for class A shares or refused

Class C shares
* No initial sales charge ; your entire investment goes to work for you
* Deferred sales charge of 1.00% if you sell
shares within one year after you bought them
* Higher annual expenses, and lower dividends, than
class A or M shares because of higher 12b-1 fee
* No conversion to class A shares, so future 12b-1 fee does not decrease
* Orders of $1,000,000 or more and orders which
because of a right of accumulation or statement
of intent would qualify for the purchase of
class A shares without an initial sales charge will be
treated as orders for class A shares or declined

Class M shares
* Initial sales charge of up to 3.50%
* Lower sales charges for larger investments of $50,000 or more
* No deferred sales charge
* Lower annual expenses, and higher dividends, than
class B or C shares because of lower 12b-1 fee
* Higher annual expenses, and lower dividends, than
class A shares because of higher 12b-1 fee
* No conversion to class A shares, so future 12b-1 fee does not decrease

Initial sales charges for class A and M shares

Class A sales charge Class M sales charge
as a percentage of: as a percentage of:
-------------------------- ------------------
Amount of purchase Net amount Offering Net amount Offering
at offering price ($) invested price* invested price*
Under 50,000 6.10% 5.75% 3.63% 3.50%

50,000 but under
100,000 4.71 4.50 2.56 2.50

100,000 but under
250,000 3.63 3.50 1.52 1.50

250,000 but under
500,000 2.56 2.50 1.01 1.00

500,000 but under
1,000,000 2.04 2.00 NONE NONE

1,000,000 and above NONE NONE NONE NONE

* Offering price includes sales charge.

Deferred sales charges for class B, class C and certain class A shares
If you sell (redeem) class B shares within six years
after you bought them, you will generally pay a deferred sales charge
according to the following schedule.
Year after
purchase 1 2 3 4 5 6 7+
______________________________________________________
Charge 5% 4% 3% 3% 2% 1% 0%

A deferred sales charge of 1% will apply to
class C shares if redeemed within one year of
purchase. A deferred sales charge of up to 1% may
apply to class A shares purchased without an initial
sales charge, if redeemed within two years after
purchase. Deferred sales charges will be based on the
lower of the shares' cost and current NAV. Shares not
subject to any charge will be redeemed first, followed
by shares held longest. You may sell shares acquired
by reinvestment of distributions without a charge at
any time.
* You may be eligible for reductions and waivers of
sales charges. Sales charges may be reduced or waived
under certain circumstances and for certain groups.
Information about reductions and waivers of sales
charges is included in the SAI. You may consult your
financial advisor or Putnam Mutual Funds for assistance.
* Distribution (12b-1) plans. The fund has adopted
distribution plans to pay for the marketing of fund
shares and for services provided to shareholders. The
plans provide for payments at annual rates (based on
average net assets) of up to 0.35% on class A shares
and 1.00% on class B, class C and class M shares. The
Trustees currently limit payments on class A and class
M shares to 0.25% and 0.75% of average net assets,
respectively. Because these fees are paid out of the
fund's assets on an ongoing basis, they will increase
the cost of your investment. The higher fees for
class B, class C and class M shares may cost you more
than paying the initial sales charge for class A
shares. Because class C and class M shares, unlike
class B shares, do not convert to class A shares,
class C and class M shares may cost you more over time
than class B shares.
How do I sell fund shares?
You can sell your shares back to the fund any day the
New York Stock Exchange is open, either through your
financial advisor or directly to the fund. Payment for
redemption may be delayed until the fund collects the
purchase price of shares, which may take up to 15
calendar days after the purchase date.

* Selling shares through your financial advisor. Your
advisor must receive your request in proper form
before the close of regular trading on the New York
Stock Exchange for you to receive that day's NAV, less
any applicable deferred sales charge. Your advisor
will be responsible for furnishing all necessary
documents to Putnam Investor Services on a timely
basis and may charge you for his or her services.
* Selling shares directly to the fund. Putnam Investor
Services must receive your request in proper form
before the close of regular trading on the New York
Stock Exchange in order to receive that day's NAV,
less any applicable sales charge.
By mail. Send a signed letter of instruction to Putnam
Investor Services. If you have certificates for the
shares you want to sell, you must include them along
with completed stock power forms.
By telephone. You may use Putnam's Telephone
Redemption Privilege to redeem shares valued at less
than $100,000 unless you have notified Putnam Investor
Services of an address change within the preceding 15
days. Unless you indicate otherwise on the account
application, Putnam Investor Services will be
authorized to accept redemption and transfer
instructions received by telephone.
The Telephone Redemption Privilege is not available
if there are certificates for your shares. The
Telephone Redemption Privilege may be modified or
terminated without notice.
* Additional documents. If you
( sell shares with a value of $100,000 or more,
* want your redemption proceeds sent to an address
other than your address as it appears on Putnam's
records, or
* have notified Putnam of a change in address within
the preceding 15 days,
the signatures of registered owners or their legal
representatives must be guaranteed by a bank, broker-
dealer or certain other financial institutions. Stock
power forms are available from your financial advisor,
Putnam Investor Services and many commercial banks.
Putnam Investor Services usually requires additional
documents for the sale of shares by a corporation,
partnership, agent or fiduciary, or a surviving joint
owner. Contact Putnam Investor Services for details.
* When will the fund pay me? The 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 laws.
* Redemption by the fund. If you own fewer shares than
the minimum set by the Trustees (presently 20 shares),
the fund may redeem your shares without your
permission and send you the proceeds. The fund may
also redeem shares if you own more than a maximum
amount set by the Trustees. There is presently no
maximum, but the Trustees could set a maximum that
applies to both present and future shareholders.
How do I exchange fund shares?
If you want to switch your investment from one Putnam
fund to another, you can exchange your fund shares for
shares of the same class of another Putnam fund at
NAV. Not all Putnam funds offer all classes of shares
or are open to new investors. If you exchange shares
subject to a deferred sales charge, the transaction
will not be subject to the deferred sales charge. When
you redeem the shares acquired through the exchange,
the redemption may be subject to the deferred sales
charge, depending upon when you originally purchased
the shares. The deferred sales charge 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 deferred sales charge applicable to
your class of shares. For purposes of computing the
deferred sales charge, 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, complete an Exchange
Authorization Form and send it to Putnam Investor
Services. The form is available from Putnam Investor
Services. A Telephone Exchange Privilege is currently
available for amounts up to $500,000. The Telephone
Exchange Privilege is not available if the fund issued
certificates for your shares. Ask your financial
advisor or Putnam Investor Services for prospectuses
of other Putnam funds. Some Putnam funds are not
available in 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 otherwise to promote
the best interests of the fund, the fund reserves the
right to revise or terminate the exchange privilege,
limit the amount or number of exchanges or reject any
exchange. The fund into which you would like to
exchange may also reject your exchange. These actions
may apply to all shareholders or only to those
shareholders whose exchanges Putnam Management
determines are likely to have a negative effect on the
fund or other Putnam funds. Consult Putnam Investor
Services before requesting an exchange.
Fund distributions and taxes
The fund distributes any net investment income and any
net realized capital gains at least once a year. You
may choose to:

* reinvest all distributions in additional shares;
* receive any distributions from net investment income
in cash while reinvesting capital gains distributions
in additional shares; or
* receive all distributions in cash.

If you do not select an option when you open your
account, all distributions will be reinvested. If you
do not cash a distribution check within a specified
period or notify Putnam Investor Services to issue a
new check, the distribution will be reinvested in the
fund. You will not receive any interest on uncashed
distribution or redemption checks. Similarly, if any
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.
For federal income tax purposes, distributions of
investment income are taxable as ordinary income.
Taxes on distributions of capital gains are determined
by how long the fund owned the investments that
generated them, rather than how long you have owned
your shares. Distributions are taxable to you even if
they are paid from income or gains earned by the fund
before your investment (and thus were included in the
price you paid). Distributions of gains from
investments that the fund owned for more than one year
will be taxable as capital gains. Distributions of
gains from investments that the fund owned for one
year or less will be taxable as ordinary income.
Distributions are taxable whether you received them in
cash or reinvested them in additional shares.
Any gain resulting from the sale or exchange of your
shares will generally also be subject to tax. You
should consult your tax advisor for more information
on your own tax situation, including possible foreign,
state and local taxes.
Financial highlights
The financial highlights table is intended to help you
understand the fund's recent financial performance.
No class C shares were outstanding during these
periods. Certain information reflects financial
results for a single fund share. The total returns
represent the rate that an investor would have earned
or lost on an investment in the fund, assuming
reinvestment of all dividends and distributions. This
information has been derived from the fund's financial
statements, which have been audited by
PricewaterhouseCoopers LLP. Its report and the fund's
financial statements are included in the fund's annual
report to shareholders, which is available upon
request.

Financial highlights
CLASS A
(For a share outstanding throughout the period)
<TABLE><CAPTION>
Year ended December 31
<S> <C> <C> <C> <C> <C>
1998 1997 1996 1995 1994
Net asset value,
beginning of period $19.11 $15.51 $14.40 $9.75 $10.29

Investment operations
Net investment income (loss)c (.12) (.10) (.11) (.01)b (.02)b

Net realized and unrealized
gain on investments 4.54 3.73 1.22 4.88 .05

Total distributions (.83) (.03) -- (.22) (.57)

Net asset value,
end of period $22.70 $19.11 $15.51 $14.40 $9.75

Ratios and supplemental data

Total investment return at net
asset value (%)a 23.52 23.42 7.71 50.14 0.34

Net assets, end of period
(in thousands) $753,319 $532,287 $348,261 $83,526 $3,190

Ratio of expenses to average
net assets (%)d 1.12 1.22 1.44 1.31b .92b

Ratio of net investment loss
to average net assets (%) (.59) (.58) (.69) (.28)b (.18)b

Portfolio turnover (%) 91.61 73.73 68.95 49.81 101.94

a Total return assumes dividend reinvestment and does not
reflect the effect of sales charges.
b Reflects an expense limitation which expired on
December 31, 1995. As a result of such limitation,
expenses of the fund for the year ended December 31, 1994,
reflect a per share reduction of approximately $0.16.
Expenses for the period ended December 31, 1995 for class A
shares reflect a per share reduction of $0.04.
c Per share net investment income (loss) has been
determined on the basis of the weighted average
number of shares outstanding during the period.
d The ratio of expenses to average net assets for the year
ended December 31, 1995 includes amounts paid through
brokerage service and expense offset arrangements.
Prior period ratios exclude these amounts.
</TABLE>

Financial highlights
CLASS B
(For a share outstanding throughout the period)

For the period October 2, 1995+ to December 31
Year ended December 31
1998 1997 1996 1995
Net asset value,
beginning of period $18.78 $15.36 $14.37 $13.08

Investment operations
Net investment income (loss) c (.27) (.22) (.22) (.04)b
Net realized and unrealized
gain on investments 4.45 3.67 1.21 1.40

Total from investment operations 4.18 3.45 .99 1.36
Less distributions:
From net investment income -- -- -- --
In excess of net investment
income -- -- -- (.03)
From net realized gain on
investments (.83) (.03) -- (.04)

Total distributions (.83) (.03) -- (.07)
Net asset value,
end of period $22.13 $18.78 $15.36 $14.37

Ratios and supplemental data
Total return at net
asset value (%)a 22.66 22.48 6.89 10.41*

Net assets, end of period
(in thousands) $699,040 $496,501 $328,268 $66,978

Ratio of expenses to average
net assets (%)d 1.87 1.97 2.19 .54b*

Ratio of net investment loss
to average net assets (%) (1.34) (1.33) (1.45) (.29)b*

Portfolio turnover (%) 91.61 73.73 68.95 49.81

+ Commencement of operations.
* Not annualized.
a Total return assumes dividend reinvestment and does not
reflect the effect of sales charges.
b Reflects an expense limitation which expired on
December 31, 1995. Expenses for the period
ended December 31, 1995 for class B shares reflect a per
share reduction of $0.04.
c Per share net investment income (loss) has been
determined on the basis of the weighted average
number of shares outstanding during the period.
d The ratio of expenses to average net assets for
the period ended December 31, 1995 includes amounts paid through
brokerage service and expense offset arrangements.

Financial highlights
CLASS M
(For a share outstanding throughout the period)

For the period October 2, 1995+ to December 31
Year ended December 31
1998 1997 1996 1995
Net asset value,
beginning of period $18.91 $15.42 $14.39 $13.08

Investment operations
Net investment income (loss)c (.22) (.18) (.19) --b

Net realized and unrealized
gain on investments 4.48 3.70 1.22 1.38

Total from investment operations 4.26 3.52 1.03 1.38
Less distributions:
From net investment income -- -- -- --
In excess of net investment
income -- -- -- (.03)
From net realized gain on
investments (.83) (.03) -- (.04)

Total distributions (.83) (.03) -- (.07)

Net asset value,
end of period $22.34 $18.91 $15.42 $14.39

Ratios and supplemental data

Total return at net
asset value (%)a 22.92 22.84 7.16 10.57*

Net assets, end of period
(in thousands) $84,507 $59,643 $37,325 $6,115

Ratio of expenses to average
net assets (%)d 1.62 1.72 1.94 .47b*

Ratio of net investment loss
to average net assets (%) (1.09) (1.08) (1.20) (.21)b*

Portfolio turnover (%) 91.61 73.73 68.95 49.81

+ Commencement of operations.
* Not annualized.
a Total return assumes dividend reinvestment and does not
reflect the effect of sales charges.
b Reflects an expense limitation which expired on
December 31, 1995. Expenses for the period
ended December 31, 1995 for class M shares reflect a per
share reduction of $0.03.
c Per share net investment income (loss) has been
determined on the basis of the weighted average
number of shares outstanding during the period.
d The ratio of expenses to average net assets for
the period ended December 31, 1995 includes amounts
paid through brokerage service and expense offset
arrangements.

Glossary of terms

Bond An IOU issued by a government or corporation
that usually pays interest.

Capital gain/loss A profit or loss on the sale of
securities (generally stocks or bonds).

Class A, B, C, M sharesTypes of shares, each class
offering investors a different way to pay sales
charges and distribution fees. A fund's prospectus
explains the availability and attributes of each type.

Common stock A unit of ownership of a corporation.

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).

Net asset value (NAV) The value of one share of a
mutual fund 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.

Public offering price (POP) The purchase price of
one class A or class M share of a mutual fund, including the
applicable "frontend" sales charge.

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.
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 Mutual Funds
that a Statement of Intention is in effect.

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.
Putnam Family of Fundsa

PUTNAM GROWTH FUNDS
Putnam Asia Pacific Growth Fund
Putnam Capital
Appreciation Fundb
Putnam Capital
Opportunities Fund
Putnam Diversified
Equity Trust Putnam
Emerging Markets Fund
Putnam Europe Growth Fund
Putnam Global Growth Fund
Putnam Global Natural
Resources Fund Putnam
Growth Opportunities 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 Research Fund
Putnam Vista Fund
Putnam Voyager Fund
Putnam Voyager Fund II

PUTNAM GROWTH AND INCOME FUNDS
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The George Putnam Fund of Boston
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The Putnam Fund for Growth and Income
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Putnam International Growth and Income Fund
Putnam New Value Fund
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PUTNAM INCOME FUNDS
Putnam American Government Income Fund
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Putnam High Quality Bond Fund
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Putnam High Yield Trust
Putnam High Yield Trust II
Putnam Income Fund
Putnam Intermediate U.S. Government Income Fund
Putnam Preferred Income Fund
Putnam Strategic Income Fund
Putnam U.S. Government Income Trust

PUTNAM TAX-FREE INCOME FUNDS
Putnam Municipal Income Fund
Putnam Tax Exempt Income Fund
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Putnam State tax-free income fund
Arizona, California, Florida, Massachusetts, Michigan,
Minnesota, New Jersey, New York, Ohio and Pennsylvania

LIFE STAGES 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 FUND
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

a As of 3/31/99.
b New investments restricted; see your financial advisor for details.
c Not available in all states.
d Investments in money market funds are not insured or
guaranteed by the Federal Deposit Insurance
Corporation or any other government agency. Although
these funds seek to preserve an investment's net asset
value at $1.00 per share, it is possible to lose money
by investing in them.

Please call your financial advisor or Putnam Mutual
Funds 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.
For more information about
Putnam Voyager Fund II

You may review and copy information about the fund,
including its SAI, at the Securities and Exchange
Commission's public reference room in Washington, D.C.
You may call the Commission at 1-800-SEC0330 for
information about the operation of the public
reference room. You may also access reports and other
information about the fund on the Commission's
Internet site at http://www.sec.gov. You may get
copies of this information, with payment of a
duplication fee, by writing the Public Reference
Section of the Commission, Washington, D.C. 20549-
6009. You may need to refer to the fund's file number.

Putnam INVESTMENTS
ONE POST OFFICE SQUARE
BOSTON, MASSACHUSETTS
02109 1-800-225-1581

ADDRESS CORRESPONDENCE
TO PUTNAM INVESTOR SERVICES
P.O. BOX 989
BOSTON, MASSACHUSETTS 02103

www.putnaminv.com

File No. 811-6203 NP017 50630
4/99

Prospectus
APRIL 30, 1999

Putnam Voyager Fund II
Class A shares - for eligible retirement plans
Investment Category: Growth
This prospectus explains what you should know about
this mutual fund before you invest. Please read it
carefully. THIS PROSPECTUS ONLY OFFERS CLASS A SHARES
OF THE FUND WITHOUT A SALES CHARGE TO ELIGIBLE
RETIREMENT PLANS.
Putnam Investment Management, Inc. (Putnam
Management), which has managed mutual funds since
1937, manages the fund.
These securities have not been approved or
disapproved by the Securities and Exchange Commission
nor has the Commission passed upon the accuracy or
adequacy of this prospectus. Any statement to the
contrary is a crime.

CONTENTS
2 Fund summary
2 Goal
2 Main investment strategies
2 Main risks
2 Performance information
3 Fees and expenses
4 What are the fund's main investment strategies and related risks?
6 Who manages the fund?
7 How does the fund price its shares?
7 How do I buy fund shares?
8 How do I sell fund shares?
9 How do I exchange fund shares?
9 Fund distributions and taxes
10 Financial highlights

Putnam Defined Contribution Plans
LOGO
BOSTON ( LONDON ( TOKYO

Fund summary
Goal
The fund seeks long term growth of capital. Main
investment strategies - GROWTH STOCKS
The fund invests mainly in "growth" stocks. Growth
stocks are common stocks that are issued by companies
whose earnings Putnam Management believes are likely
to grow faster than the economy as a whole. Growth in
earnings may lead to an increase in the price of the
stock. The fund invests mainly in small and medium-
sized companies, although the fund may invest
in companies of any size.
MAIN RISKS
The main risks that could adversely affect the value
of this fund's shares and the total return on your investment
include * The risk that the stock price of one or
more of the companies in the fund's portfolio will
fall , or will fail to appreciate as anticipated
by Putnam Management. Many factors can adversely
affect a stock's performance , including factors
related to a specific company or industry or general
financial market conditions . This risk is greater
for small and medium- sized companies .
They tend to be more vulnerable to adverse
developments because they may have limited product
lines, markets or financial resources or inexperienced
managers .
* The risk that movements in the securities markets
will adversely affect the value of the fund's
investments, regardless of how well the companies in
the fund's portfolio perform.
You can lose money by investing in the fund. The fund
may not achieve its goals, and is not intended as a
complete investment program. An investment in the fund
is NOT a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
PERFORMANCE INFORMATION
The following information provides some indication of
the fund's risks. The chart shows year-to-year
changes in the performance of the fund's class A
shares. The table following the chart compares the
fund's performance to that of two broad measures of
market performance. Of course, the fund's past
performance is not an indication of future
performance.
CALENDAR YEAR TOTAL RETURNS FOR CLASS A SHARES
1998 23.52%
1997 23.42%
1996 7.71%
1995 50.14%
1994 0.34%
During the periods shown in the bar chart, the highest
return for a quarter was 28.43% (quarter ending
12/31/98) and the lowest return for a quarter was -
17.65% (quarter ending 9/30/98).
Average Annual Total Returns (for periods ending
12/31/98)

Since
Past Past Inception
1 year 5 years (4/14/93)
Class A 23.52% 19.86% 21.51%
Russell Midcap
Growth Index 17.86% 17.34% 16.86%

Class A share performance reflects the waiver
of sales charges for purchases through eligible
retirement plans. The fund's performance is
compared to the Russell Midcap Growth Index,
an unmanaged index of common stocks composed of
the 800 smallest companies in the Russell 1000 Index
which have greater-than-average growth. The Russell
1000 Index represents approximately 87% of the U.S.
investable equity market .
Fees and expenses
This table summarizes the expenses you may pay if you
invest in class A shares of the fund. Expenses are
based on the fund's last fiscal year.
Annual Fund Operating Expenses
(expenses that are deducted from fund assets)
Total
Annual
Fund
Management Distribution Other Operating
Fees (12b-1) Fees Expenses Expenses

Class A 0.63% 0.25% 0.24% 1.12%

1 year 3 years 5 years 10 years
Class A $114 $356 $617 $1,363
What are the fund's main investment strategies and
related risks? Any investment carries with it some
level of risk that generally reflects its potential
for reward. The fund pursues its goal by investing
mainly in growth stocks. Putnam Management
will consider, among other things, a company's
financial strength, competitive position in its
industry and projected future earnings and dividends
when deciding whether to buy or sell investments. A
description of the risks associated with the fund's
main investment strategies follows.
* Common stocks. Common stocks represent ownership
interests in companies. The value of a company's
stock may fall as a result of factors directly
relating to that company, such as decisions made by
its management or lower demand for the company's
products or services. A stock's value may also fall
because of factors affecting multiple companies in a
number of different industries, such as increases in
production costs. The value of a company's stock may
also be affected by changes in financial market
conditions that are relatively unrelated to the
company or its industry, such as changes in interest
rates or currency exchange rates. In addition, a
company's stock generally pays dividends only after
the company makes required payments to holders of its
bonds and other debt. For this reason, the value of
the stock will usually react more strongly than the
bonds and other debt to actual or perceived changes in
the company's financial condition or prospects.
* Growth stocks. The fund mainly invests in stocks of
companies Putnam Management believes have earnings
that are likely to grow faster than the economy as a
whole. These growth stocks typically trade at higher
multiples of current earnings than other stocks.
Therefore, the values of growth stocks may be more
sensitive to changes in current or expected earnings
than the values of other stocks. If Putnam
Management's assessment of the prospects for the
company's earnings growth is wrong, or if its judgment
about how other investors will value the company's
earnings growth is wrong, then the price of the
company's stock may fall or not approach the value
that Putnam Management has placed on it.
* Smaller companies. The fund invests a substantial
portion of its assets in small and medium-sized
companies, including companies with market
capitalizations of less than $1 billion. There
is no minimum market capitalization for the fund's
investments. These companies are more likely than
larger companies to have limited product lines,
markets or financial resources, or to depend on a
small, inexperienced management group. Stocks of
these companies may trade less frequently and in
limited volume, and their prices may fluctuate more
than stocks of other companies. Stocks of these
companies may therefore be more vulnerable to adverse
developments than those of larger companies. * Foreign
investments. The fund may invest in securities of
foreign issuers. Foreign investments involve
certain special risks. For example, their values may
decline in response to changes in currency
exchange rates, unfavorable political and legal
developments, unreliable or untimely information, and
economic and financial instability. In addition, the
liquidity of these investments may be more limited than domestic
investments, which means the fund may at times be
unable to sell them at desirable prices. Foreign
settlement procedures may also involve additional
risks. These risks are generally greater in the case
of developing (also known as emerging) markets
that typically have less developed legal and
financial systems.
Certain of these risks may also apply to some extent
to domestic investments that are denominated in
foreign currencies or that are traded in foreign
markets, or to securities of U.S. companies that have
significant foreign operations.
* Other investments. In addition to the main
investment strategies described above, the fund may
also make other types of investments, such as
investments in preferred stocks, convertible
securities , derivative instruments or fixed-
income securities, and therefore may be subject to
other risks, as described in the fund ' s
statement of additional information (SAI).
* Alternative strategies. At times Putnam Management
may judge that market conditions make pursuing the
fund's investment strategies inconsistent with the
best interests of its shareholders. Putnam Management
may then temporarily use alternative strategies that
are mainly designed to limit the fund's losses.
Although Putnam Management has the flexibility to use
these strategies, it may choose not to for a variety
of reasons, even in very volatile market conditions.
These strategies may cause the fund to miss out on
investment opportunities, and may prevent the fund
from achieving its goal.
> Changes in policies. The fund's Trustees may
change the fund's goal, investment strategies and
other policies without shareholder approval, except as
otherwise indicated.

Manager Since Experience
Roland W. Gillis 1995 Employed by Putnam Management
Managing Director since 1995. Prior to March, 1995,
Mr. Gillis was employed at Keystone
Custodian Funds, Inc.

Jeffrey R. Lindsey 1998 Employed by Putnam Management
Senior Vice President since 1994. Prior to April, 1994,
Mr. Lindsey was employed at Strategic
Portfolio Management, Inc.

Charles H. Swanberg 1993 Employed by Putnam Management
Senior Vice President since 1984.
______________________________________________________

> Year 2000 issues. The fund could be adversely
affected if the computer systems used by Putnam
Management and the fund's other service providers do
not properly process and calculate date-
related information relating to the end of this
century and the beginning of the next. While year
2000-related computer problems could have a negative
effect on the fund, both in its operations and in its
investments, Putnam Management is working to avoid
such problems and to obtain assurances from service
providers that they are taking similar steps. No
assurances, though, can be provided that the fund will
not be adversely impacted by these matters.
How does the fund price its shares?
The price of the fund's shares is based on its net
asset value (NAV). The NAV per share of each class
equals the total value of its assets, less its
liabilities, divided by the number of its outstanding
shares. Shares are only valued as of the close of
regular trading on the New York Stock Exchange each
day the exchange is open.
The fund values its investments for which market
quotations are readily available at market value. It
values short-term investments that will mature within
60 days at amortized cost, which approximates market
value. It values all other investments and assets at
their fair value.
The fund translates prices for its investments quoted
in foreign currencies into U.S. dollars at current
exchange rates. As a result, changes in the value of
those currencies in relation to the U.S. dollar may
affect the fund's NAV. Because foreign markets may be
open at different times than the New York Stock
Exchange, the value of the fund's shares may change on
days when shareholders are not able to buy or sell
them. If events materially affecting the values of the
fund's foreign investments occur between the close of
foreign markets and the close of regular trading on
the New York Stock Exchange, these investments will be
valued at their fair value.
How do I buy fund 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.
Putnam Mutual Funds Corp. (Putnam Mutual Funds)
generally must receive your plan's completed buy
order before the close of regular trading on the New
York Stock Exchange for shares to be bought at that
day's offering price.
To eliminate the need for safekeeping, the fund will
not issue certificates for shares.
The fund may periodically close to new purchases of
shares or refuse any order to buy shares if Putnam
Management determines that doing so would be in the
best interests of the fund and its shareholders.
* Distribution (12b-1) plan. The fund has adopted a
distribution plan to pay for the marketing of class
A shares and for services provided to shareholders.
The plan provides for payments at an annual rate
(based on average net assets) of up to 0.35%. The
Trustees currently limit payments on class A shares
to 0.25% of average net assets. Because the fees are
paid out of the fund's assets on an ongoing basis,
they will increase the cost of your investment.
* Eligible retirement plans. An employer-sponsored
retirement plan for which Putnam Fiduciary Trust
Company or its affiliates provide recordkeeping or
other services in connection with the purchase of
class A shares is eligible to purchase fund shares
through this prospectus if
* it initially invests at least $20 million in
Putnam funds and other investments managed by Putnam Management or its
affiliates, or
* its dealer of record has, with the consent of
Putnam Mutual Funds, waived its commission or
agreed to refund its commission to Putnam Mutual Funds
if the plan redeems 90% or more of its cumulative purchases
within two years of its initial purchase. Other employer-sponsored retirement
plans, are eligible to purchase fund shares through this prospectus if

> they invest at least $1 million in class A
shares, or have 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
"multifund" program approved by Putnam Mutual Funds
may include amounts invested in other participating
mutual funds for purposes of determining the $20
million and $1 million thresholds listed above.
Employer-sponsored plans may make additional
investments of any amount at any time.
How do I sell fund shares?
Subject to any restrictions imposed by your employer's
plan, you can sell your shares through the plan back
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 the plan may impose, please consult your
employer.
Your plan administrator must send a signed letter of
instruction to Putnam Investor Services. The price you
will receive is the next NAV per share calculated
after the fund receives the instruction in proper
form. In order to receive that day's NAV, Putnam
Investor Services must receive the instruction before
the close of regular trading on the New York Stock
Exchange.
The fund generally sends 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.
How do I exchange fund shares?
Subject to any restrictions your plan imposes, you can
exchange your fund shares for shares of other Putnam
funds offered through your employer's plan without any
sales charges. Contact your plan administrator or
Putnam Investor Services for more information. 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 otherwise to promote
the best interests of the fund, the fund reserves the
right to revise or terminate the exchange privilege,
limit the amount or number of exchanges or reject any
exchange. The fund into which you would like to
exchange may also reject your exchange. These actions
may apply to all shareholders or only to those
shareholders whose exchanges Putnam Management
determines are likely to have a negative effect on the
fund or other Putnam funds.
Fund distributions and taxes
The fund distributes any net investment income and any
net realized capital gains at least once a year.
The terms of your employer's plan will govern how your
employer's plan may receive distributions from the
fund. Generally, periodic distributions from the fund
to your employer's plan are reinvested in additional
fund shares, although your employer's 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.
Generally, for federal income tax purposes, fund
distributions are taxable as ordinary income, except
that any distributions of longterm capital gains will
be taxed as such regardless of how long you have held
your shares. However, distributions by the fund to
retirement 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
advisor 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.
You should consult your tax advisor for more
information on your own tax situation, including
possible foreign, state and local taxes.
Financial highlights
The financial highlights table is intended to help
you understand the fund's recent financial
performance. Certain information reflects financial
results for a single fund share. The total returns
represent the rate that an investor would have earned
or lost on an investment in the fund, assuming
reinvestment of all dividends and distributions. This
information has been derived from the fund's
financial statements, which have been audited by
PricewaterhouseCoopers LLP. Its report and the fund's
financial statements are included in the fund's
annual report to shareholders, which is available
upon request.

FINANCIAL HIGHLIGHTS
CLASS[/R] A
(For a share outstanding throughout the period)

Year ended December 31
1998 1997 1996 1995 1994
Net asset value,
beginning of period $19.11 $15.51 $14.40 $9.75 $10.29

Investment operations
Net investment income (loss)c (.12) (.10) (.11) (.01)b (.02)b

Net realized and unrealized
gain on investments 4.54 3.73 1.22 4.88 .05

Total from investment operations 4.42 3.63 1.11 4.87 .03
Less distributions:
From net investment income -- -- -- -- (.01)
In excess of net investment
income -- -- -- (.10) --
From net realized gain on
investments (.83) (.03) -- (.12) (.56)
Total distributions (.83) (.03) -- (.22) (.57)
Net asset value,
end of period $22.70 $19.11 $15.51 $14.40 $9.75

Ratios and supplemental data

Total investment return at net
asset value (%)a 23.52 23.42 7.71 50.14 0.34
Net assets, end of period
(in thousands) $753,319 $532,287 $348,261 $83,526 $3,190

Ratio of expenses to average
net assets (%)d 1.12 1.22 1.44 1.31b .92b

Ratio of net investment loss
to average net assets (%) (.59) (.58) (.69) (.28)b (.18)b

Portfolio turnover (%) 91.61 73.73 68.95 49.81 101.94

a Total return assumes dividend reinvestment and
does not reflect the effect of sales charges.
b Reflects an expense limitation which expired on
December 31, 1995. As a result of such limitation,
expenses of the fund for the year ended December 31, 1994
reflect a per share reduction of approximately $0.16. Expenses for the period
ended December 31, 1995 for class A shares reflect a per share reduction of
$0.04.
c Per share net investment income (loss) has been determined on
the basis of the weighted average number of shares outstanding during
the period.
d The ratio of expenses to average net assets for
the year ended December 31, 1995 includes amounts paid through
brokerage service and expense offset arrangements.
Prior period ratios exclude these amounts.

For more information about Putnam Voyager Fund II

The fund's statement of additional information (SAI)
and annual and semi-annual reports to shareholders
include additional information about the fund. The
SAI, and the auditor's report and financial statements
included in the fund's most recent annual report to
its shareholders, are incorporated by reference into
this prospectus, which means they are part of this
prospectus for legal purposes. The fund's annual
report discusses the market conditions and investment
strategies that significantly affected the fund's
performance during its last fiscal year. You may get
free copies of these materials, request other
information about the fund and other Putnam funds, or
make shareholder inquiries, by calling Putnam toll-free at 1-800-752-9894.
You may review and copy information about the fund,
including its SAI, at the Securities and Exchange
Commission's public reference room in Washington, D.C.
You may call the Commission at 1-800-SEC0330 for
information about the operation of the public
reference room. You may also access reports and other
information about the fund on the Commission's
Internet site at http://www.sec.gov. You may get
copies of this information, with payment of a
duplication fee, by writing the Public Reference
Section of the Commission, Washington, D.C. 20549-
6009. You may need to refer to the fund's file number.

Putnam INVESTMENTS

PUTNAM DEFINED CONTRIBUTION PLANS
ONE POST OFFICE SQUARE
BOSTON, MASSACHUSETTS
02109 1-800-752-9894

ADDRESS CORRESPONDENCE
TO PUTNAM INVESTOR SERVICES
P.O. BOX 989
BOSTON, MASSACHUSETTS 02103
www.putnaminv.com
File No. 811-6203 52277 4/99

PUTNAM VOYAGER FUND II

FORM N-1A
PART B

STATEMENT OF ADDITIONAL INFORMATION ("SAI")
April 30, 1999

This SAI is not a prospectus and is only authorized
for distribution when accompanied or preceded by the
prospectus of the fund dated April 30, 1999, as
revised from time to time. This SAI contains
information that may be useful to investors but that
is not included in the prospectus. If the fund has
more than one form of current prospectus, each
reference to the prospectus in this SAI includes all
of the fund's prospectuses, unless otherwise noted.
The SAI should be read together with the applicable
prospectus. Certain disclosure has been incorporated
by reference from the fund's annual report. For a
free copy of the fund's annual report or prospectus,
call Putnam Investor Services at 1800-225-1581 or
write Putnam Investor Services, Mailing
address: P.O. Box 41203, Providence, RI 02940-1203.

Part I of this SAI contains specific information about
the fund. Part II includes information about the fund
and the other Putnam funds.

Table of Contents

PART I
FUND ORGANIZATION AND CLASSIFICATION I-3
INVESTMENT RESTRICTIONS I-3
CHARGES AND EXPENSES I-5
INVESTMENT PERFORMANCE I-12
ADDITIONAL OFFICERS I- 12
INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS I-13

PART II
MISCELLANEOUS INVESTMENTS, INVESTMENT PRACTICES AND RISKS II-1
TAXES II-25
MANAGEMENT II-28
DETERMINATION OF NET ASSET VALUE II-36
HOW TO BUY SHARES II-37
DISTRIBUTION PLANS II-48
INVESTOR SERVICES II- 52
SIGNATURE GUARANTEES II- 56
SUSPENSION OF REDEMPTIONS II- 56
SHAREHOLDER LIABILITY II- 56
STANDARD PERFORMANCE MEASURES II- 56
COMPARISON OF PORTFOLIO PERFORMANCE II- 57
SECURITIES RATINGS II- 61
DEFINITIONS II- 65

SAI
PART I

FUND ORGANIZATION AND CLASSIFICATION

Putnam Voyager Fund II is a Massachusetts business
trust organized on October 18, 1990. 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. Prior to
July 26, 1995, the fund was known as Putnam Growth Fund.

The fund is an open-end management investment company
with an unlimited number of authorized shares of
beneficial interest. The Trustees may, without
shareholder approval, create two or more series of
shares representing separate investment portfolios.
Any such series of shares 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. The fund's
shares are not currently divided into series. The
fund offers 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 certain classes
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 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.

INVESTMENT RESTRICTIONS

As fundamental investment restrictions, which may not
be changed without a vote of a majority of the
outstanding voting securities, the fund may not and
will not:

(1) Borrow money in excess of 10% of the value (taken
at the lower of cost or current value) of the fund's
total assets (not including the amount borrowed) at
the time the borrowing is made, and then only from
banks as a temporary measure to facilitate the meeting
of redemption requests (not for leverage) which might
otherwise require the untimely disposition of
portfolio investments or for extraordinary or
emergency purposes. Such borrowings will be repaid
before any additional investments are purchased.

(2) Underwrite securities issued by other persons
except to the extent that, in connection with the
disposition of its portfolio investments, it may be
deemed to be an underwriter under certain federal
securities laws.

(3) Purchase or sell real estate, although it may
purchase securities of issuers which deal in real
estate, securities which are secured by interests in
real estate, and securities which represent interests
in real estate, and it may acquire and dispose of real
estate or interests in real estate acquired through
the exercise of its rights as a holder of debt
obligations secured by real estate or interests
therein.

(4) Purchase or sell commodities or commodity
contracts, except that the fund may purchase and sell
financial futures contracts and options and may enter
into foreign exchange contracts and other financial
transactions not involving physical commodities.

(5) Make loans, except by purchase of debt
obligations in which the fund may invest consistent
with its investment policies, by entering into
repurchase agreements, or by lending its portfolio
securities.

(6) With respect to 75% of its total assets, invest
in securities of any issuer if, immediately after such
investment, more than 5% of the total assets of the
fund (taken at current value) would be invested in the
securities of such issuer; provided that this
limitation does not apply to obligations issued or
guaranteed as to interest and principal by the U.S.
government or its agencies or instrumentalities.

(7) With respect to 75% of its total assets, acquire
more than 10% of the outstanding voting securities of
any issuer.

(8) Purchase securities (other than securities of the
U.S. government, its agencies or instrumentalities if,
as a result of such purchase, more than 25% of the
fund's total assets would be invested in any one
industry.

(9) Issue any class of securities which is senior to
the fund's shares of beneficial interest, except for
permitted borrowings.

Although certain of the fund's fundamental investment
restrictions permit it to borrow money to a limited
extent, the fund does not currently intend to do so
and did not do so last year.

The Investment Company Act of 1940 provides that a
"vote of a majority of the outstanding voting
securities" of the fund means the affirmative vote of
the lesser of (1) more than 50% of the outstanding
shares of the fund, or (2) 67% or more of the shares
present at a meeting if more than 50% of the
outstanding shares of the fund are represented at the
meeting in person or by proxy.

It is contrary to the fund's present policy, which may
be changed without shareholder approval, to:

Invest in (a) securities which are not readily
marketable, (b) securities restricted as to resale
(excluding securities determined by the Trustees of
the fund (or the person designated by the Trustees of
the fund to make such determinations) to be readily
marketable), and (c) repurchase agreements maturing in
more than seven days, if, as a result, more than 15%
of the fund's net assets (taken at current value)
would be invested in securities described in (a), (b)
and (c) above.

------------------------
All percentage limitations on investments (other than
pursuant to the non-fundamental restriction) will
apply at the time of the making of an investment and
shall not be considered violated unless an excess or
deficiency occurs or exists immediately after and as a
result of such investment.

CHARGES AND EXPENSES

Management fees

Under a Management Contract dated September 29, 1995,
the fund pays a quarterly fee to Putnam Management
based on the average net assets of the fund, as
determined at the close of each business
day during the quarter, at the annual rate of 0.70% of
the first $500 million of average net assets, 0.60% of
the next $500 million, 0.55% of the next $500
million, 0.50% of the next $5 billion, 0.475% of the next
$5 billion, 0.455% of the next $5 billion, 0.44% of the
next $5 billion, and 0.43% thereafter . For
the past three fiscal years, pursuant to the
Management Contract, the fund incurred the following
fees:

Fiscal Management
year fee paid
------ ----------
1998 $7,946,333
1997 $5,848,204
1996 $3,170,929

Brokerage commissions

The following table shows brokerage commissions paid
during the fiscal periods indicated:

Fiscal Brokerage
year commissions

1998 $1,702,223
1997 $1,060,277
1996 $ 826,147

The following table shows transactions placed with
brokers and dealers during the most recent fiscal year
to recognize research, statistical and quotation
services received by Putnam Management and its
affiliates:

Dollar value Percent of
of these total Amount of
transactions transactions commissions

$490,586,668 34.80% $683,700

At the end of fiscal 1998, the fund held securities
valued at $3,764,700 and $2,577,300 of Merrill Lynch
& Co., Inc. and Morgan Stanley, Dean Witter,
respectively, two of the fund's regular broker-
dealers.

Administrative expense reimbursement

The fund reimbursed Putnam Management for
administrative services during fiscal 1998, including
compensation of certain fund officers and
contributions to the Putnam Investments, Inc. Profit
Sharing Retirement Plan for their benefit, as
follows:

Portion of total
Total reimbursement for
compensation and reimbursement contributions

$19,409 $16,200

Trustee responsibilities and fees

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.
Each Trustee receives a fee for his or her services.
Each Trustee also receives fees for serving as Trustee
of other Putnam funds. The Trustees periodically
review their fees to assure that such fees continue to
be appropriate in light of their responsibilities as
well as in relation to fees paid to trustees of other
mutual fund complexes. The Trustees meet monthly over
a two-day period, except in August. The Board Policy
Committee, which consists solely of Trustees not
affiliated with Putnam Management and is responsible
for recommending Trustee compensation, estimates that
Committee and Trustee meeting time together with the
appropriate preparation requires the equivalent of at
least three business days per Trustee meeting. The
following table shows the year each Trustee was first
elected a Trustee of the Putnam funds, the fees paid
to each Trustee by the fund for fiscal 1998 and the
fees paid to each Trustee by all of the Putnam funds
during calendar year 1998:

<TABLE><CAPTION>
COMPENSATION TABLE
<S> <C> <C> <C> <C>
Pension or Estimated Total
Aggregate retirement annual benefits compensation
compensation benefits accrued from all from all
from the as part of Putnam funds Putnam
Trustees/Year fund(1) fund expenses upon retirement(2) funds(3)

Jameson A. Baxter/1994(4) $1,931 $445 $95,000 $207,000
Hans H. Estin/1972 1,737 834 95,000 182,500
John A. Hill/1985(4)(5) 1,699 313 115,000 200,500
Ronald J. Jackson/1996(4) 1,906 242 95,000 200,500
Paul L. Joskow/1997(4) 1,727 36 95,000 180,500
Elizabeth T. Kennan/1992 1,906 453 95,000 200,500
Lawrence J. Lasser/1992 1,699 339 95,000 178,500
John H. Mullin, III/1997(4) 1,727 55 95,000 180,500
Robert E. Patterson/1984 1,727 250 95,000 181,500
Donald S. Perkins/1982 1,737 901 95,000 182,500
William F. Pounds/1971(5) 1,942 937 115,000 215,000
George Putnam/1957 1,708 953 95,000 179,500
George Putnam, III/1984 1,727 165 95,000 181,500
A.J.C. Smith/1986 1,680 561 95,000 176,500
W. Thomas Stephens/1997(4) 1,727 52 95,000 181,500
W. Nicholas Thorndike/1992 1,736 651 95,000 182,500
</TABLE>
(1) Includes an annual retainer and an attendance fee
for each meeting attended.
(2) Assumes that each Trustee retires at the normal
retirement date. Estimated benefits for each Trustee
are based on Trustee fee rates in effect during calendar 1998.
(3) As of December 31, 1998, there were 113 funds in
the Putnam family.
(4) Includes compensation deferred pursuant to a
Trustee Compensation Deferral Plan. The total amounts
of deferred compensation payable by the fund to Ms.
Baxter, Messrs. Hill, Jackson, Stephens, Joskow and
Mullin as of December 31, 1998 were $2,282, $2,214,
$2,012, $1,847, $2,013 and $1,824, respectively,
including income earned on such amounts.
(5) Includes additional compensation for service as
Vice Chairman of the Putnam funds.

Under a Retirement Plan for Trustees of the Putnam
funds (the "Plan"), each Trustee who retires with at
least five years of service as a Trustee of the funds
is entitled to receive an annual retirement benefit
equal to one-half of the average annual compensation
paid to such Trustee for the last three years of
service prior to retirement. This retirement benefit
is payable during a Trustee's lifetime, beginning the
year following retirement, for a number of years equal
to such Trustee's years of service. A death benefit
is also available under the Plan which assures that
the Trustee and his or her beneficiaries will receive
benefit payments for the lesser of an aggregate period
of (i) ten years or (ii) such Trustee's total years of
service.

The Plan Administrator (a committee comprised of
Trustees that are not "interested persons" of the
fund, as defined in the Investment Company Act of
1940) may terminate or amend the Plan at any time, but
no termination or amendment will result in a reduction
in the amount of benefits (i) currently being paid to
a Trustee at the time of such termination or
amendment, or (ii) to which a current Trustee would
have been entitled had he or she retired immediately
prior to such termination or amendment.

For additional information concerning the Trustees,
see "Management" in Part II of this SAI.

Share ownership

At January 31, 1999, the officers and Trustees of the
fund as a group owned less than 1% of the outstanding
shares of each class of the fund, and to the knowledge
of the fund no person owned of record or beneficially
5% or more of any class of shares of the fund.

Distribution fees

During fiscal 1998, the fund paid the following 12b-1

fees to Putnam Mutual Funds:

Class A Class B Class M

$1,544,635 $5,757,397 $516,491

Class A sales charges and contingent deferred sales

charges

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 received sales charges with
respect to class A shares in the following amounts
during the periods indicated:

Sales charges
retained by Putnam Contingent
Total Mutual Funds deferred
front-end after sales
Fiscal year sales charges dealer concessions charges

1998 $4,484,044 $716,488 $27,459
1997 $4,200,832 $648,178 $19,017
1996 $9,439,747 $1,374,998 $18,445

Class B contingent deferred sales charges

Putnam Mutual Funds received contingent deferred sales
charges upon redemptions of class B shares in the
following amounts during
the periods indicated:

Contingent deferred
Fiscal year sales charges

1998 $906,735
1997 $751,977
1996 $249,697

Class M sales charges

Putnam Mutual Funds received sales charges with
respect to class M shares in the following amounts
during the periods indicated:

Sales charges
retained by Putnam
Total Mutual Funds
front-end after
Fiscal year sales charges dealer concessions

1998 $258,986 $42,111
1997 $268,470 $44,259
1996 $501,936 $79,672

Investor servicing and custody fees and expenses

During the 1998 fiscal year, the fund incurred
$2,143,797 in fees and out-of-pocket expenses for
investor servicing and custody services provided by
Putnam Fiduciary Trust Company.

INVESTMENT PERFORMANCE

Standard performance measures
(for periods ended December 31, 1998)

Class A Class B Class C Class M
Inception Date : 4/14/93 10/2/95 2/1/99 10/2/95

Average annual total return

1 year 16.40% 17.66% 21.59% 18.60%
5 years 18.44% 18.76% 18.96% 18.43%
Life of Fund 20.26% 20.53% 20.61% 20.17%

Returns for class A and class M shares reflect the
deduction of the current maximum initial sales charges
of 5.75% for class A shares and 3.50% for class M
shares.

Returns for class B shares reflect the deduction of
the applicable contingent deferred sales charge
("CDSC") which is 5% in the first year, declining to
1% in the sixth year, and is eliminated thereafter.
Returns for class C shares reflect the
deduction of the CDSC currently applicable to class C
shares, which is 1% for the first year and is
eliminated thereafter .

Returns shown for class B , class C and class M
shares for periods prior to their inception are
derived from the historical performance of class A
shares, adjusted to reflect both the deduction of the
initial sales charge or CDSC, if any, currently
applicable to each class and , in the case of class
B, class C and class M shares, the higher
operating expenses applicable to such shares.

Returns shown for class A shares have not been
adjusted to reflect
payments under the class A distribution plan prior to
its implementation. All returns assume reinvestment
of distributions at net asset value and represent past
performance; they do not guarantee future results.
Investment return and principal value will fluctuate
so that an investor's shares, when redeemed, may be
worth more or less than their original cost.

See "Standard Performance Measures" in Part II of this
SAI for information on how performance is calculated.

ADDITIONAL OFFICERS

In addition to the persons listed as fund officers in
Part II of this SAI, each of the following persons is
also a Vice President of the fund and certain of the
other Putnam funds, the total number of which is noted
parenthetically. Officers of Putnam Management hold
the same offices in Putnam Management's parent
company, Putnam Investments, Inc.

Officer Name (Age) (Number of funds)

Roland W. Gillis (age 49) (7 funds). Managing
Director of Putnam Management. Prior to March, 1995,
Mr. Gillis was employed at Keystone Custodian Funds,
Inc.

Daniel L. Miller (age 41) (6 funds). Managing
Director of Putnam Management.

John J. Morgan, Jr. (age 58) (34 funds). Managing
Director of Putnam Management.

Jeffrey R. Lindsey (age 36) (4 funds). Senior Vice
President of Putnam Management. Prior to April, 1994,
Mr. Lindsey was employed at Strategic Portfolio
Management, Inc.

Charles H. Swanberg (age 51) (4 funds). Senior Vice
President of Putnam Management.

INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS

PricewaterhouseCoopers LLP, 160 Federal Street,
Boston, Massachusetts 02110, are the fund's
independent accountants, providing audit services, tax
return review and other tax consulting services and
assistance and consultation in connection with the
review of various Securities and Exchange Commission
filings. The Report of Independent Accountants,
financial highlights and financial statements included
in the fund's Annual Report for the fiscal year ended
December 31, 1998, filed electronically on February
17, 1999 (File No. 811-6203), are incorporated by
reference into this SAI. The financial highlights
included in the prospectus and incorporated by
reference into this SAI and the financial statements
incorporated by reference into the prospectus and this
SAI have been so included and incorporated in reliance
upon the report of the independent accountants, given
on their authority as experts in auditing and
accounting.

<PAGE>

II-1
4/29/99

TABLE OF CONTENTS

MISCELLANEOUS INVESTMENTS, INVESTMENT PRACTICES AND RISKS II-1

TAXES.. II-25

MANAGEMENT II-28

DETERMINATION OF NET ASSET VALUE II-36

HOW TO BUY SHARES II-37

DISTRIBUTION PLANS II-48

INVESTOR SERVICES II-52

SIGNATURE GUARANTEES II-55

SUSPENSION OF REDEMPTIONS II-56

SHAREHOLDER LIABILITY II-56

STANDARD PERFORMANCE MEASURES II-56

COMPARISON OF PORTFOLIO PERFORMANCE II-57

SECURITIES RATINGS II-61

DEFINITIONS II-65

THE PUTNAM FUNDS
STATEMENT OF ADDITIONAL INFORMATION ("SAI")
PART II

As noted in the prospectus, in addition to the
principal investment strategies and the principal
risks described in the prospectus, the fund may
employ other investment practices and may be subject
to other risks, which are described below. Because
the following is a combined description of
investment strategies of all of the Putnam funds,
certain matters described herein may not apply to
your fund. Unless a strategy or policy described
below is specifically prohibited by the investment
restrictions explained in a fund's prospectus or
part I of this SAI, or by applicable law, the fund
may engage in each of the practices described below.
Shareholders who purchase shares at net asset value
through employer-sponsored defined contribution
plans should also consult their employer for
information about the extent to which the matters
described below apply to them.

MISCELLANEOUS INVESTMENTS, INVESTMENT PRACTICES AND
RISKS

Foreign Investments

The fund may invest in securities of foreign
issuers. 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. 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, foreign
withholding taxes 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, including the risks of
nationalization or expropriation of assets, are
typically increased in connection with investments in
"emerging markets." For example, political and
economic structures in these countries may be in
their infancy and developing rapidly, and such
countries may lack the social, political and economic
stability characteristic of more developed countries.
Certain of these countries have in the past failed to
recognize private property rights and have at times
nationalized and expropriated the assets of private
companies. 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 currencies of certain emerging market countries
have experienced a steady devaluation relative to the
U.S. dollar, and continued devaluations may adversely
affect the value of a fund's assets denominated in
such currencies. Many emerging market companies have
experienced substantial, and in some periods
extremely high, rates of inflation or deflation for
many years, and continued inflation may adversely
affect the economies and securities markets of such
countries.

In addition, unanticipated political or social
developments may affect the value of the fund's
investments in emerging markets and the availability
to the fund of additional investments in these
markets. The small size, limited trading volume and
relative inexperience of the securities markets in
these countries may make the fund's investments in
securities traded in emerging markets illiquid and
more volatile than investments in securities traded
in more developed countries, and the fund may be
required to establish special custodial or other
arrangements before making investments in securities
traded in emerging markets. There may be little
financial or accounting information
available with respect to issuers of emerging market
securities, and it may be difficult as a result to
assess the value of prospects of an investment in
such securities.

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.

Foreign Currency Transactions

The fund may engage without limit in currency
exchange transactions, including purchasing and
selling foreign currency, foreign currency options,
foreign currency forward contracts and foreign
currency futures contracts and related options, to
manage its exposure to foreign currencies. In
addition, the fund may write covered call and put
options on foreign currencies for the purpose of
increasing its current return.

Generally, the fund may engage in both "transaction
hedging" and "position hedging." The fund may also
engage in foreign currency transactions for non-
hedging purposes, subject to applicable law. When it
engages in transaction hedging, the fund enters into
foreign currency transactions with respect to
specific receivables or payables, generally arising
in connection with the purchase or sale of portfolio
securities. The fund will engage in transaction
hedging when it desires to "lock in" the U.S. dollar
price of a security it has agreed to purchase or
sell, or the U.S. dollar equivalent of a dividend or
interest payment in a foreign currency. By
transaction hedging the fund will attempt to protect
itself against a possible loss resulting from an
adverse change in the relationship between the U.S.
dollar and the applicable foreign currency during the
period between the date on which the security is
purchased or sold, or on which the dividend or
interest payment is earned, and the date on which
such payments are made or received.

The fund may purchase or sell a foreign currency on a
spot (or cash) basis at the prevailing spot rate in
connection with the settlement of transactions in
portfolio securities denominated in that foreign
currency. If conditions warrant, for transaction
hedging purposes the fund may also enter into
contracts to purchase or sell foreign currencies at a
future date ("forward contracts") and purchase and
sell foreign currency futures contracts. A foreign
currency forward contract is a negotiated agreement
to exchange currency at a future time at a rate or
rates that may be higher or lower than the spot rate.
Foreign currency futures contracts are standardized
exchange-traded contracts and have margin
requirements. In addition, for transaction hedging
purposes the fund may also purchase or sell exchange-
listed and over-the-counter call and put options on
foreign currency futures contracts and on foreign
currencies.
The fund may also enter into contracts to purchase
or sell foreign currencies at a future date
("forward contracts") and purchase and sell foreign
currency futures contracts.

For transaction hedging purposes the fund may also
purchase exchange-listed and over-the-counter call
and put options on foreign currency futures
contracts and on foreign currencies. A put option
on a futures contract gives the fund the right to
assume a short position in the futures contract
until the expiration of the option. A put option on
a currency gives the fund the right to sell the
currency at an exercise price until the expiration
of the option. A call option on a futures contract
gives the fund the right to assume a long position
in the futures contract until the expiration of the
option. A call
option on a currency gives the fund the right to
purchase the currency at the exercise price until the
expiration of the option.

The fund may engage in position hedging to protect
against a decline in the value relative to the U.S.
dollar of the currencies in which its portfolio
securities are denominated or quoted (or an increase
in the value of the currency in which the securities
the fund intends to buy are denominated, when the
fund holds cash or short-term investments). For
position hedging purposes, the fund may purchase or
sell, on exchanges or in overthe-counter markets,
foreign currency futures contracts, foreign currency
forward contracts and options on foreign currency
futures contracts and on foreign currencies. In
connection with position hedging, the fund may also
purchase or sell foreign currency on a spot basis.

It is impossible to forecast with precision the
market value of portfolio securities at the
expiration or maturity of a forward or futures
contract. Accordingly, it may be necessary for the
fund to purchase additional foreign currency on the
spot market (and bear the expense of such purchase)
if the market value of the security or securities
being hedged is less than the amount of foreign
currency the fund is obligated to deliver and a
decision is made to sell the security or securities
and make delivery of the foreign currency.
Conversely, it may be necessary to sell on the spot
market some of the foreign currency received upon the
sale of the portfolio security or securities if the
market value of such security or securities exceeds
the amount of foreign currency the fund is obligated
to deliver.

Transaction and position hedging do not eliminate
fluctuations in the underlying prices of the
securities which the fund owns or intends to purchase
or sell. They simply establish a rate of exchange
which one can achieve at some future point in time.
Additionally, although these techniques tend to
minimize the risk of loss due to a decline in the
value of the hedged currency, they tend to limit any
potential gain which might result from the increase
in value of such currency. See "Risk factors in
options transactions."

The fund may seek to increase its current return or
to offset some of the costs of hedging against
fluctuations in current exchange rates by writing
covered call options and covered put options on
foreign currencies. The fund receives a premium from
writing a call or put option, which increases the
fund's current return if the option expires
unexercised or is closed out at a net profit. 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's currency hedging transactions may call for
the delivery of one foreign currency in exchange for
another foreign currency and may at times not involve
currencies in which its portfolio securities are then
denominated. Putnam Management will engage in such
"cross hedging" activities when it believes that such
transactions provide significant hedging
opportunities for the fund. Cross hedging
transactions by the fund involve the risk of
imperfect correlation between changes in the values
of the currencies to which such transactions relate
and changes in the value of the currency or other
asset or liability which is the subject of the hedge.

The fund may also engage in non-hedging currency
transactions. For example, Putnam Management may
believe that exposure to a
currency is in the fund's best interest but that
securities denominated in that currency are
unattractive. In that case the fund may purchase a
currency forward contract or option in order to
increase its exposure to the currency. In accordance
with SEC regulations, the fund will segregate liquid
assets in its portfolio to cover forward contracts
used for non-hedging purposes.

The value of any currency, including U.S. dollars and
foreign currencies, may be affected by complex
political and economic factors applicable to the
issuing country. In addition, the exchange rates of
foreign currencies (and therefore the values of
foreign currency options, forward contracts and
futures contracts) may be affected significantly,
fixed, or supported directly or indirectly by U.S.
and foreign government actions. Government
intervention may increase risks involved in
purchasing or selling foreign currency options,
forward contracts and futures contracts, since
exchange rates may not be free to fluctuate in
response to other market forces.

The value of a foreign currency option, forward
contract or futures contract reflects the value of an
exchange rate, which in turn reflects relative values
of two currencies, the U.S. dollar and the foreign
currency in question. Because foreign currency
transactions occurring in the interbank market
involve substantially larger amounts than those that
may be involved in the exercise of foreign currency
options, forward contracts and futures contracts,
investors may be disadvantaged by having to deal in
an odd-lot market for the underlying foreign
currencies in connection with options at prices that
are less favorable than for round lots. Foreign
governmental restrictions or taxes could result in
adverse changes in the cost of acquiring or disposing
of foreign currencies.

There is no systematic reporting of last sale
information for foreign currencies and there is no
regulatory requirement that quotations available
through dealers or other market sources be firm or
revised on a timely basis. Available quotation
information is generally representative of very large
round-lot transactions in the interbank market and
thus may not reflect exchange rates for smaller odd-
lot transactions (less than $1 million) where rates
may be less favorable. The interbank market in
foreign currencies is a global, around-the-clock
market. To the extent that options markets are
closed while the markets for the underlying
currencies remain open, significant price and rate
movements may take place in the underlying markets
that cannot be reflected in the options markets.

The decision as to whether and to what extent the
fund will engage in foreign currency exchange
transactions will depend on a number of factors,
including prevailing market conditions, the
composition of the fund's portfolio and the
availability of suitable transactions. Accordingly,
there can be no assurance that the fund will engage
in foreign currency exchange transactions at any
given time or from time to time.

Currency forward and futures contracts. A forward
foreign currency contract involves an obligation to
purchase or sell a specific currency at a future
date, which may be any fixed number of days from the
date of the contract as agreed by the parties, at a
price set at the time of the contract. In the case
of a cancelable forward contract, the holder has the
unilateral right to cancel the contract at maturity
by paying a specified fee.
The contracts are traded in the interbank market
conducted directly between currency traders (usually
large commercial banks) and their customers. A
forward contract generally has no
deposit requirement, and no commissions are charged
at any stage for trades. A foreign currency futures
contract is a standardized contract for the future
delivery of a specified amount of a foreign currency
at a price set at the time of the contract. Foreign
currency futures contracts traded in the United
States are designed by and traded on exchanges
regulated by the CFTC, such as the New York
Mercantile Exchange.

Forward foreign currency exchange contracts differ
from foreign currency futures contracts in certain
respects. For example, the maturity date of a
forward contract may be any fixed number of days from
the date of the contract agreed upon by the parties,
rather than a predetermined date in a given month.
Forward contracts may be in any amount agreed upon by
the parties rather than predetermined amounts. Also,
forward foreign exchange contracts are traded
directly between currency traders so that no
intermediary is required. A forward contract
generally requires no margin or other deposit.

At the maturity of a forward or futures contract, the
fund either may accept or make delivery of the
currency specified in the contract, or at or prior to
maturity enter into a closing transaction involving
the purchase or sale of an offsetting contract.
Closing transactions with respect to forward
contracts are usually effected with the currency
trader who is a party to the original forward
contract. Closing transactions with respect to
futures contracts are effected on a commodities
exchange; a clearing corporation associated with the
exchange assumes responsibility for closing out such
contracts.

Positions in the foreign currency futures contracts
may be closed out only on an exchange or board of
trade which provides a secondary market in such
contracts. Although the fund intends to purchase or
sell foreign currency futures contracts only on
exchanges or boards of trade where there appears to
be an active secondary market, there is no assurance
that a secondary market on an exchange or board of
trade will exist for any particular contract or at
any particular time. In such event, it may not be
possible to close a futures position and, in the
event of adverse price movements, the fund would
continue to be required to make daily cash payments
of variation margin.

Foreign currency options. In general, options on
foreign currencies operate similarly to options on
securities and are subject to many of the risks
described above. Foreign currency options are traded
primarily in the over-the-counter market, although
options on foreign currencies are also listed on
several exchanges. Options are traded not only on
the currencies of individual nations, but also on the
euro, the joint currency of most countries in the
European Union.

The fund will only purchase or write foreign currency
options when Putnam Management believes that a liquid
secondary market exists for such options. There can
be no assurance that a liquid secondary market will
exist for a particular option at any specific time.
Options on foreign currencies are affected by all of
those factors which influence foreign exchange rates
and investments generally.

Settlement procedures. Settlement procedures
relating to the fund's investments in foreign
securities and to the fund's foreign currency
exchange transactions may be more complex than
settlements with respect to investments in debt or
equity securities of U.S. issuers, and may involve
certain risks not present in the fund's domestic
investments. For example, settlement of transactions
involving foreign securities or
foreign currencies may occur within a foreign
country, and the fund may be required to accept or
make delivery of the underlying securities or
currency in conformity with any applicable U.S. or
foreign restrictions or regulations, and may be
required to pay any fees, taxes or charges associated
with such delivery. Such investments may also
involve the risk that an entity involved in the
settlement may not meet its obligations.

Foreign currency conversion. Although foreign
exchange dealers do not charge a fee for currency
conversion, they do realize a profit based on the
difference (the "spread") between prices at which
they are buying and selling various currencies.
Thus, a dealer may offer to sell a foreign currency
to the fund at one rate, while offering a lesser rate
of exchange should the fund desire to resell that
currency to the dealer.

Options on Securities

Writing covered options. The fund may write covered
call options and covered put options on optionable
securities held in its portfolio, when in the opinion
of Putnam Management such transactions are consistent
with the fund's investment objective(s) and policies.
Call options written by the fund give the purchaser
the right to buy the underlying securities from the
fund at a stated exercise price; put options give the
purchaser the right to sell the underlying securities
to the fund at a stated price.

The fund may write only covered options, which means
that, so long as the fund is obligated as the writer
of a call option, it will own the underlying
securities subject to the option (or comparable
securities satisfying the cover requirements of
securities exchanges). In the case of put options,
the fund will hold cash and/or high-grade short-term
debt obligations equal to the price to be paid if the
option is exercised. In addition, the fund will be
considered to have covered a put or call option if
and to the extent that it holds an option that
offsets some or all of the risk of the option it has
written. The fund may write combinations of covered
puts and calls on the same underlying security.

The fund will receive a premium from writing a put or
call option, which increases the fund's return on the
underlying security in the event the option expires
unexercised or is closed out at a profit. The amount
of the premium reflects, among other things, the
relationship between the exercise price and the
current market value of the underlying security, the
volatility of the underlying security, the amount of
time remaining until expiration, current interest
rates, and the effect of supply and demand in the
options market and in the market for the underlying
security. By writing a call option, the fund limits
its opportunity to profit from any increase in the
market value of the underlying security above the
exercise price of the option but continues to bear
the risk of a decline in the value of the underlying
security. By writing a put option, the fund assumes
the risk that it may be required to purchase the
underlying security for an exercise price higher than
its then-current market value, resulting in a
potential capital loss unless the security
subsequently appreciates in value.

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
offsetting option. The fund realizes a profit or
loss from a closing transaction if the cost of the
transaction (option premium plus transaction costs)
is less or more than the premium received from
writing the option. If the
fund writes a call option but does not own the
underlying security, and when it writes a put option,
the fund may be required to deposit cash or
securities with its broker as "margin," or
collateral, for its obligation to buy or sell the
underlying security. As the value of the underlying
security varies, the fund may have to deposit
additional margin with the broker. Margin
requirements are complex and are fixed by individual
brokers, subject to minimum requirements currently
imposed by the Federal Reserve Board and by stock
exchanges and other self-regulatory organizations.

Purchasing put options. The fund may purchase put
options to protect its portfolio holdings in an
underlying security against a decline in market
value. Such protection is provided during the life
of the put option since the fund, as holder of the
option, is able to sell the underlying security at
the put exercise price regardless of any decline in
the underlying security's market price. In order for
a put option to be profitable, the market price of
the underlying security must decline sufficiently
below the exercise price to cover the premium and
transaction costs. By using put options in this
manner, the fund will reduce any profit it might
otherwise have realized from appreciation of the
underlying security by the premium paid for the put
option and by transaction costs.

Purchasing call options. The fund may purchase call
options to hedge against an increase in the price of
securities that the fund wants ultimately to buy.
Such hedge protection is provided during the life of
the call option since the fund, as holder of the call
option, is able to buy the underlying security at the
exercise price regardless of any increase in the
underlying security's market price. In order for a
call option to be profitable, the market price of the
underlying security must rise sufficiently above the
exercise price to cover the premium and transaction
costs.

Risk Factors in Options Transactions

The successful use of the fund's options strategies
depends on the ability of Putnam Management to
forecast correctly interest rate and market
movements. For example, if the fund were to write a
call option based on Putnam Management's expectation
that the price of the underlying security would fall,
but the price were to rise instead, the fund could be
required to sell the security upon exercise at a
price below the current market price. Similarly, if
the fund were to write a put option based on Putnam
Management's expectation that the price of the
underlying security would rise, but the price were to
fall instead, the fund could be required to purchase
the security upon exercise at a price higher than the
current market price.

When the fund purchases an option, it runs the risk
that it will lose its entire investment in the option
in a relatively short period of time, unless the fund
exercises the option or enters into a closing sale
transaction before the option's expiration. If the
price of the underlying security does not rise (in
the case of a call) or fall (in the case of a put) to
an extent sufficient to cover the option premium and
transaction costs, the fund will lose part or all of
its investment in the option. This contrasts with an
investment by the fund in the underlying security,
since the fund will not realize a loss if the
security's price does not change.

The effective use of options also depends on the
fund's ability to terminate option positions at times
when Putnam Management deems it desirable to do so.
There is no assurance that the fund
will be able to effect closing transactions at any
particular time or at an acceptable price.

If a secondary market in options were to become
unavailable, the fund could no longer engage in
closing transactions. Lack of investor interest
might adversely affect the liquidity of the market
for particular options or series of options. A
market may discontinue trading of a particular option
or options generally. In addition, a market could
become temporarily unavailable if unusual events --
such as volume in excess of trading or clearing
capability -- were to interrupt its normal
operations.

A market may at times find it necessary to impose
restrictions on particular types of options
transactions, such as opening transactions. For
example, if an underlying security ceases to meet
qualifications imposed by the market or the Options
Clearing Corporation, new series of options on that
security will no longer be opened to replace expiring
series, and opening transactions in existing series
may be prohibited. If an options market were to
become unavailable, the fund as a holder of an option
would be able to realize profits or limit losses only
by exercising the option, and the fund, as option
writer, would remain obligated under the option until
expiration or exercise.

Disruptions in the markets for the securities
underlying options purchased or sold by the fund
could result in losses on the options. If trading is
interrupted in an underlying security, the trading of
options on that security is normally halted as well.
As a result, the fund as purchaser or writer of an
option will be unable to close out its positions
until options trading resumes, and it may be faced
with considerable losses if trading in the security
reopens at a substantially different price. In
addition, the Options Clearing Corporation or other
options markets may impose exercise restrictions. If
a prohibition on exercise is imposed at the time when
trading in the option has also been halted, the fund
as purchaser or writer of an option will be locked
into its position until one of the two restrictions
has been lifted. If the Options Clearing Corporation
were to determine that the available supply of an
underlying security appears insufficient to permit
delivery by the writers of all outstanding calls in
the event of exercise, it may prohibit indefinitely
the exercise of put options. The fund, as holder of
such a put option, could lose its entire investment
if the prohibition remained in effect until the put
option's expiration.

Foreign-traded options are subject to many of the
same risks presented by internationally-traded
securities. In addition, because of time differences
between the United States and various foreign
countries, and because different holidays are
observed in different countries, foreign options
markets may be open for trading during hours or on
days when U.S. markets are closed. As a result,
option premiums may not reflect the current prices of
the underlying interest in the United States.

Over-the-counter ("OTC") options purchased by the
fund and assets held to cover OTC options written by
the fund may, under certain circumstances, be
considered illiquid securities for purposes of any
limitation on the fund's ability to invest in
illiquid securities.

Investments in Miscellaneous Fixed-Income Securities

If the fund may invest in inverse floating
obligations, premium securities, or interest-only or
principal-only classes of mortgage-backed securities
(IOs and POs), it may do so without
limit. The fund, however, currently does not intend
to invest more than 15% of its assets in inverse
floating obligations or more than 35% of its assets
in IOs and POs under normal market conditions.

Lower-rated Securities

The fund may invest in lower-rated fixed-income
securities (commonly known as "junk bonds"). The
lower ratings of certain securities held by the fund
reflect a greater possibility that adverse changes in
the financial condition of the issuer or in general
economic conditions, or both, or an unanticipated
rise in interest rates, may impair the ability of the
issuer to make payments of interest and principal.
The inability (or perceived inability) of issuers to
make timely payment of interest and principal would
likely make the values of securities held by the fund
more volatile and could limit the fund's ability to
sell its securities at prices approximating the
values the fund had placed on such securities. In
the absence of a liquid trading market for securities
held by it, the fund at times may be unable to
establish the fair value of such securities.

Securities ratings are based largely on the issuer's
historical financial condition and the rating
agencies' analysis at the time of rating.
Consequently, the rating assigned to any particular
security is not necessarily a reflection of the
issuer's current financial condition, which may be
better or worse than the rating would indicate. In
addition, the rating assigned to a security by
Moody's Investors Service, Inc. or Standard & Poor's
(or by any other nationally recognized securities
rating agency) does not reflect an assessment of the
volatility of the security's market value or the
liquidity of an investment in the security. See
"Securities ratings."

Like those of other fixed-income securities, the
values of lowerrated securities fluctuate in response
to changes in interest rates. A decrease in interest
rates will generally result in an increase in the
value of the fund's assets. Conversely, during
periods of rising interest rates, the value of the
fund's assets will generally decline. The values of
lower-rated securities may often be affected to a
greater extent by changes in general economic
conditions and business conditions affecting the
issuers of such securities and their industries.
Negative publicity or investor perceptions may also
adversely affect the values of lower-rated
securities. Changes by nationally recognized
securities rating agencies in their ratings of any
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 these
securities, but will affect the fund's net asset
value. 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 its
retention will assist in meeting the fund's
investment objective(s).

Issuers of lower-rated securities are often highly
leveraged, so that their ability to service their
debt obligations during an economic downturn or
during sustained periods of rising interest rates may
be impaired. Such issuers may not have more
traditional methods of financing available to them
and may be unable to repay outstanding obligations at
maturity by refinancing. The risk of loss due to
default in payment of interest or repayment of
principal by such issuers is significantly greater
because such securities frequently are
unsecured and subordinated to the prior payment of
senior indebtedness.

At times, a substantial portion of the fund's assets
may be invested in securities of which the fund, by
itself or together with other funds and accounts
managed by Putnam Management or its affiliates, holds
all or a major portion. Although Putnam Management
generally considers such securities to be liquid
because of the availability of an institutional
market for such securities, it is possible that,
under adverse market or economic conditions or in the
event of adverse changes in the financial condition
of the issuer, the fund could find it more difficult
to sell these securities when Putnam Management
believes it advisable to do so or 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 such 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 such securities.
This could increase the fund's operating expenses and
adversely affect the fund's net asset value. In the
case of tax-exempt funds, any income derived from the
fund's ownership or operation of such assets would
not be tax-exempt. The ability of a holder of a tax-
exempt security to enforce the terms of that security
in a bankruptcy proceeding may be more limited than
would be the case with respect to securities of
private issuers. In addition, the fund's intention to
qualify as a "regulated investment company" under the
Internal Revenue Code may limit the extent to which
the fund may exercise its rights by taking possession
of such assets.

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 may invest without limit in so-called "zero-
coupon" bonds and "payment-in-kind" bonds. Zero-
coupon bonds are issued at a significant discount
from their principal amount in lieu of paying
interest periodically. 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. Because zero-coupon and payment-in-kind bonds
do not pay current interest in cash, their value is
subject to greater fluctuation in response to changes
in market interest rates than bonds that pay interest
currently. Both zero-coupon and payment-in-kind
bonds allow an issuer to avoid the need to generate
cash to meet current interest payments. Accordingly,
such bonds may involve greater credit risks than
bonds paying interest currently in cash. The fund is
required to accrue interest income on such
investments and to distribute such amounts at least
annually to shareholders even though such bonds do
not pay current interest in cash.
Thus, it may be necessary at times for the fund to
liquidate investments in order to satisfy its
dividend requirements.

To the extent the fund invests in securities in the
lower rating categories, the achievement of the
fund's goals is more dependent on Putnam Management's
investment analysis than would be the case if the
fund were investing in securities in the higher
rating categories. This may be particularly true
with respect to taxexempt securities, as the amount
of information about the financial condition of an
issuer of tax-exempt securities may not
be as extensive as that which is made available by
corporations whose securities are publicly traded.

Loan Participations

The fund may invest in "loan participations." By
purchasing a loan participation, the fund acquires
some or all of the interest of a bank or other
lending institution in a loan to a particular
borrower. Many such loans are secured, and most
impose restrictive covenants which must be met by the
borrower.

The loans in which the fund may invest are typically
made by a syndicate of banks, represented by an agent
bank which has negotiated and structured the loan and
which is responsible generally for collecting
interest, principal, and other amounts from the
borrower on its own behalf and on behalf of the other
lending institutions in the syndicate and for
enforcing its and their other rights against the
borrower. Each of the lending institutions,
including the agent bank, lends to the borrower a
portion of the total amount of the loan, and retains
the corresponding interest in the loan.

The fund's ability to receive payments of principal
and interest and other amounts in connection with
loan participations held by it will depend primarily
on the financial condition of the borrower. The
failure by the fund to receive scheduled interest or
principal payments on a loan participation would
adversely affect the income of the fund and would
likely reduce the value of its assets, which would be
reflected in a reduction in the fund's net asset
value. Banks and other lending institutions
generally perform a credit analysis of the borrower
before originating a loan or participating in a
lending syndicate. In selecting the loan
participations in which the fund will invest,
however, Putnam Management will not rely solely on
that credit analysis, but will perform its own
investment analysis of the borrowers. Putnam
Management's analysis may include consideration of
the borrower's financial strength and managerial
experience, debt coverage, additional borrowing
requirements or debt maturity schedules, changing
financial conditions, and responsiveness to changes
in business conditions and interest rates. Because
loan participations in which the fund may invest are
not generally rated by independent credit rating
agencies, a decision by the fund to invest in a
particular loan participation will depend almost
exclusively on Putnam Management's, and the original
lending institution's, credit analysis of the
borrower.

Loan participations may be structured in different
forms, including novations, assignments, and
participating interests.
In a novation, the fund assumes all of the rights of
a lending institution in a loan, including the right
to receive payments of principal and interest and
other amounts directly from the borrower and to
enforce its rights as a lender directly against the
borrower. The fund assumes the position of a co-
lender with other syndicate members. As an
alternative, the fund may purchase an assignment of a
portion of a lender's interest in a loan. In this
case, the fund may be required generally to rely upon
the assigning bank to demand payment and enforce its
rights against the borrower, but would otherwise be
entitled to all of such bank's rights in the loan.
The fund may also purchase a participating interest
in a portion of the rights of a lending institution
in a loan. In such case, it will be entitled to
receive payments of principal, interest, and premium,
if any, but will not generally be entitled to enforce
its rights directly against the agent bank or the
borrower, but must rely for that purpose on the
lending institution. The fund may also acquire a
loan participation directly by acting as a member of
the original
lending syndicate.

The fund will in many cases be required to rely upon
the lending institution from which it purchases the
loan participation to collect and pass on to the fund
such payments and to enforce the fund's rights under
the loan. As a result, an insolvency, bankruptcy, or
reorganization of the lending institution may delay
or prevent the fund from receiving principal,
interest, and other amounts with respect to the
underlying loan. When the fund is required to rely
upon a lending institution to pay to the fund
principal, interest, and other amounts received by
it, Putnam Management will also evaluate the
creditworthiness of the lending institution.

The borrower of a loan in which the fund holds a
participation interest may, either at its own
election or pursuant to terms of the loan
documentation, prepay amounts of the loan from time
to time. There is no assurance that the fund will be
able to reinvest the proceeds of any loan prepayment
at the same interest rate or on the same terms as
those of the original loan participation.

Corporate loans in which the fund may purchase a loan
participation are made generally to finance internal
growth, mergers, acquisitions, stock repurchases,
leveraged buy-outs, and other corporate activities.
Under current market conditions, most of the
corporate loan participations purchased by the fund
will represent interests in loans made to finance
highly leveraged corporate acquisitions, known as
"leveraged buy-out" transactions. The highly
leveraged capital structure of the borrowers in such
transactions may make such loans especially
vulnerable to adverse changes in economic or market
conditions. In addition, loan participations
generally are subject to restrictions on transfer,
and only limited opportunities may exist to sell such
participations in secondary markets. As a result,
the fund may be unable to sell loan participations at
a time when it may otherwise be desirable to do so or
may be able to sell them only at a price that is less
than their fair market value.

Certain of the loan participations acquired by the
fund may involve revolving credit facilities under
which a borrower may from time to time borrow and
repay amounts up to the maximum amount of the
facility. In such cases, the fund would have an
obligation to advance its portion of such additional
borrowings upon the terms specified in the loan
participation. To the extent that the fund is
committed to make additional loans under such a
participation, it will at all times hold and maintain
in a segregated account liquid assets in an amount
sufficient to meet such commitments. Certain of the
loan participations acquired by the fund may also
involve loans made in foreign currencies. The fund's
investment in such participations would involve the
risks of currency fluctuations described above with
respect to investments in the foreign securities.

Floating Rate and Variable Rate Demand Notes

Certain funds may purchase floating rate and variable
rate demand notes and bonds. These securities may
have a stated maturity in excess of one year, but
permit a holder to demand payment of principal plus
accrued interest upon a specified number of days
notice. Frequently, such obligations are secured by
letters of credit or other credit support
arrangements provided by banks. The issuer has a
corresponding right, after a given period, to prepay
in its discretion the outstanding principal of the
obligation plus accrued interest upon a specific
number of days
notice to the holders. The interest rate of a
floating rate instrument may be based on a known
lending rate, such as a bank's prime rate, and is
reset whenever such rate is adjusted. The interest
rate on a variable rate demand note is reset at
specified intervals at a market rate.

Mortgage Related and Asset-backed Securities

The fund may invest in mortgage-backed securities,
including collateralized mortgage obligations
("CMOs") and certain stripped mortgage-backed
securities. CMOs and other mortgage-backed
securities represent a participation in, or are
secured by, mortgage loans.

The fund may also invest in asset-backed securities.
Asset-backed securities are structured like mortgage-
backed securities, but instead of mortgage loans or
interests in mortgage loans, the underlying assets
may include such items as motor vehicle installment
sales or installment loan contracts, leases of
various types of real and personal property, and
receivables from credit card agreements. The ability
of an issuer of asset-backed securities to enforce
its security interest in the underlying assets may be
limited.

Mortgage-backed securities have yield and maturity
characteristics corresponding to the underlying
assets. Unlike traditional debt securities, which
may pay a fixed rate of interest until maturity, when
the entire principal amount comes due, payments on
certain mortgage-backed securities include both
interest and a partial repayment of principal.
Besides the scheduled repayment of principal,
repayments of principal may result from the voluntary
prepayment, refinancing, or foreclosure of the
underlying mortgage loans. If property owners make
unscheduled prepayments of their mortgage loans,
these prepayments will result in early payment of the
applicable mortgage-related securities. In that
event the fund may be unable to invest the proceeds
from the early payment of the mortgage-related
securities in an investment that provides as high a
yield as the mortgage-related securities.
Consequently, early payment associated with mortgage-
related securities may cause these securities to
experience significantly greater price and yield
volatility than that experienced by traditional fixed
income securities. The occurrence of mortgage
prepayments is affected by factors including the
level of interest rates, general economic conditions,
the location and age of the mortgage and other social
and demographic conditions. During periods of
falling interest rates, the rate of mortgage
prepayments tends to increase, thereby tending to
decrease the life of mortgagerelated securities.
During periods of rising interest rates, the rate of
mortgage prepayments usually decreases, thereby
tending to increase the life of mortgage-related
securities. If the life of a mortgage-related
security is inaccurately predicted, the fund may not
be able to realize the rate of return it expected.

Mortgage-backed and asset-backed securities are less
effective than other types of securities as a means
of "locking in" attractive long-term interest rates.
One reason is the need to reinvest prepayments of
principal; another is the possibility of significant
unscheduled prepayments resulting from declines in
interest rates. These prepayments would have to be
reinvested at lower rates. As a result, these
securities may have less potential for capital
appreciation during periods of declining interest
rates than other securities of comparable maturities,
although they may have a similar risk of decline in
market value during periods of rising interest rates.
Prepayments may also significantly shorten the
effective maturities of these
securities, especially during periods of declining
interest rates. Conversely, during periods of rising
interest rates, a reduction in prepayments may
increase the effective maturities of these
securities, subjecting them to a greater risk of
decline in market value in response to rising
interest rates than traditional debt securities, and,
therefore, potentially increasing the volatility of
the fund.

Prepayments may cause losses on securities purchased
at a premium. At times, some of the mortgage-backed
and asset-backed securities in which the fund may
invest will have higher than market interest rates
and therefore will be purchased at a premium above
their par value. Unscheduled prepayments, which are
made at par, will cause the fund to experience a loss
equal to any unamortized premium.

CMOs may be issued by a U.S. government agency or
instrumentality or by a private issuer. Although
payment of the principal of, and interest on, the
underlying collateral securing privately issued CMOs
may be guaranteed by the U.S. government or its
agencies or instrumentalities, these CMOs represent
obligations solely of the private issuer and are not
insured or guaranteed by the U.S. government, its
agencies or instrumentalities or any other person or
entity.

Prepayments could cause early retirement of CMOs.
CMOs are designed to reduce the risk of prepayment
for investors by issuing multiple classes of
securities, each having different maturities,
interest rates and payment schedules, and with the
principal and interest on the underlying mortgages
allocated among the several classes in various ways.
Payment of interest or principal on some classes or
series of CMOs may be subject to contingencies or
some classes or series may bear some or all of the
risk of default on the underlying mortgages. CMOS of
different classes or series are generally retired in
sequence as the underlying mortgage loans in the
mortgage pool are repaid.
If enough mortgages are repaid ahead of schedule, the
classes or series of a CMO with the earliest
maturities generally will be retired prior to their
maturities. Thus, the early retirement of particular
classes or series of a CMO held by the fund would
have the same effect as the prepayment of mortgages
underlying other mortgage-backed securities.
Conversely, slower than anticipated prepayments can
extend the effective maturities of CMOs, subjecting
them to a greater risk of decline in market value in
response to rising interest rates than traditional
debt securities, and, therefore, potentially
increasing the volatility of the fund.

Prepayments could result in losses on stripped
mortgage-backed securities. Stripped mortgage-backed
securities are usually structured with two classes
that receive different portions of the interest and
principal distributions on a pool of mortgage loans.
The fund may invest in both the interest-only or "IO"
class and the principal-only or "PO" class. The
yield to maturity on an IO class of stripped mortgage-
backed securities is extremely sensitive not only to
changes in prevailing interest rates but also to the
rate of principal payments (including prepayments) on
the underlying assets. A rapid rate of principal
prepayments may have a measurable adverse effect on
the fund's yield to maturity to the extent it invests
in IOs. If the assets underlying the IO experience
greater than anticipated prepayments of principal,
the fund may fail to recoup fully its initial
investment in these securities. Conversely, POs tend
to increase in value if prepayments are greater than
anticipated and decline if prepayments are slower
than anticipated.

The secondary market for stripped mortgage-backed
securities may be more volatile and less liquid than
that for other mortgagebacked securities, potentially
limiting the fund's ability to buy or sell those
securities at any particular time.

Structured notes

A fund may be able to invest in so-called structured
notes. These securities are generally derivative
instruments whose value is tied to an underlying
index or other security or asset class. Such
structured notes may include, for example, notes that
allow a fund to invest indirectly in certain foreign
investments which the fund would otherwise would not
be able to directly invest often because of
restrictions imposed by local laws.

Tax-exempt Securities

General description. As used in this SAI, the term
"Tax-exempt securities" includes debt obligations
issued by a state, its political subdivisions (for
example, counties, cities, towns, villages, districts
and authorities) and their agencies,
instrumentalities or other governmental units, the
interest from which is, in the opinion of bond
counsel, exempt from federal income tax and the
appropriate state's personal income tax. Such
obligations are issued to obtain funds for various
public purposes, including the construction of a wide
range of public facilities, such as airports,
bridges, highways, housing, hospitals, mass
transportation, schools, streets and water and sewer
works. Other public purposes for which Tax-exempt
securities may be issued include the refunding of
outstanding obligations or the payment of general
operating expenses.

Short-term Tax-exempt securities are generally issued
by state and local governments and public authorities
as interim financing in anticipation of tax
collections, revenue receipts, or bond sales to
finance such public purposes.

In addition, certain types of "private activity"
bonds may be issued by public authorities to finance
projects such as privately operated housing
facilities; certain local facilities for supplying
water, gas or electricity; sewage or solid waste
disposal facilities; student loans; or public or
private institutions for the construction of
educational, hospital, housing and other facilities.
Such obligations are included within the term Tax-
exempt securities if the interest paid thereon is, in
the opinion of bond counsel, exempt from federal
income tax and state personal income tax (such
interest may, however, be subject to federal
alternative minimum tax). Other types of private
activity bonds, the proceeds of which are used for
the construction, repair or improvement of, or to
obtain equipment for, privately operated industrial
or commercial facilities, may also constitute Tax-
exempt securities, although the current federal tax
laws place substantial limitations on the size of
such issues.

Participation interests (Money Market Funds only).
The Money Market Fund may invest in Tax-exempt
securities either by purchasing them directly or by
purchasing certificates of accrual or similar
instruments evidencing direct ownership of interest
payments or principal payments, or both, on Tax-
exempt securities, provided that, in the opinion of
counsel to the initial seller of each such
certificate or instrument, any discount accruing on a
certificate or instrument that is purchased at a
yield not greater than the coupon rate of interest on
the related Tax-exempt securities will be exempt from
federal income tax to the same extent as interest on
the Tax-exempt
securities. The Money Market Fund may also invest in
Tax-exempt securities by purchasing from banks
participation interests in all or part of specific
holdings of Tax-exempt securities. These
participations may be backed in whole or in part by
an irrevocable letter of credit or guarantee of the
selling bank. The selling bank may receive a fee from
the Money Market Fund in connection with the
arrangement. The Money Market Fund will not purchase
such participation interests unless it receives an
opinion of counsel or a ruling of the Internal
Revenue Service that interest earned by it on Tax-
exempt securities in which it holds such
participation interests is exempt from federal income
tax. The Money Market Fund does not expect to invest
more than 5% of its assets in participation
interests.

Stand-by commitments. When the fund purchases Tax-
exempt securities, it has the authority to acquire
stand-by commitments from banks and broker-dealers
with respect to those Tax-exempt securities. A stand-
by commitment may be considered a security
independent of the Tax-exempt security to which it
relates. The amount payable by a bank or dealer
during the time a stand-by commitment is exercisable,
absent unusual circumstances, would be substantially
the same as the market value of the underlying Tax
exempt security to a third party at any time. The
fund expects that stand-by commitments generally will
be available without the payment of direct or
indirect consideration. The fund does not expect to
assign any value to stand-by commitments.

Yields. The yields on Tax-exempt securities depend
on a variety of factors, including general money
market conditions, effective marginal tax rates, the
financial condition of the issuer, general conditions
of the Tax-exempt security market, the size of a
particular offering, the maturity of the obligation
and the rating of the issue. The ratings of
nationally recognized securities rating agencies
represent their opinions as to the credit quality of
the Tax-exempt securities which they undertake to
rate. It should be emphasized, however, that ratings
are general and are not absolute standards of
quality. Consequently, Tax-exempt securities with
the same maturity and interest rate but with
different ratings may have the same yield. Yield
disparities may occur for reasons not directly
related to the investment quality of particular
issues or the general movement of interest rates and
may be due to such factors as changes in the overall
demand or supply of various types of Tax-exempt
securities or changes in the investment objectives of
investors. Subsequent to purchase by the fund, an
issue of Tax-exempt securities or other investments
may cease to be rated, or its rating may be reduced
below the minimum rating required for purchase by the
fund. Neither event will require the elimination of
an investment from the fund's portfolio, but Putnam
Management will consider such an event in its
determination of whether the fund should continue to
hold an investment in its portfolio.

"Moral obligation" bonds. The fund does not
currently intend to invest in so-called "moral
obligation" bonds, where repayment is backed by a
moral commitment of an entity other than the issuer,
unless the credit of the issuer itself, without
regard to the "moral obligation," meets the
investment criteria established for investments by
the fund.

Municipal leases. The fund may acquire participations
in lease obligations or installment purchase contract
obligations (collectively, "lease obligations") of
municipal authorities or entities. Lease obligations
do not constitute general obligations of the
municipality for which the municipality's taxing
power is pledged. Certain of these lease obligations
contain "nonappropriation" clauses, which provide
that the municipality has
no obligation to make lease or installment purchase
payments in future years unless money is appropriated
for such purpose on a yearly basis. In addition to the
"non-appropriation" risk, these securities represent a
relatively new type of financing that has not yet
developed the depth of marketability associated with
more conventional bonds. In the case of a "non-
appropriation" lease, the fund's ability to recover
under the lease in the event of nonappropriation or
default will be limited solely to the repossession of
the leased property, and in any event,
foreclosure of that property might prove difficult.

Additional risks. Securities in which the fund may
invest, including Tax-exempt securities, are subject
to the provisions of bankruptcy, insolvency and other
laws affecting the rights and remedies of creditors,
such as the federal Bankruptcy Code (including special
provisions related to municipalities and other public
entities), and laws, if any, that may be enacted by
Congress or state legislatures extending the time for
payment of principal or interest, or both, or imposing
other constraints upon enforcement of such
obligations. There is also the possibility that, as a
result of litigation or other conditions, the power,
ability or willingness of issuers to meet their
obligations for the payment of interest and principal
on their Tax-exempt securities may be materially
affected.

From time to time, proposals have been introduced
before Congress for the purpose of restricting or
eliminating the federal income tax exemption for
interest on debt obligations issued by states and
their political subdivisions. Federal tax laws limit
the types and amounts of tax-exempt bonds issuable for
certain purposes, especially industrial development
bonds and private activity bonds. Such limits may
affect the future supply and yields of these types of
Tax-exempt securities. Further proposals limiting the
issuance of tax-exempt bonds may well be introduced in
the future. If it appeared that the availability of
Tax-exempt securities for investment by the fund and
the value of the fund's portfolio could be materially
affected by such changes in law, the Trustees of the
fund would reevaluate its investment objective and
policies and consider changes in the structure of the
fund or its dissolution.

Convertible Securities

Convertible securities include bonds, debentures,
notes, preferred stocks and other securities that may
be converted into or exchanged for, at a specific
price or formula within a particular period of time, a
prescribed amount of common stock or other equity
securities of the same or a different issuer.
Convertible securities entitle the holder to receive
interest paid or accrued on debt or dividends paid or
accrued on preferred stock until the security matures
or is redeemed, converted or exchanged.

The market value of a convertible security is a
function of its "investment value" and its "conversion
value." A security's "investment value" represents
the value of the security without its conversion
feature (i.e., a nonconvertible fixed income
security). The investment value may be determined by
reference to its credit quality and the current value
of its yield to maturity or probable call date. At
any given time, investment value is dependent upon
such factors as the general level of interest rates,
the yield of similar nonconvertible securities, the
financial strength of the issuer and the seniority of
the security in the issuer's capital structure. A
security's "conversion value" is determined by
multiplying the number of shares the holder is
entitled to receive upon conversion or
exchange by the current price of the underlying
security.

If the conversion value of a convertible security is
significantly below its investment value, the
convertible security will trade like nonconvertible
debt or preferred stock and its market value will not
be influenced greatly by fluctuations in the market
price of the underlying security. Conversely, if the
conversion value of a convertible security is near or
above its investment value, the market value of the
convertible security will be more heavily influenced
by fluctuations in the market price of the underlying
security.

The fund's investments in convertible securities may
at times include securities that have a mandatory
conversion feature, pursuant to which the securities
convert automatically into common stock or other
equity securities at a specified date and a specified
conversion ratio, or that are convertible at the
option of the issuer. Because conversion of the
security is not at the option of the holder, the fund
may be required to convert the security into the
underlying common stock even at times when the value
of the underlying common stock or other equity
security has declined substantially.

The fund's investments in convertible securities,
particularly securities that are convertible into
securities of an issuer other than the issuer of the
convertible security, may be illiquid. The fund may
not be able to dispose of such securities in a timely
fashion or for a fair price, which could result in
losses to the fund.

Private Placements

The fund may invest in securities that are purchased
in private placements and, accordingly, are subject to
restrictions on resale as a matter of contract or
under federal securities laws. Because there may be
relatively few potential purchasers for such
investments, especially under adverse market or
economic conditions or in the event of adverse changes
in the financial condition of the issuer, the fund
could find it more difficult to sell such securities
when Putnam Management believes it advisable to do so
or may be able to sell such securities only at prices
lower than if such securities were more widely held.
At times, it may also be more difficult to determine
the fair value of such securities for purposes of
computing the fund's net asset value.

While such private placements may often offer
attractive opportunities for investment not otherwise
available on the open market, the securities so
purchased are often "restricted securities," i.e.,
securities which cannot be sold to the public without
registration under the Securities Act of 1933 or the
availability of an exemption from registration (such
as Rules 144 or 144A), or which are "not readily
marketable" because they are subject to other legal or
contractual delays in or restrictions on resale.

The absence of a trading market can make it difficult
to ascertain a market value for illiquid investments.
Disposing of illiquid investments may involve time-
consuming negotiation and legal expenses, and it may
be difficult or impossible for the fund to sell them
promptly at an acceptable price. The fund may have to
bear the extra expense of registering such securities
for resale and the risk of substantial delay in
effecting such registration. Also market quotations
are less readily available. The judgment of Putnam
Management may at times play a greater role in valuing
these securities than in the case of unrestricted
securities.

Generally speaking, restricted securities may be sold
only to qualified institutional buyers, or in a
privately negotiated transaction to a limited number
of purchasers, or in limited quantities after they
have been held for a specified period of time and
other conditions are met pursuant to an exemption from
registration, or in a public offering for which a
registration statement is in effect under the
Securities Act of 1933. The funds may be deemed to be
an "underwriter" for purposes of the Securities Act of
1933 when selling restricted securities to the public,
and in such event the fund may be liable to purchasers
of such securities if the registration statement
prepared by the issuer, or the prospectus forming a
part of it, is materially inaccurate or misleading.

Futures Contracts and Related Options

Subject to applicable law the fund may invest without
limit in futures contracts and related options for
hedging and non-hedging purposes, such as to manage
the effective duration of the fund's portfolio or as a
substitute for direct investment. A financial futures
contract sale creates an obligation by the seller to
deliver the type of financial instrument called for in
the contract in a specified delivery month for a
stated price. A financial futures contract purchase
creates an obligation by the purchaser to take
delivery of the type of financial instrument called
for in the contract in a specified delivery month at a
stated price. The specific instruments delivered or
taken, respectively, at settlement date are not
determined until on or near that date. The
determination is made in accordance with the rules of
the exchange on which the futures contract sale or
purchase was made. Futures contracts are traded in
the United States only on commodity exchanges or
boards of trade -- known as "contract markets" --
approved for such trading by the Commodity Futures
Trading Commission (the "CFTC"), and must be executed
through a futures commission merchant or brokerage
firm which is a member of the relevant contract
market.

Although futures contracts (other than index futures)
by their terms call for actual delivery or acceptance
of commodities or securities, in most cases the
contracts are closed out before the settlement date
without the making or taking of delivery.
Closing out a futures contract sale is effected by
purchasing a futures contract for the same aggregate
amount of the specific type of financial instrument or
commodity with the same delivery date. If the price
of the initial sale of the futures contract exceeds
the price of the offsetting purchase, the seller is
paid the difference and realizes a gain. Conversely,
if the price of the offsetting purchase exceeds the
price of the initial sale, the seller realizes a loss.
If the fund is unable to enter into a closing
transaction, the amount of the fund's potential loss
is unlimited. The closing out of a futures contract
purchase is effected by the purchaser's entering into
a futures contract sale. If the offsetting sale price
exceeds the purchase price, the purchaser realizes a
gain, and if the purchase price exceeds the offsetting
sale price, he realizes a loss. In general, 40% of
the gain or loss arising from the closing out of a
futures contract traded on an exchange approved by the
CFTC is treated as short-term gain or loss, and 60% is
treated as long-term gain or loss.

Unlike when the fund purchases or sells a security, no
price is paid or received by the fund upon the
purchase or sale of a futures contract. Upon entering
into a contract, the fund is required to deposit with
its custodian in a segregated account in the name of
the futures broker an amount of liquid assets. This
amount is known as "initial margin." The nature of
initial margin in futures transactions is different
from that of margin in security transactions in that
futures contract margin does not involve the borrowing
of funds to finance the transactions. Rather, initial
margin is similar to a performance bond or good faith
deposit which is returned to the fund upon termination
of the futures contract, assuming all contractual
obligations have been satisfied. Futures contracts
also involve brokerage costs.

Subsequent payments, called "variation margin" or
"maintenance margin," to and from the broker (or the
custodian) are made on a daily basis as the price of
the underlying security or commodity fluctuates,
making the long and short positions in the futures
contract more or less valuable, a process known as
"marking to the market." For example, when the fund
has purchased a futures contract on a security and the
price of the underlying security has risen, that
position will have increased in value and the fund
will receive from the broker a variation margin
payment based on that increase in value. Conversely,
when the fund has purchased a security futures
contract and the price of the underlying security has
declined, the position would be less valuable and the
fund would be required to make a variation margin
payment to the broker.

The fund may elect to close some or all of its futures
positions at any time prior to their expiration in
order to reduce or eliminate a hedge position then
currently held by the fund. The fund may close its
positions by taking opposite positions which will
operate to terminate the fund's position in the
futures contracts. Final determinations of variation
margin are then made, additional cash is required to
be paid by or released to the fund, and the fund
realizes a loss or a gain. Such closing transactions
involve additional commission costs.

The fund does not intend to purchase or sell futures
or related options for other than hedging purposes,
if, as a result, the sum of the initial margin
deposits on the fund's existing futures and related
options positions and premiums paid for outstanding
options on futures contracts would exceed 5% of the
fund's net assets.

Options on futures contracts. The fund may purchase
and write call and put options on futures contracts it
may buy or sell and enter into closing transactions
with respect to such options to terminate existing
positions. In return for the premium paid, options on
futures contracts give the purchaser the right to
assume a position in a futures contract at the
specified option exercise price at any time during the
period of the option. The fund may use options on
futures contracts in lieu of writing or buying options
directly on the underlying securities or purchasing
and selling the underlying futures contracts. For
example, to hedge against a possible decrease in the
value of its portfolio securities, the fund may
purchase put options or write call options on futures
contracts rather than selling futures contracts.
Similarly, the fund may purchase call options or write
put options on futures contracts as a substitute for
the purchase of futures contracts to hedge against a
possible increase in the price of securities which the
fund expects to purchase. Such options generally
operate in the same manner as options purchased or
written directly on the underlying investments.

As with options on securities, the holder or writer of
an option may terminate his position by selling or
purchasing an offsetting option. There is no
guarantee that such closing transactions can be
effected.

The fund will be required to deposit initial margin
and maintenance margin with respect to put and call
options on futures contracts written by it pursuant to
brokers' requirements similar to those described above
in connection with the discussion of futures
contracts.

Risks of transactions in futures contracts and related
options. Successful use of futures contracts by the
fund is subject to Putnam Management's ability to
predict movements in various factors affecting
securities markets, including interest rates. Compared
to the purchase or sale of futures contracts, the
purchase of call or put options on futures contracts
involves less potential risk to the fund because the
maximum amount at risk is the premium paid for the
options (plus transaction costs). However, there may
be circumstances when the purchase of a call or put
option on a futures contract would result in a loss to
the fund when the purchase or sale of a futures
contract would not, such as when there is no movement
in the prices of the hedged investments. The writing
of an option on a futures contract involves risks
similar to those risks relating to the sale of futures
contracts.

The use of options and futures strategies also
involves the risk of imperfect correlation among
movements in the prices of the securities underlying
the futures and options purchased and sold by the
fund, of the options and futures contracts themselves,
and, in the case of hedging transactions, of the
securities which are the subject of a hedge. The
successful use of these strategies further depends on
the ability of Putnam Management to forecast interest
rates and market movements correctly.

There is no assurance that higher than anticipated
trading activity or other unforeseen events might not,
at times, render certain market clearing facilities
inadequate, and thereby result in the institution by
exchanges of special procedures which may interfere
with the timely execution of customer orders.

To reduce or eliminate a position held by the fund,
the fund may seek to close out such position. The
ability to establish and close out positions will be
subject to the development and maintenance of a liquid
secondary market. It is not certain that this market
will develop or continue to exist for a particular
futures contract or option. Reasons for the absence
of a liquid secondary market on an exchange include
the following: (i) there may be insufficient trading
interest in certain contracts or options; (ii)
restrictions may be imposed by an exchange on opening
transactions or closing transactions or both; (iii)
trading halts, suspensions or other restrictions may
be imposed with respect to particular classes or
series of contracts or options, or underlying
securities; (iv) unusual or unforeseen circumstances
may interrupt normal operations on an exchange; (v)
the facilities of an exchange or a clearing
corporation may not at all times be adequate to handle
current trading volume; or (vi) one or more exchanges
could, for economic or other reasons, decide or be
compelled at some future date to discontinue the
trading of contracts or options (or a particular class
or series of contracts or options), in which event the
secondary market on that exchange for such contracts
or options (or in the class or series of contracts or
options) would cease to exist, although outstanding
contracts or options on the exchange that had been
issued by a clearing corporation as a result of trades
on that exchange would continue to be exercisable in
accordance with their terms.

U.S. Treasury security futures contracts and options.
U.S.
Treasury security futures contracts require the seller
to deliver, or the purchaser to take delivery of, the
type of U.S. Treasury security called for in the
contract at a specified date and price. Options on
U.S. Treasury security futures contracts give the
purchaser the right in return for the premium paid to
assume a position in a U.S. Treasury security futures
contract at the specified option exercise price at any
time during the period of the option.

Successful use of U.S. Treasury security futures
contracts by the fund is subject to Putnam
Management's ability to predict movements in the
direction of interest rates and other factors
affecting markets for debt securities. For example,
if the fund has sold U.S. Treasury security futures
contracts in order to hedge against the possibility of
an increase in interest rates which would adversely
affect securities held in its portfolio, and the
prices of the fund's securities increase instead as a
result of a decline in interest rates, the fund will
lose part or all of the benefit of the increased value
of its securities which it has hedged because it will
have offsetting losses in its futures positions. In
addition, in such situations, if the fund has
insufficient cash, it may have to sell securities to
meet daily maintenance margin requirements at a time
when it may be disadvantageous to do so.

There is also a risk that price movements in U.S.
Treasury security futures contracts and related
options will not correlate closely with price
movements in markets for particular securities. For
example, if the fund has hedged against a decline in
the values of tax-exempt securities held by it by
selling Treasury security futures and the values of
Treasury securities subsequently increase while the
values of its taxexempt securities decrease, the fund
would incur losses on both
the Treasury security futures contracts written by it
and the taxexempt securities held in its portfolio.

Index futures contracts. An index futures contract is
a contract to buy or sell units of an index at a
specified future date at a price agreed upon when the
contract is made. Entering into a contract to buy
units of an index is commonly referred to as buying or
purchasing a contract or holding a long position in
the index. Entering into a contract to sell units of
an index is commonly referred to as selling a contract
or holding a short position. A unit is the current
value of the index. The fund
may enter into stock index futures contracts, debt
index futures contracts, or other index futures
contracts appropriate to its objective(s). The fund
may also purchase and sell options on index futures
contracts.

For example, the Standard & Poor's 500 Composite Stock
Price Index ("S&P 500") is composed of 500 selected
common stocks, most of which are listed on the New
York Stock Exchange. The S&P 500 assigns relative
weightings to the common stocks included in the Index,
and the value fluctuates with changes in the market
values of those common stocks. In the case of the S&P
500, contracts are to buy or sell 500 units. Thus, if
the value of the S&P 500 were $150, one contract would
be worth $75,000 (500 units x $150). The stock index
futures contract specifies that no delivery of the
actual stocks making up the index will take place.
Instead, settlement in cash must occur upon the
termination of the contract, with the settlement being
the difference between the contract price and the
actual level of the stock index at the expiration of
the contract. For example, if the fund enters into a
futures contract to buy 500 units of the S&P 500 at a
specified future date at a contract price of $150 and
the S&P 500 is at $154 on that future date, the fund
will
gain $2,000 (500 units x gain of $4). If the fund
enters into a futures contract to sell 500 units of
the stock index at a specified future date at a
contract price of $150 and the S&P 500 is at $152 on
that future date, the fund will lose $1,000 (500 units
x loss of $2).

There are several risks in connection with the use by
the fund of index futures. One risk arises because of
the imperfect correlation between movements in the
prices of the index futures and movements in the
prices of securities which are the subject of the
hedge. Putnam Management will, however, attempt to
reduce this risk by buying or selling, to the extent
possible, futures on indices the movements of which
will, in its judgment, have a significant correlation
with movements in the prices of the securities sought
to be hedged.

Successful use of index futures by the fund is also
subject to Putnam Management's ability to predict
movements in the direction of the market. For
example, it is possible that, where the fund has sold
futures to hedge its portfolio against a decline in
the market, the index on which the futures are written
may advance and the value of securities held in the
fund's portfolio may decline. If this occurred, the
fund would lose money on the futures and also
experience a decline in value in its portfolio
securities. It is also possible that, if the fund has
hedged against the possibility of a decline in the
market adversely affecting securities held in its
portfolio and securities prices increase instead, the
fund will lose part or all of the benefit of the
increased value of those securities it has hedged
because it will have offsetting losses in its futures
positions. In addition, in such situations, if the
fund has insufficient cash, it may have to sell
securities to meet daily variation margin requirements
at a time when it is disadvantageous to do so.

In addition to the possibility that there may be an
imperfect correlation, or no correlation at all,
between movements in the index futures and the portion
of the portfolio being hedged, the prices of index
futures may not correlate perfectly with movements in
the underlying index due to certain market
distortions. First, all participants in the futures
market are subject to margin deposit and maintenance
requirements. Rather than meeting additional margin
deposit requirements, investors may close futures
contracts through offsetting transactions which could
distort the normal relationship between the index and
futures markets. Second, margin requirements in the
futures market are less onerous than margin
requirements in the securities market, and as a result
the futures market may attract more speculators than
the securities market does. Increased participation
by speculators in the futures market may also cause
temporary price distortions. Due to the possibility
of price distortions in the futures market and also
because of the imperfect correlation between movements
in the index and movements in the prices of index
futures, even a correct forecast of general market
trends by Putnam Management may still not result in a
profitable position over a short time period.

Options on stock index futures. Options on index
futures are similar to options on securities except
that options on index futures give the purchaser the
right, in return for the premium paid, to assume a
position in an index futures contract (a long position
if the option is a call and a short position if the
option is a put) at a specified exercise price at any
time during the period of the option. Upon exercise
of the option, the delivery of the futures position by
the writer of the option to the holder of the option
will be accompanied by delivery of the accumulated
balance in the writer's futures margin account which
represents the amount by which the market price of the
index futures contract, at exercise, exceeds (in the
case of a call) or is less than (in the case of a put)
the exercise price of the option on the index future.
If an option is exercised on the last trading day
prior to its expiration date, the settlement will be
made entirely in cash equal to the difference between
the exercise price of the option and the closing level
of the index on which the future is based on the
expiration date. Purchasers of options who fail to
exercise their options prior to the exercise date
suffer a loss of the premium paid.

Options on Indices

As an alternative to purchasing call and put options
on index futures, the fund may purchase and sell call
and put options on the underlying indices themselves.
Such options would be used in a manner identical to
the use of options on index futures.

Index Warrants

The fund may purchase put warrants and call warrants
whose values vary depending on the change in the value
of one or more specified securities indices ("index
warrants"). Index warrants are generally issued by
banks or other financial institutions and give the
holder the right, at any time during the term of the
warrant, to receive upon exercise of the warrant a
cash payment from the issuer based on the value of the
underlying index at the time of exercise. In general,
if the value of the underlying index rises above the
exercise price of the index warrant, the holder of a
call warrant will be entitled to receive a cash
payment from the issuer upon exercise based on the
difference between the value of the index and the
exercise price of the warrant; if the value of the
underlying index falls, the holder of a put warrant
will be entitled to receive a cash payment from the
issuer upon exercise based on the difference between
the exercise price of the warrant and the value of the
index. The holder of a warrant would not be entitled
to any payments from the issuer at any time when, in
the case of a call warrant, the exercise price is
greater than the value of the underlying index, or, in
the case of a put warrant, the exercise price is less
than the value of the underlying index. If the fund
were not to exercise an index warrant prior to its
expiration, then the fund would lose the amount of the
purchase price paid by it for the warrant.

The fund will normally use index warrants in a manner
similar to its use of options on securities indices.
The risks of the fund's use of index warrants are
generally similar to those relating to its use of
index options. Unlike most index options, however,
index warrants are issued in limited amounts and are
not obligations of a regulated clearing agency, but
are backed only by the credit of the bank or other
institution which issues the warrant. Also, index
warrants generally have longer terms than index
options. Although the fund will normally invest only
in exchange-listed warrants, index warrants are not
likely to be as liquid as certain index options backed
by a recognized clearing agency. In addition, the
terms of index warrants may limit the fund's ability
to exercise the warrants at such time, or in such
quantities, as the fund would otherwise wish to do.

Short-term Trading

In seeking the fund's objective(s), Putnam Management
will buy or sell portfolio securities whenever Putnam
Management believes it appropriate to do so. In
deciding whether to sell a portfolio security, Putnam
Management does not consider how long the fund
has owned the security. From time to time the fund
will buy securities intending to seek short-term
trading profits. A change in the securities held by
the fund is known as "portfolio turnover" and
generally involves some expense to the fund. This
expense may include brokerage commissions or dealer
markups and other transaction costs on both the sale
of securities and the reinvestment of the proceeds in
other securities. If sales of portfolio securities
cause the fund to realize net short-term capital
gains, such gains will be taxable as ordinary income.
As a result of the fund's investment policies, under
certain market conditions the fund's portfolio
turnover rate may be higher than that of other mutual
funds. Portfolio turnover rate for a fiscal year is
the ratio of the lesser of purchases or sales of
portfolio securities to the monthly average of the
value of portfolio securities -- excluding securities
whose maturities at acquisition were one year or less.
The fund's portfolio turnover rate is not a limiting
factor when Putnam Management considers a change in
the fund's portfolio.

Securities Loans

The fund may make secured loans of its portfolio
securities, on either a short-term or long-term basis,
amounting to not more than 25% of its total assets,
thereby realizing additional income. The risks in
lending portfolio securities, as with other extensions
of credit, consist of possible delay in recovery of
the securities or possible loss of rights in the
collateral should the borrower fail financially. As a
matter of policy, securities loans are made to broker-
dealers pursuant to agreements requiring that the
loans be continuously secured by collateral consisting
of cash or short-term debt obligations at least equal
at all times to the value of the securities on loan,
"marked-to-market" daily. The borrower pays to the
fund an amount equal to any dividends or interest
received on securities lent. The fund retains all or
a portion of the interest received on investment of
the cash collateral or receives a fee from the
borrower. Although voting rights, or rights to
consent, with respect to the loaned securities may
pass to the borrower, the fund retains the right to
call the loans at any time on reasonable notice, and
it will do so to enable the fund to exercise voting
rights on any matters materially affecting the
investment. The fund may also call such loans in
order to sell the securities.

Repurchase Agreements

The fund (except for Putnam Money Market Fund) may
enter into repurchase agreements, amounting to not
more than 25% of its total assets. A repurchase
agreement is a contract under which the fund acquires
a security for a relatively short period (usually not
more than one week) subject to the obligation of the
seller to repurchase and the fund to resell such
security at a fixed time and price (representing the
fund's cost plus interest). It is the fund's present
intention to enter into repurchase agreements only
with commercial banks and registered broker-dealers
and only with respect to obligations of the U.S.
government or its agencies or instrumentalities.
Repurchase agreements may also be viewed as loans made
by the fund which are collateralized by the securities
subject to repurchase. Putnam Management will monitor
such transactions to ensure that the value of the
underlying securities will be at least equal at all
times to the total amount of the repurchase
obligation, including the interest factor. If the
seller defaults, the fund could realize a loss on the
sale of the underlying security to the extent that the
proceeds of the sale including accrued interest are
less than the resale price provided in the agreement
including interest. In addition, if the seller should
be involved in bankruptcy or insolvency proceedings,
the fund may incur delay and costs in selling the
underlying security or may suffer a loss of principal
and interest if the fund is treated as an unsecured
creditor and required to return the underlying
collateral to the seller's estate.

Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the fund may
transfer uninvested cash balances into a joint
account, along with cash of other Putnam funds and
certain other accounts. These balances may be
invested in one or more repurchase agreements and/or
short-term money market instruments.

Restricted Securities

The SEC Staff currently takes the view that any
delegation by the Trustees of the authority to
determine that a restricted security is readily
marketable (as described in the investment
restrictions of the funds) must be pursuant to written
procedures established by the Trustees. It is the
present intention of the funds' Trustees that, if the
Trustees decide to delegate such determinations to
Putnam Management or another person, they would do so
pursuant to written procedures, consistent with the
Staff's position. Should the Staff modify its
position in the future, the Trustees would consider
what action would be appropriate in light of the
Staff's position at that time.

Forward Commitments

The fund may enter into contracts to purchase
securities for a fixed price at a future date beyond
customary settlement time ("forward commitments") if
the fund sets aside, on the books and records of its
custodian, liquid assets in an amount sufficient to
meet the purchase price, or if the fund enters into
offsetting contracts for the forward sale of other
securities it owns. In the case of to-be-announced
("TBA") purchase commitments, the unit price and the
estimated principal amount are established when the
fund enters into a contract, with the actual principal
amount being within a specified range of the estimate.
Forward commitments may be considered securities in
themselves, and involve a risk of loss if the value of
the security to be purchased declines prior to the
settlement date, which risk is in addition to the risk
of decline in the value of the fund's other assets.
Where such purchases are made through dealers, the
fund relies on the dealer to consummate the sale. The
dealer's failure to do so may result in the loss to
the fund of an advantageous yield or price. Although
the fund will generally enter into forward commitments
with the intention of acquiring securities for its
portfolio or for delivery pursuant to options
contracts it has entered into, the fund may dispose of
a commitment prior to settlement if Putnam Management
deems it appropriate to do so. The fund may realize
short-term profits or losses upon the sale of forward
commitments.

The fund may enter into TBA sale commitments to hedge
its portfolio positions or to sell securities it owns
under delayed delivery arrangements. Proceeds of TBA
sale commitments are not received until the
contractual settlement date. During the time a TBA
sale commitment is outstanding, equivalent deliverable
securities, or an offsetting TBA purchase commitment
deliverable on or before the sale commitment date, are
held as "cover" for the transaction. Unsettled TBA
sale commitments are valued at current market value of
the underlying securities. If the TBA sale commitment
is closed through the acquisition of an offsetting
purchase commitment, the fund realizes a gain or loss
on the commitment without regard to any unrealized
gain or loss on the underlying security. If the fund
delivers securities under the commitment, the fund
realizes a gain or loss from the sale of the
securities based upon the unit price established at
the date the commitment was entered into.

Swap Agreements

The fund may enter into swap agreements and other
types of overthe-counter transactions with broker-
dealers or other financial institutions, in which its
investment return will depend on the change in value
of a specified security or index. The fund would
typically receive from the counterparty the amount of
any increase, and pay to the counterparty the amount
of any decrease, in the value of the underlying
security or index. The contracts would thus, absent
the failure of the counterparty to complete its
obligations, provide to the fund approximately the
same return as it would have realized if it had owned
the security or index directly.

The fund's ability to realize a profit from such
transactions will depend on the ability of the
financial institutions with which it enters into the
transactions to meet their obligations to the fund.
Under certain circumstances, suitable transactions may
not be available to the fund, or the fund may be
unable to close out its position under such
transactions at the same time, or at the same price,
as if it had purchased comparable publicly traded
securities.

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
the prospectus or in this SAI. The fund's use of
derivatives may cause the fund to recognize higher
amounts of short-term capital gains, generally taxed
to shareholders at ordinary income tax rates.

Year 2000

Like other financial and business organizations, the
funds depend on the proper function of their service
providers' computer systems. To the extent that the
systems used by the funds or their service providers
cannot distinguish between the year 1900 and the year
2000 or have other operating difficulties as a result
of the year 2000, the operations of and services
provided to the funds and their shareholders could be
adversely impacted. Putnam Management and its
affiliates have reported that each expects to modify
its systems, as necessary, to address this socalled
"year 2000 problem," and will, on behalf of the funds,
inquire as to the year 2000 compliance of the funds'
other major service providers. However, there can be
no assurance that the operations of and services
provided to the funds and their shareholders will not
be adversely affected. Similarly, companies in which
the funds invest may also experience "year 2000
problems," which could ultimately result in losses to
a fund to the extent that the securities of any such
company decline in value as a result of a "year 2000
problem."

Euro Conversion

Eleven member countries of the European Economic and
Monetary Union (the "EMU") have qualified for conversion of
their national currencies to the euro on January 1,
1999. The euro is a common currency that is expected
to eventually be used as the sole currency for these
countries and other EMU members that wish to convert
to the euro. National currencies will remain for the
converting countries through at least July of 2002
while the full transition to the euro in the countries
involved in the conversion occurs. Possible
consequences to funds that invest in securities
denominated in any of the national currencies affected
include the risks that: (i) the unification of
economic and monetary policies underpinning the
currency unification may increase the potential for
similarities in the movements of markets in the
European countries converting to the euro, (ii)
contracts (including contracts regarding currency
transactions) denominated in (or tied to) those
currencies may become more difficult to enforce, and
that (iii) companies in which the funds invest may be
adversely affected by their failure (or the failure of
other companies with which they do business) to
adequately address the operational aspects of the
conversion.

Like other financial and business organizations, the
funds depend on the proper function of their service
providers' computer and other systems. The funds
could be adversely affected if the computer or other
systems used by Putnam Management and the funds' other
service providers cannot appropriately account for the
conversion to the euro. Putnam Management and its
affiliates expect that their systems will be able to
address this issue without any material interruption
of service. However, there can be no assurance that
the operations of and services provided to the funds
and their shareholders will not be adversely affected.
Similarly, companies in which the funds invest may
also experience similar problems in dealing with the
conversion to the euro, which could result in losses
to the funds.

TAXES

Taxation of the fund. The fund intends to qualify
each year as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). In order to qualify for the
special tax treatment accorded regulated investment
companies and their shareholders, the fund must, among
other things:

(a) Derive at least 90% of its gross income from
dividends, interest, payments with respect to certain
securities loans, and gains from the sale of stock,
securities and foreign currencies, or other income
(including but not limited to gains from options,
futures, or forward contracts) derived with respect to
its business of investing in such stock, securities,
or currencies;

(b) distribute with respect to each taxable year at
least 90% of the sum of its taxable net investment
income, its net tax-exempt income, and the excess, if
any, of net short-term capital gains over net long-
term capital losses for such year; and

(c) diversify its holdings so that, at the end of each
fiscal quarter, (i) at least 50% of the market value
of the fund's assets is represented by cash and cash
items, U.S. government securities, securities of other
regulated investment companies, and other securities
limited in respect of any one issuer to a value not
greater than 5% of the value of the fund's total
assets and to not more than 10% of the outstanding
voting securities of such issuer, and (ii) not more
than 25% of the value of its assets is invested in the
securities (other than those of the U.S. Government or
other regulated investment companies) of any one
issuer or of two or more issuers which the fund
controls and
which are engaged in the same, similar, or related
trades or businesses.

If the fund qualifies as a regulated investment
company that is accorded special tax treatment, the
fund will not be subject to federal income tax on
income paid to its shareholders in the form of
dividends (including capital gain dividends).

If the fund failed to qualify as a regulated
investment company accorded special tax treatment in
any taxable year, the fund would be subject to tax on
its taxable income at corporate rates, and all
distributions from earnings and profits, including any
distributions of net tax-exempt income and net long-
term capital gains, would be taxable to shareholders
as ordinary income. In addition, the fund could be
required to recognize unrealized gains, pay
substantial taxes and interest and make substantial
distributions before requalifying as a regulated
investment company that is accorded special tax
treatment.

If the fund fails to distribute in a calendar year
substantially all of its ordinary income for such year
and substantially all of its capital gain net income
for the one-year period ending October 31 (or later if
the fund is permitted so to elect and so elects), plus
any retained amount from the prior year, the fund will
be subject to a 4% excise tax on the undistributed
amounts. A dividend paid to shareholders by the fund
in January of a year generally is deemed to have been
paid by the fund on December 31 of the preceding year,
if the dividend was declared and payable to
shareholders of record on a date in October, November
or December of that preceding year. The fund intends
generally to make distributions sufficient to avoid
imposition of the 4% excise tax.

Fund distributions. Distributions from the fund
(other than exempt-interest dividends, as discussed
below) will be taxable to shareholders as ordinary
income to the extent derived from the fund's
investment income and net short-term gains.
Distributions of net capital gains (that is, the
excess of net gains from capital assets held more than
one year over net losses from capital assets held for
not more than one year) will be taxable to
shareholders as such, regardless of how long a
shareholder has held the shares in the fund.

Exempt-interest dividends. The fund will be qualified
to pay exempt-interest dividends to its shareholders
only if, at the close of each quarter of the fund's
taxable year, at least 50% of the total value of the
fund's assets consists of obligations the interest on
which is exempt from federal income tax. Distributions
that the fund properly designates as exemptinterest
dividends are treated as interest excludable from
shareholders' gross income for federal income tax
purposes but may be taxable for federal alternative
minimum tax purposes and for state and local purposes.
If the fund intends to be qualified to pay exempt-
interest dividends, the fund may be limited in its
ability to enter into taxable transactions involving
forward commitments, repurchase agreements, financial
futures and options contracts on financial futures,
tax-exempt bond indices and other assets.

Part or all of the interest on indebtedness, if any,
incurred or continued by a shareholder to purchase or
carry shares of a fund paying exempt-interest
dividends is not deductible. The portion of interest
that is not deductible is equal to the total interest
paid or accrued on the indebtedness, multiplied by the
percentage of the fund's total distributions (not
including distributions from net long-term capital
gains) paid to the shareholder that
are exempt-interest dividends. Under rules used by
the Internal Revenue Service for determining when
borrowed funds are considered used for the purpose of
purchasing or carrying particular assets, the purchase
of shares may be considered to have been made with
borrowed funds even though such funds are not directly
traceable to the purchase of shares.

In general, exempt-interest dividends, if any,
attributable to interest received on certain private
activity obligations and certain industrial
development bonds will not be tax-exempt to any
shareholders who are "substantial users" of the
facilities financed by such obligations or bonds or
who are "related persons" of such substantial users.

A fund which is qualified to pay exempt-interest
dividends will inform investors within 60 days of the
fund's fiscal year-end of the percentage of its income
distributions designated as taxexempt. The percentage
is applied uniformly to all distributions
made during the year. The percentage of income
designated as taxexempt for any particular
distribution may be substantially different from the
percentage of the fund's income that was taxexempt
during the period covered by the distribution.

Hedging transactions. If the fund engages in hedging
transactions, including hedging transactions in
options, futures contracts, and straddles, or other
similar transactions, it will be subject to special
tax rules (including constructive sale, mark-to-
market, straddle, wash sale, and short sale rules),
the effect of which may be to accelerate income to the
fund, defer losses to the fund, cause adjustments in
the holding periods of the fund's securities, convert
long-term capital gains into shortterm capital gains
or convert short-term capital losses into longterm
capital losses. These rules could therefore affect
the amount, timing and character of distributions to
shareholders.
The fund will endeavor to make any available
elections pertaining to such transactions in a manner
believed to be in the best interests of the fund.

Certain of the fund's hedging activities (including
its transactions, if any, in foreign currencies or
foreign currencydenominated instruments) are likely
to produce a difference between its book income and
its taxable income. If the fund's book income
exceeds its taxable income, the distribution (if any)
of such excess will be treated as (i) a dividend to
the extent of the fund's remaining earnings and
profits (including earnings and profits arising from
tax-exempt income), (ii) thereafter as a return of
capital to the extent of the recipient's basis in the
shares, and (iii) thereafter as gain from the sale or
exchange of a capital asset. If the fund's book
income is less than its taxable income, the fund
could be required to make distributions exceeding
book income to qualify as a regulated investment
company that is accorded special tax treatment.

Return of capital distributions. If the fund makes a
distribution to you in excess of its current and
accumulated "earnings and profits" in any taxable
year, the excess distribution will be treated as a
return of capital to the extent of your tax basis in
your shares, and thereafter as capital gain. A return
of capital is not taxable, but it reduces your tax
basis in your shares, thus reducing any loss or
increasing any gain on a subsequent taxable
disposition by you of your shares.

Dividends and distributions on a fund's shares are
generally subject to federal income tax as described
herein to the extent they do not exceed the fund's
realized income and gains, even though such dividends
and distributions may economically
represent a return of a particular shareholder's
investment. Such distributions are likely to occur in
respect of shares purchased at a time when the fund's
net asset value reflects gains that are either
unrealized, or realized but not distributed.

Securities issued or purchased at a discount. The
fund's investment in securities issued at a discount
and certain other obligations will (and investments
in securities purchased at a discount may) require
the fund to accrue and distribute income not yet
received. In order to generate sufficient cash to
make the requisite distributions, the fund may be
required to sell securities in its portfolio that it
otherwise would have continued to hold.

Capital loss carryover. Distributions from capital
gains are generally made after applying any available
capital loss
carryovers. The amounts and expiration dates of any
capital loss carryovers available to the fund are
shown in Note 1 (Federal income taxes) to the
financial statements included in Part I of this SAI
or incorporated by reference into this SAI.

Foreign currency-denominated securities and related
hedging transactions. The fund's transactions in
foreign currencies, foreign currency-denominated debt
securities and certain foreign currency options,
futures contracts and forward contracts (and similar
instruments) may give rise to ordinary income or loss
to the extent such income or loss results from
fluctuations in the value of the foreign currency
concerned.

If more than 50% of the fund's assets at year end
consists of the securities of foreign corporations,
the fund may elect to permit shareholders to claim a
credit or deduction on their income tax returns for
their pro rata portion of qualified taxes paid by the
fund to foreign countries in respect of foreign
securities the fund has held for at least the minimum
period specified in the Code. In such a case,
shareholders will include in gross income from
foreign sources their pro rata shares of such taxes.
A shareholder's ability to claim a foreign tax credit
or deduction in respect of foreign taxes paid by the
fund may be subject to certain limitations imposed by
the Code, as a result of which a shareholder may not
get a full credit or deduction for the amount of such
taxes. In particular, shareholders must hold their
fund shares (without protection from risk of loss) on
the ex-dividend date and for at least 15 additional
days during the 30-day period surrounding the ex-
dividend date to be eligible to claim a foreign tax
credit with respect to a given dividend.
Shareholders who do not itemize on their federal
income tax returns may claim a credit (but no
deduction) for such foreign taxes.

Investment by the fund in "passive foreign investment
companies" could subject the fund to a U.S. federal
income tax or other charge on the proceeds from the
sale of its investment in such a company; however,
this tax can be avoided by making an election to mark
such investments to market annually or to treat the
passive foreign investment company as a "qualified
electing fund."

A "passive foreign investment company" is any foreign
corporation: (i) 75 percent or more of the income of
which for the taxable year is passive income, or (ii)
the average percentage of the assets of which
(generally by value, but by adjusted tax basis in
certain cases) that produce or are held for the
production of passive income is at least 50 percent.
Generally, passive income for this purpose means
dividends,
interest (including income equivalent to interest),
royalties, rents, annuities, the excess of gains over
losses from certain property transactions and
commodities transactions, and foreign currency gains.
Passive income for this purpose does not include
rents and royalties received by the foreign
corporation from active business and certain income
received from related persons.

Sale or redemption of shares. The sale, exchange or
redemption of fund shares may give rise to a gain or
loss. In general, any gain or loss realized upon a
taxable disposition of shares will be treated as long-
term capital gain or loss if the shares have been
held for more than 12 months. Otherwise the gain or
loss on the sale, exchange or redemption of fund
shares will be treated as short-term capital gain or
loss. However, if a shareholder sells shares at a
loss within six months of purchase, any loss will be
disallowed for Federal income tax purposes to the
extent of any exempt-interest dividends received on
such shares. In addition, any loss (not already
disallowed as provided in the preceding sentence)
realized upon a taxable disposition of shares held
for six months or less will be treated as long-term,
rather than short-term, to the extent of any long-
term capital gain distributions received by the
shareholder with respect to the shares. All or a
portion of any loss realized upon a taxable
disposition of fund shares will be disallowed if
other shares of the same fund are purchased within 30
days before or after the disposition. In such a
case, the basis of the newly purchased shares will be
adjusted to reflect the disallowed loss.

Shares purchased through tax-qualified plans.
Special tax rules apply to investments though defined
contribution plans and other tax-qualified plans.
Shareholders should consult their tax adviser to
determine the suitability of shares of a fund as an
investment through such plans and the precise effect
of an investment on their particular tax situation.

Backup withholding. The fund generally is required
to withhold and remit to the U.S. Treasury 31% of the
taxable dividends and other distributions paid to any
individual shareholder who fails to furnish the fund
with a correct taxpayer identification number (TIN),
who has under-reported dividends or interest income,
or who fails to certify to the fund that he or she is
not subject to such withholding.

The Internal Revenue Service recently revised its
regulations affecting the application to foreign
investors of the back-up withholding and withholding
tax rules described above. The new regulations will
generally be effective for payments made after
December 31, 1999 (although transition rules will
apply). In some circumstances, the new rules will
increase the certification and filing requirements
imposed on foreign investors in order to qualify for
exemption from the 31% back-up withholding tax rates
under income tax treaties. Foreign investors in a
fund should consult their tax advisors with respect
to the potential application of these new
regulations.

MANAGEMENT

Trustees Name (Age)

*+George Putnam (72), Chairman and President.
Chairman and Director of Putnam Management and Putnam
Mutual Funds. Director, Freeport Copper and Gold,
Inc. (a mining and natural resource company),
Houghton Mifflin Company (a major publishing company)
and Marsh & McLennan Companies, Inc.

John A. Hill (57), Vice Chairman. Chairman and
Managing
Director, First Reserve Corporation (a registered
investment adviser investing in companies in the
world-wide energy industry on behalf of institutional
investors). Director of Snyder Oil Corporation,
TransMontaigne Oil Company and various private
companies owned by First Reserve Corporation, such as
James River Coal and Anker Coal Corporation.

+William F. Pounds (70), Vice Chairman. Professor
Emeritus of Management, Alfred P. Sloan School of
Management, Massachusetts Institute of Technology.
Director of IDEXX Laboratories, Inc. (a provider of
diagnostic products and services for the animal
health and food and environmental industries),
Management Sciences for Health, Inc. (a non-profit
organization), and Sun Company, Inc. (a petroleum
refining and marketing company).

Jameson A. Baxter (55), Trustee. President, Baxter
Associates, Inc. (a management consulting and private
investments firm). Director of MB Financial, Inc.,
ASHTA Chemicals, Inc., Banta Corporation (printing
and digital imaging), and Ryerson Tull, Inc.
(America's largest steel service corporation).
Chairman Emeritus of the Board of Trustees, Mount
Holyoke College.

+Hans H. Estin (70), Trustee. Chartered Financial
Analyst and Vice Chairman, North American Management
Corp. (a registered investment adviser).

Ronald J. Jackson (55), Trustee. Former Chairman,
President and Chief Executive Officer of Fisher-
Price, Inc. (a major toy manufacturer).

*Paul L. Joskow (51), Trustee. Professor Emeritus of
Economics and Management and former Chairman of the
Department of Economics, Massachusetts Institute of
Technology. Director, New England Electric System (a
public utility holding company), State Farm Indemnity
Company (an automobile insurance company) and
Whitehead Institute for Biomedical Research (a non-
profit research institution).

Elizabeth T. Kennan (61), Trustee. President
Emeritus and Professor, Mount Holyoke College.
Director, Bell Atlantic (a telecommunications
company), the Kentucky Home Life Insurance Companies,
Bell Atlantic, Northeast Utilities and Talbots (a
distributor of women's apparel).

*Lawrence J. Lasser (56), Trustee and Vice President.
President, Chief Executive Officer and Director of
Putnam Investments, Inc. and Putnam Investment
Management, Inc. Director of Marsh & McLennan
Companies, Inc. and the United Way of Massachusetts
Bay.

John H. Mullin, III (57), Trustee. Chairman and CEO
of Ridgeway Farm, Director of ACX Technologies, Inc.
(a company engaged in the manufacture of industrial
ceramics and packaging products), Alex. Brown Realty,
Inc. and The Liberty Corporation (a company engaged
in the life insurance and broadcasting industries).

+Robert E. Patterson (53), Trustee. President and
Trustee of Cabot Industrial Trust (a publicly traded
real estate investment trust). Director of
Brandywine Trust Company.

*Donald S. Perkins (71), Trustee. Director of
various corporations, including AON Corp. (an
insurance company), Cummins Engine Company, Inc. (an
engine and power generator manufacturer and
assembler), Parsons Group L.L.C. (a corporation
providing financial staffing services), LaSalle Hotel
Properties, LaSalle Street Fund, Inc. and LaSalle
U.S. Realty Income and Growth Fund, Inc. (real estate
investment trusts), Lucent Technologies Inc. (a
global provider of telecommunications equipment),
Nanophase Technologies Inc. (a producer of nano
crystalline materials), Neodesic Corp. (a software
company), Ryerson Tull, Inc. (America's largest steel
service corporation) and Springs Industries, Inc. (a
textile manufacturer).

*George Putnam III (47), Trustee. President, New
Generation Research, Inc. (a publisher of financial
advisory and other research services relating to
bankrupt and distressed companies) and New Generation
Advisers, Inc. (a registered investment adviser).
Director, Massachusetts Audubon Society and The
Boston Family Office, L.L.C. (a registered investment
advisor).

*A.J.C. Smith (64), Trustee. Chairman and Chief
Executive Officer, Marsh & McLennan Companies, Inc.
Director, Trident Partnership (a $667 million 10-year
limited partnership with over 30 institutional
investors).

W. Thomas Stephens (56), Trustee. President and
Chief Executive Officer of MacMillan Bloedel Ltd. (a
major forest products company). Director, Qwest
Communications (a fiber optics manufacturer) and New
Century Energies (a public utility company).

W. Nicholas Thorndike (65), Trustee. Director of
various corporations and charitable organizations,
including Courier Corporation (a book manufacturer),
Data General Corporation (a provider of customized
computer solutions), Bradley Real Estate, Inc., and
Providence Journal Co.

Officers Name (Age)

Charles E. Porter (60), Executive Vice President.
Managing Director of Putnam Investments, Inc. and
Putnam Management.

Patricia C. Flaherty (52), Vice President. Senior
Vice President of Putnam Investments, Inc. and Putnam
Management.

Gordon H. Silver (51), Vice President. Director and
Senior Managing Director of Putnam Investments, Inc.
and Putnam Management.

Brett C. Browchuk (36), Vice President. Managing
Director of Putnam Management.

Ian C. Ferguson (41), Vice President. Senior
Managing Director of Putnam Investments, Inc. and
Putnam Management.

Richard A. Monaghan (44), Vice President. Managing
Director of Putnam Investments, Inc., Putnam
Management and Putnam Mutual Funds.

John R. Verani (59), Vice President. Senior Vice
President of Putnam Investments, Inc. and Putnam
Management.

John D. Hughes (64), Senior Vice President and
Treasurer.

Beverly Marcus (54), Clerk and Assistant Treasurer.

*Trustees who are or may be deemed to be "interested
persons" (as defined in the Investment Company Act of
1940) of the fund, Putnam Management or Putnam Mutual
Funds.

Messrs. Putnam, Lasser and Smith are deemed
"interested persons" by virtue of their positions as
officers or shareholders of the fund, or directors of
Putnam Management, Putnam Mutual Funds, or
Marsh & McLennan Companies, Inc., the parent company
of Putnam Management and Putnam Mutual Funds.
Mr. George Putnam, III, Mr. Putnam's son, is also an
"interested person" of the fund, Putnam Management,
and Putnam Mutual Funds. Mr. Perkins may be deemed to
be an "interested person" of the fund because of his
service as a director of a certain publicly held
company that includes registered broker-dealer firms
among its subsidiaries. Neither the fund nor any of
the other Putnam funds currently engages in any
transactions with such firms except that certain of
such firms act as dealers in the retail sale of
shares of certain Putnam funds in the ordinary course
of their business. Mr. Joskow is not currently an
"interested person" of the fund but could be deemed
by the Securities and Exchange Commission to be an
"interested person" on account of his prior
consulting relationship with National Economic
Research Associates, Inc., a wholly-owned subsidiary
of Marsh & McLennan Companies, Inc., which was
terminated as of August 31, 1998. The balance of the
Trustees are not "interested persons."
+Members of the Executive Committee of the Trustees.
The Executive Committee meets between regular
meetings of the Trustees as may be required to review
investment matters and other affairs of the fund and
may exercise all of the powers of the Trustees.
----------------
Certain other officers of Putnam Management are
officers of the fund. See "Additional officers" in
Part I of this SAI. The mailing address of each of
the officers and Trustees is One Post Office Square,
Boston, Massachusetts 02109.
Except as stated below, the principal occupations of
the officers and Trustees for the last five years
have been with the employers as shown above, although
in some cases they have held different positions with
such employers. Prior to July, 1998, Mr. Joskow was
Chairman of the Department of Economics,
Massachusetts Institute of Technology, and, prior to
September, 1998, he was a consultant to National
Economic Research Associates. Prior to June, 1995,
Dr. Kennan was President of Mount Holyoke College.
Prior to 1996, Mr. Stephens was Chairman of the Board
of Directors, President and Chief Executive Officer
of Johns Manville Corporation. Prior to April, 1996,
Mr. Ferguson was CEO at Hong Kong Shanghai Banking
Corporation. Prior to February, 1998, Mr. Patterson
was Executive Vice President and Director of
Acquisitions of Cabot Partners Limited Partnership.
Prior to November, 1998, Mr. Monaghan was Managing
Director at Merrill Lynch.
Each Trustee of the fund receives an annual fee and
an additional fee for each Trustees' meeting
attended. Trustees who are not interested persons of
Putnam Management and who serve on committees of the
Trustees receive additional fees for attendance at
certain committee meetings and for special services
rendered in that connection. All of the Trustees are
Trustees of all the Putnam funds and each receives
fees for his or her services. For details of
Trustees' fees paid by the fund and information
concerning retirement guidelines for the Trustees,
see "Charges and expenses" in Part I of this SAI.
The Agreement and Declaration of Trust of the fund
provides that the fund will indemnify its Trustees
and officers against liabilities and expenses
incurred in connection with litigation in which they
may be involved because of their offices with the
fund, except if it is determined in the manner
specified in the
Agreement and Declaration of Trust that they have not
acted in good faith in the reasonable belief that
their actions were in the best interests of the fund
or that such indemnification would relieve any
officer or Trustee of any liability to the fund or
its shareholders by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of
his or her duties. The fund, at its expense,
provides liability insurance for the benefit of its
Trustees and officers.

Putnam Management and its affiliates

Putnam Management is one of America's oldest and
largest money management firms. Putnam Management's
staff of experienced portfolio managers and research
analysts selects securities and constantly supervises
the fund's portfolio. By pooling an investor's money
with that of other investors, a greater variety of
securities can be purchased than would be the case
individually; the resulting diversification helps
reduce investment risk. Putnam Management has been
managing mutual funds since 1937. Today, the firm
serves as the investment manager for the funds in the
Putnam Family, with nearly $222 billion in
assets in nearly 11 million shareholder accounts at
December 31, 1998. An affiliate, The Putnam Advisory
Company, Inc., manages domestic and foreign
institutional accounts and mutual funds, including
the accounts of many Fortune 500 companies. Another
affiliate, Putnam Fiduciary Trust Company, provides
investment advice to institutional clients under its
banking and fiduciary powers. At December 31, 1998,
Putnam Management and its affiliates managed over
$294 billion in assets, including over $20
billion in tax-exempt securities and over $71 billion
in retirement plan assets.

Putnam Management, Putnam Mutual Funds and Putnam
Fiduciary Trust Company are subsidiaries of Putnam
Investments, Inc., a holding company which in turn
is , except for a minority stake owned by
employees, 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.

Trustees and officers of the fund who are also
officers of Putnam Management or its affiliates or
who are stockholders of Marsh & McLennan Companies,
Inc. will benefit from the advisory fees, sales
commissions, distribution fees, custodian fees and
transfer agency fees paid or allowed by the fund.

The Management Contract

Under a Management Contract between the fund and
Putnam Management, subject to such policies as the
Trustees may determine, Putnam Management, at its
expense, furnishes continuously an investment program
for the fund and makes investment decisions on behalf
of the fund. Subject to the control of the Trustees,
Putnam Management also manages, supervises and
conducts the other affairs and business of the fund,
furnishes office space and equipment, provides
bookkeeping and clerical services (including
determination of the fund's net asset value, but
excluding shareholder accounting services) and places
all orders for the purchase and sale of the fund's
portfolio securities. Putnam Management may place
fund portfolio transactions with broker-dealers which
furnish Putnam Management, without cost to it,
certain research, statistical and quotation services
of value to Putnam Management and its affiliates in
advising the fund and other clients. In so doing,
Putnam Management may cause the fund to pay greater
brokerage commissions than it might otherwise pay.

For details of Putnam Management's compensation under
the Management Contract, see "Charges and expenses"
in Part I of this SAI. Putnam Management's
compensation under the Management Contract may be
reduced in any year if the fund's expenses exceed the
limits on investment company expenses imposed by any
statute or regulatory authority of any jurisdiction
in which shares of the fund are qualified for offer
or sale. The term "expenses" is defined in the
statutes or regulations of such jurisdictions, and
generally excludes brokerage commissions, taxes,
interest, extraordinary expenses and, if the fund has
a distribution plan, payments made under such plan.

Under the Management Contract, Putnam Management may
reduce its compensation to the extent that the fund's
expenses exceed such lower expense limitation as
Putnam Management may, by notice to the fund, declare
to be effective. The expenses subject to this
limitation are exclusive of brokerage commissions,
interest, taxes, deferred organizational and
extraordinary expenses and, if the fund has a
distribution plan, payments required under such plan.
For the purpose of determining any such limitation on
Putnam Management's compensation, expenses of the
fund shall not reflect the application of commissions
or cash management credits that may reduce designated
fund expenses. The terms of any expense limitation
from time to time in effect are described in the
prospectus and/or Part I of this SAI.

In addition to the fee paid to Putnam Management, the
fund reimburses Putnam Management for the
compensation and related expenses of certain officers
of the fund and their assistants who provide certain
administrative services for the fund and the other
Putnam funds, each of which bears an allocated share
of the foregoing costs. The aggregate amount of all
such payments and reimbursements is determined
annually by the Trustees.

The amount of this reimbursement for the fund's most
recent fiscal year is included in "Charges and
Expenses" in Part I of this SAI. Putnam Management
pays all other salaries of officers of the fund. The
fund pays all expenses not assumed by Putnam
Management including, without limitation, auditing,
legal, custodial, investor servicing and shareholder
reporting expenses. The fund pays the cost of
typesetting for its prospectuses and the cost of
printing and mailing any prospectuses sent to its
shareholders. Putnam Mutual Funds pays the cost of
printing and distributing all other prospectuses.

The Management Contract provides that Putnam
Management shall not be subject to any liability to
the fund or to any shareholder of the fund for any
act or omission in the course of or connected with
rendering services to the fund in the absence of
willful misfeasance, bad faith, gross negligence or
reckless disregard of its duties on the part of
Putnam Management.

The Management Contract may be terminated without
penalty by vote of the Trustees or the shareholders
of the fund, or by Putnam Management, on 30 days'
written notice. It may be amended only by a vote of
the shareholders of the fund. The Management
Contract also terminates without payment of any
penalty in the event of its assignment. The
Management Contract provides that it will continue in
effect only so long as such continuance is approved
at least annually by vote of either the Trustees or
the shareholders, and, in either case, by a majority
of the Trustees who are not "interested persons" of
Putnam Management or the fund. In each of the
foregoing cases, the vote of the shareholders is the
affirmative vote of a "majority of the outstanding
voting securities" as defined in the Investment
Company Act of 1940.

Personal Investments by Employees of Putnam Management

Employees of Putnam Management are permitted to engage
in personal securities transactions, subject to
requirements and restrictions set forth in Putnam
Management's Code of Ethics. The Code of Ethics
contains provisions and requirements designed to
identify and address certain conflicts of interest
between personal investment activities and the
interests of investment
advisory clients such as the funds. Among other
things, the Code of Ethics, consistent with standards
recommended by the Investment Company Institute's
Advisory Group on Personal Investing, prohibits
certain types of transactions absent prior approval,
imposes time periods during which personal
transactions may not be made in certain securities,
and requires the submission of duplicate broker
confirmations and quarterly reporting of securities
transactions. Additional restrictions apply to
portfolio managers, traders, research analysts and
others involved in the investment advisory process.
Exceptions to these and other provisions of the Code
of Ethics may be granted in particular circumstances
after review by appropriate personnel.

Portfolio Transactions

Investment decisions. Investment decisions for the
fund and for the other investment advisory clients of
Putnam Management and its affiliates are made with a
view to achieving their respective investment
objectives. Investment decisions are the product of
many factors in addition to basic suitability for the
particular client involved. Thus, a particular
security may be bought or sold for certain clients
even though it could have been bought or sold for
other clients at the same time. Likewise, a
particular security may be bought for one or more
clients when one or more other clients are selling the
security. In some instances, one client may sell a
particular security to another client. It also
sometimes happens that two or more clients
simultaneously purchase or sell the same security, in
which event each day's transactions in such security
are, insofar as possible, averaged as to price and
allocated between such clients in a manner which in
Putnam Management's opinion is equitable to each and
in accordance with the amount being purchased or sold
by each.
There may be circumstances when purchases or sales of
portfolio securities for one or more clients will have
an adverse effect on other clients.

Brokerage and research services. Transactions on U.S.
stock exchanges, commodities markets and futures
markets and other agency transactions involve the
payment by the fund of negotiated brokerage
commissions. Such commissions vary among different
brokers. A particular broker may charge different
commissions according to such factors as the
difficulty and size of the transaction. Transactions
in foreign investments often involve the payment of
fixed brokerage commissions, which may be higher than
those in the United States. There is generally no
stated commission in the case of securities traded in
the over-thecounter markets, but the price paid by the
fund usually includes an undisclosed dealer commission
or mark-up. In underwritten offerings, the price paid
by the fund includes a disclosed, fixed commission or
discount retained by the underwriter or dealer. It is
anticipated that most purchases and sales of
securities by funds investing primarily in tax-exempt
securities and certain other fixed-income securities
will be with the issuer or with underwriters of or
dealers in those securities, acting as principal.
Accordingly, those funds would not ordinarily pay
significant brokerage commissions with respect to
securities transactions. See "Charges and expenses"
in Part I of this SAI for information concerning
commissions paid by the fund.

It has for many years been a common practice in the
investment advisory business for advisers of
investment companies and other institutional investors
to receive brokerage and research services (as defined
in the Securities Exchange Act of 1934, as amended
(the "1934 Act")) from broker-dealers that execute
portfolio transactions for the clients of such
advisers and from third parties with which such broker-
dealers have arrangements. Consistent with this
practice, Putnam Management receives brokerage and
research services and other similar services from many
broker-dealers with which Putnam Management places the
fund's portfolio transactions and from third parties
with which these broker-dealers have arrangements.
These services include such matters as general
economic and market reviews, industry and company
reviews, evaluations of investments, recommendations
as to the purchase and sale of investments,
newspapers, magazines, pricing services, quotation
services, news services and personal computers
utilized by Putnam Management's managers and analysts.
Where the services referred to above are not used
exclusively by Putnam Management for research
purposes, Putnam Management, based upon its own
allocations of expected use, bears that portion of the
cost of these services which directly relates to their
nonresearch use. Some of these services are of value
to Putnam Management and its affiliates in advising
various of their clients (including the fund),
although not all of these services are necessarily
useful and of value in managing the fund. The
management fee paid by the fund is not reduced because
Putnam Management and its affiliates receive these
services even though Putnam Management might otherwise
be required to purchase some of these services for
cash.

Putnam Management places all orders for the purchase
and sale of portfolio investments for the fund and
buys and sells investments for the fund through a
substantial number of brokers and dealers. In so
doing, Putnam Management uses its best efforts to
obtain for the fund the most favorable price and
execution available, except to the extent it may be
permitted to pay higher brokerage commissions as
described below. In seeking the most favorable price
and execution, Putnam Management, having in mind the
fund's best interests, considers all factors it deems
relevant, including, by way of illustration, price,
the size of the transaction, the nature of the market
for the security or other investment, the amount of
the commission, the timing of the transaction taking
into account market prices and trends, the reputation,
experience and financial stability of the broker
dealer involved and the quality of service rendered by
the brokerdealer in other transactions.

As permitted by Section 28(e) of the 1934 Act, and by
the Management Contract, Putnam Management may cause
the fund to pay
a broker-dealer which provides "brokerage and
research services" (as defined in the 1934 Act) to
Putnam Management an amount of disclosed commission
for effecting securities transactions on stock
exchanges and other transactions for the fund on an
agency basis in excess of the commission which
another broker-dealer would have charged for
effecting that transaction. Putnam Management's
authority to cause the fund to pay any such greater
commissions is also subject to such policies as the
Trustees may adopt from time to time. Putnam
Management does not currently intend to cause the
fund to make such payments. It is the position of
the staff of the Securities and Exchange Commission
that Section 28(e) does not apply to the payment of
such greater commissions in "principal" transactions.
Accordingly Putnam
Management will use its best effort to obtain the
most favorable price and execution available with
respect to such transactions, as described above.

The Management Contract provides that commissions,
fees, brokerage or similar payments received by
Putnam Management or an affiliate in connection with
the purchase and sale of portfolio investments of the
fund, less any direct expenses approved by the
Trustees, shall be recaptured by the fund through a
reduction of the fee payable by the fund under the
Management Contract.
Putnam Management seeks to recapture for the fund
soliciting dealer fees on the tender of the fund's
portfolio securities in tender or exchange offers.
Any such fees which may be recaptured are likely to
be minor in amount.

Consistent with the Conduct Rules of the National
Association of Securities Dealers, Inc. and subject
to seeking the most favorable price and execution
available and such other policies as the Trustees may
determine, Putnam Management may consider sales of
shares of the fund (and, if permitted by law, of the
other Putnam funds) as a factor in the selection of
brokerdealers to execute portfolio transactions for
the fund.

Principal Underwriter

Putnam Mutual Funds is the principal underwriter of
shares of the fund and the other continuously offered
Putnam funds. Putnam Mutual Funds is not obligated
to sell any specific amount of shares of the fund and
will purchase shares for resale only against orders
for shares. See "Charges and expenses" in Part I of
this SAI for information on sales charges and other
payments received by Putnam Mutual Funds.

Investor Servicing Agent and Custodian

Putnam Investor Services, a division of Putnam
Fiduciary Trust Company ("PFTC"), is the fund's
investor servicing agent (transfer, plan and dividend
disbursing agent), for which it receives fees which
are paid monthly by the fund as an expense of all its
shareholders. The fee paid to Putnam Investor
Services is determined on the basis of the number of
shareholder accounts, the number of transactions and
the assets of the fund. Putnam Investor Services has
won the DALBAR Service Award eight times in the past
nine years. In 1997 and 1998, Putnam was the only
company to win all three DALBAR Awards: for service
to investors, to financial advisors, and to variable
annuity contract holders. DALBAR, Inc. an independent
research firm, presents the awards to financial
services firms that provide consistently excellent
service.

PFTC is the custodian of the fund's assets. In
carrying out its duties under its custodian contract,
PFTC may employ one or more subcustodians whose
responsibilities include safeguarding and controlling
the fund's cash and securities, handling the receipt
and delivery of securities and collecting interest
and dividends on the fund's investments. PFTC and
any subcustodians employed by it have a lien on the
securities of the fund (to the extent permitted by
the fund's investment restrictions) to secure charges
and any advances made by such subcustodians at the
end of any day for the purpose of paying for
securities purchased by the fund. The fund expects
that such advances will exist only in unusual
circumstances. Neither PFTC nor any subcustodian
determines the investment policies of the fund or
decides which securities the fund will buy or sell.
PFTC pays the fees and other charges of any
subcustodians employed by it. The fund may from time
to time pay custodial expenses in full or in part
through the placement by Putnam Management of the
fund's portfolio transactions with the subcustodians
or with a thirdparty broker having an agreement with
the subcustodians. The fund pays PFTC an annual fee
based on the fund's assets, securities transactions
and securities holdings and reimburses PFTC for
certain out-of-pocket expenses incurred by it or any
subcustodian employed by it in performing custodial
services.

See "Charges and expenses" in Part I of this SAI for
information on fees and reimbursements for investor
servicing and custody received by PFTC. The fees may
be reduced by credits allowed by PFTC.

DETERMINATION OF NET ASSET VALUE

The fund determines the net asset value per share of
each class of shares once each day the New York Stock
Exchange (the "Exchange") is open. Currently, the
Exchange is closed Saturdays, Sundays and the
following holidays: New Year's Day, Rev. Dr. Martin
Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day, the Fourth of July, Labor Day,
Thanksgiving and Christmas. The fund determines net
asset value as of the close of regular trading on the
Exchange, currently 4:00 p.m. However, equity options
held by the fund are priced as of the close of
trading at 4:10 p.m., and futures contracts on U.S.
government and other fixed-income securities and
index options held by the fund are priced as of their
close of trading at 4:15 p.m.

Securities for which market quotations are readily
available are valued at prices which, in the opinion
of Putnam Management, most nearly represent the
market values of such securities.
Currently, such prices are determined using the last
reported sale price or, if no sales are reported (as
in the case of some securities traded over-the-
counter), the last reported bid price, except that
certain securities are valued at the mean between the
last reported bid and asked prices. Short-term
investments having remaining maturities of 60 days or
less are valued at amortized cost, which approximates
market value. All other securities and assets are
valued at their fair value following procedures
approved by the Trustees. Liabilities are deducted
from the total, and the resulting amount is divided
by the number of shares of the class outstanding.

Reliable market quotations are not considered to be
readily available for long-term corporate bonds and
notes, certain preferred stocks, tax-exempt
securities, and certain foreign securities. These
investments are valued at fair value on the basis of
valuations furnished by pricing services, which
determine 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.

If any securities held by the fund are restricted as
to resale, Putnam Management determines their fair
value following procedures approved by the Trustees.
The fair value of such securities is generally
determined as the amount which the fund could
reasonably expect to realize from an orderly
disposition of such securities over a reasonable
period of time. The valuation procedures applied in
any specific instance are likely to vary from case to
case. However, consideration is generally given to
the financial position of the issuer and other
fundamental analytical data relating to the
investment and to the nature of the restrictions on
disposition of the securities (including any
registration expenses that might be borne by the fund
in connection with such disposition). In addition,
specific factors are also generally considered, such
as the cost of the investment, the market value of
any unrestricted securities of the same class, the
size of the holding, the prices of any recent
transactions or offers with respect to such
securities and any available analysts' reports
regarding the issuer.

Generally, trading in certain securities (such as
foreign securities) is substantially completed each
day at various times prior to the close of the
Exchange. The values of these securities used in
determining the net asset value of the fund's shares
are computed as of such times. Also, because of the
amount of time required to collect and process
trading information as to large numbers of securities
issues, the values of certain securities (such as
convertible bonds, U.S. government securities, and
tax-exempt securities) are determined based on market
quotations collected earlier in the day at the latest
practicable time prior to the close of the Exchange.
Occasionally, events affecting the value of such
securities may occur between such times and the close
of the Exchange which will not be reflected in the
computation of the fund's net asset value. If events
materially affecting the value of such securities
occur during such period, then these securities will
be valued at their fair value following procedures
approved by the Trustees. In addition, securities
held by some of the funds may be traded in foreign
markets that are open for business on days that a
fund is not, and the trading of such securities on
those days may have an impact on the value of a
shareholder's investment at a time when the
shareholder cannot buy and sell shares of the fund.

Money market funds generally value their portfolio
securities at amortized cost according to Rule 2a-7
under the Investment Company Act of 1940.

HOW TO BUY SHARES

General

The prospectus contains a general description of how
investors may buy shares of the fund and states
whether the fund offers more than one class of
shares. This SAI contains additional information
which may be of interest to investors.

Class A shares and class M shares are generally sold
with a sales charge payable at the time of purchase
(except for class A shares and class M shares of
money market funds). As used in this SAI and unless
the context requires otherwise, the term "class A
shares" includes shares of funds that offer only one
class of shares. The prospectus contains a table of
applicable sales charges. For information about how
to purchase class A or class M shares of a Putnam
fund at net asset value through an employersponsored
retirement plan, please consult your employer.
Certain purchases of class A shares and class M
shares may be exempt from a sales charge or, in the
case of class A shares, may be subject to a
contingent deferred sales charge ("CDSC"). See
"General-Sales without sales charges or contingent
deferred sales charges," "Additional Information
About Class A and Class M shares," and "Contingent
Deferred Sales Charges--Class A shares."

Class B shares and class C shares are sold subject to
a CDSC payable upon redemption within a specified
period after purchase. The prospectus contains a
table of applicable CDSCs.

Class B shares will automatically convert into class
A shares no
later than the end of the month eight years after the
purchase date, and may, in the discretion of the
Trustees, convert to class A shares earlier. Class B
shares acquired by exchanging class B shares of
another Putnam fund will convert into class A shares
based on the time of the initial purchase. Class B
shares acquired through reinvestment of distributions
will convert into Class A shares based on the date of
the initial purchase to which such shares relate.
For this purpose, class B shares acquired through
reinvestment of distributions will be attributed to
particular purchases of class B shares in accordance
with such procedures as the Trustees may determine
from time to time. The conversion of class B shares
to class A shares is subject to the condition that
such conversions will not constitute taxable events
for Federal tax purposes.

Class Y shares, which are not subject to sales
charges or a CDSC, are available only to certain
defined contribution plans. See the prospectus that
offers class Y shares for more information. Certain
purchase programs described below are not available
to defined contribution plans. Consult your employer
for information on how to purchase shares through
your plan.

The fund is currently making a continuous offering of
its shares. The fund receives the entire net asset
value of shares sold. The fund will accept
unconditional orders for shares to be executed at the
public offering price based on the net asset value
per share next determined after the order is placed.
In the case of class A shares and class M shares, the
public offering price is the net asset value plus the
applicable sales charge, if any. No sales charge is
included in the public offering price of other
classes of shares. In the case of orders for
purchase of shares placed through dealers, the public
offering price will be based on the net asset value
determined on the day the order is placed, but only
if the dealer receives the order before the close of
regular trading on the Exchange. If the dealer
receives the order after the close of the Exchange,
the price will be based on the net asset value next
determined. If funds for the purchase of shares are
sent directly to Putnam Investor Services, they will
be invested at the public offering price based on the
net asset value next determined after receipt.
Payment for shares of the fund must be in U.S.
dollars; if made by check, the check must be drawn on
a U.S. bank.

Initial and subsequent purchases must satisfy the
minimums stated in the prospectus, except that (i)
individual investments under certain employee benefit
plans or Tax Qualified Retirement Plans may be lower,
(ii) persons who are already shareholders may make
additional purchases of $50 or more by sending funds
directly to Putnam Investor Services (see "Your
investing account" below), and (iii) for investors
participating in systematic investment plans and
military allotment plans, the initial and subsequent
purchases must be $25 or more. Information about
these plans is available from investment dealers or
from Putnam Mutual Funds.

As a convenience to investors, shares may be
purchased through a systematic investment plan. Pre-
authorized monthly bank drafts for a fixed amount (at
least $25) are used to purchase fund shares at the
applicable public offering price next determined
after Putnam Mutual Funds receives the proceeds from
the draft.
A shareholder may choose any day of the month and, if
a given month (for example, February) does not
contain that particular date, or if the date falls on
a weekend or holiday, the draft will be processed on
the next business day. Further information and
application forms are available from investment
dealers or from Putnam Mutual Funds.

Except for funds that declare a distribution daily,
distributions to be reinvested are reinvested without
a sales charge in shares of the same class as of the
ex-dividend date using the net asset value determined
on that date, and are credited to a shareholder's
account on the payment date. Dividends for Putnam
money market funds are credited to a shareholder's
account on the payment date. Distributions for all
other funds that declare a distribution daily are
reinvested without a sales charge as of the last day
of the period for which distributions are paid using
the net asset value determined on that date, and are
credited to a shareholder's account on the payment
date.
Payment in securities. In addition to cash, the fund
may accept securities as payment for fund shares at
the applicable net asset value. Generally, the fund
will only consider accepting securities to increase
its holdings in a portfolio security, or if Putnam
Management determines that the offered securities are
a suitable investment for the fund and in a
sufficient amount for efficient management.
While no minimum has been established, it is expected
that the fund would not accept securities with a
value of less than $100,000 per issue as payment for
shares. The fund may reject in whole or in part any
or all offers to pay for purchases of fund shares
with securities, may require partial payment in cash
for such purchases to provide funds for applicable
sales charges, and may discontinue accepting
securities as payment for fund shares at any time
without notice. The fund will value accepted
securities in the manner described in the section
"Determination of Net Asset Value" for valuing shares
of the fund. The fund will only accept securities
which are delivered in proper form. The fund will not
accept options or restricted securities as payment
for shares. The acceptance of securities by certain
funds in exchange for fund shares is subject to
additional requirements. For federal income tax
purposes, a purchase of fund shares with securities
will be treated as a sale or exchange of such
securities on which the investor will generally
realize a taxable gain or loss. The processing of a
purchase of fund shares with securities involves
certain delays while the fund considers the
suitability of such securities and while other
requirements are satisfied. For information
regarding procedures for payment in securities,
contact Putnam Mutual Funds.
Investors should not send securities to the fund
except when authorized to do so and in accordance
with specific instructions received from Putnam
Mutual Funds.

Sales without sales charges or contingent deferred
sales charges. The fund may sell shares without a
sales charge or CDSC to:

(i) current and retired Trustees of the fund;
officers of the
fund; directors and current and retired U.S. full-
time employees of Putnam Management, Putnam Mutual
Funds, their parent corporations and certain
corporate affiliates; family members of and
employee benefit plans for the foregoing; and
partnerships, trusts or other entities in which
any of the foregoing has a substantial interest;

(ii) employer-sponsored retirement plans, for the
repurchase of shares in connection with repayment
of plan loans made to plan participants (if the
sum loaned was obtained by
redeeming shares of a Putnam fund sold with a sales
charge)
(not offered by tax-exempt funds);
(iii) clients of administrators of tax-qualified
employersponsored retirement plans which have
entered into agreements with Putnam Mutual Funds
(not offered by tax-exempt funds);

(iv) registered representatives and other
employees of brokerdealers having sales agreements
with Putnam Mutual Funds; employees of financial
institutions having sales agreements with Putnam
Mutual Funds or otherwise having an arrangement
with any such broker-dealer or financial
institution with respect to sales of fund shares;
and their spouses and children under age 21
(Putnam Mutual Funds is regarded as
the dealer of record for all such accounts);

(v) investors meeting certain requirements who
sold shares of certain Putnam closed-end funds
pursuant to a tender offer by such closed-end
fund;

(vi) a trust department of any financial
institution purchasing shares of the fund in its
capacity as trustee of any trust (other than a
tax-qualified retirement plan trust), through an
arrangement approved by Putnam Mutual Funds, if
the value of the shares of the fund and other
Putnam funds purchased or held by all such trusts
exceeds $1 million in the aggregate; and

(vii) "wrap accounts" maintained for clients of
brokerdealers, financial institutions or
financial intermediaries who have entered into
agreements with Putnam Mutual Funds with respect
to such accounts, which in all cases shall be
subject to a wrap fee economically comparable to
a sales charge. Fund shares offered pursuant to
this waiver may not be advertised as "no load,"
or otherwise offered for sale at NAV without a
wrap fee.

In addition, each of the Putnam funds may issue its
shares at net asset value without an initial sales
charge or a CDSC in connection with the acquisition
of substantially all of the securities owned by other
investment companies or personal holding companies,
and the CDSC will be waived on redemptions of shares
arising out of 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 fund may sell class A or class M shares at net
asset value to members of qualified groups. See
"Group purchases of class A and class M shares"
below. Class A and class M shares are available
without an initial sales charge to "class A qualified
benefit plans" and "class M qualified benefit plans,"
respectively, as described below. See "Qualified
benefit plans; Individual account plans" below.

Payments to dealers. Putnam Mutual Funds may, at its
expense, pay concessions in addition to the payments
disclosed in the prospectus to dealers which satisfy
certain criteria established from time to time by
Putnam Mutual Funds relating to increasing net sales
of shares of the Putnam funds over prior periods, and
certain other factors.

Additional Information About Class A and Class M
Shares

The underwriter's commission is the sales charge
shown in the prospectus less any applicable dealer
discount. Putnam Mutual Funds will give dealers ten
days' notice of any changes in the dealer discount.
Putnam Mutual Funds retains the entire sales charge
on any retail sales made by it.

Putnam Mutual Funds offers several plans by which an
investor may obtain reduced sales charges on
purchases of class A shares and
class M shares. The variations in sales charges
reflect the varying efforts required to sell shares
to separate categories of purchasers. These plans
may be altered or discontinued at any time.
The public offering price of class A and 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, in its
discretion, allocates the entire amount to your
investment dealer.
For Growth Funds, Growth and Income Funds and Asset
Allocation Funds only:
CLASS A CLASS M
Amount of Amount of
Sales charge sales charge Sales charge sales charge
as a reallowed to as a reallowed to
percentage dealers as a percentage dealers as a
Amount of transaction of offering percentage of of offering percentage of
at offering price ($) price offering price price offering price
- ----------------------------------------------------------------------------
Under 50,000 5.75% 5.00% 3.50% 3.00%
50,000 but under 100,000 4.50 3.75 2.50 2.00
100,000 but under 250,000 3.50 2.75 1.50 1.00
250,000 but under 500,000 2.50 2.00 1.00 1.00
500,000 but under 1,000,000 2.00 1.75 NONE NONE
1,000,000 and above NONE NONE NONE NONE
- ----------------------------------------------------------------------------

For Income Funds only (except for Putnam Intermediate
U.S. Government Income Fund and Putnam Preferred
Income Fund:

CLASS A CLASS M
Amount of Amount of
Sales charge sales charge Sales charge sales charge
as a reallowed to as a reallowed to
percentage dealers as a percentage dealers as a
Amount of transaction of offering percentage of of offering percentage of
at offering price ($) price offering price price offering price
- -------------------------------------------------------------------------
Under 50,000 4.75% 4.25% 3.25% 3.00%
50,000 but under 100,000 4.50 4.00 2.25 2.00
100,000 but under 250,000 3.50 3.00 1.50 1.25
250,000 but under 500,000 2.50 2.25 1.00 1.00
500,000 but under 1,000,000 2.00 1.75 NONE NONE
1,000,000 and above NONE NONE NONE NONE
- ---------------------------------------------------------------------------

For Putnam Intermediate U.S. Government Income Fund
and Putnam Preferred Income Fund only:

CLASS A CLASS M
Amount of Amount of
Sales charge sales charge Sales charge sales charge
as a reallowed to as a reallowed to
percentage dealers as a percentage dealers as a
Amount of transaction of offering percentage of of offering percentage of
at offering price ($) price offering price price offering price
- --------------------------------------------------------------------------
Under 100,000 3.25% 3.00% 2.00% 1.80%
100,000 but under 250,000 2.50 2.25 1.50 1.30
250,000 but under 500,000 2.00 1.75 1.00 1.00
500,000 but under 1,000,000 1.50 1.25 NONE NONE
1,000,000 and above NONE NONE NONE NONE
- ---------------------------------------------------------------------------

For Tax Free Funds only:

CLASS A CLASS M
Amount of Amount of
Sales charge sales charge Sales charge sales charge
as a reallowed to as a reallowed to
percentage dealers as a percentage dealers as a
Amount of transaction of offering percentage of of offering percentage of
at offering price ($) price offering price price offering price
- ---------------------------------------------------------------------------
Under 25,000 4.75% 4.50% 3.25% 3.00%
25,000 but under 50,000 4.50 4.25 3.25 3.00
50,000 but under 100,000 4.50 4.25 2.25 2.00
100,000 but under 250,000 3.75 3.50 1.50 1.25
250,000 but under 500,000 3.00 2.75 1.00 1.00
500,000 but under 1,000,000 2.00 1.85 NONE NONE
1,000,000 and above NONE NONE NONE NONE
- ----------------------------------------------------------------------------

Combined purchase privilege. The following persons
may qualify for the sales charge reductions or
eliminations shown in the prospectus by combining
into a single transaction the purchase of class A
shares or class M shares with other purchases of any
class of shares:

(i) an individual, or a "company" as defined in
Section 2(a)(8) of the Investment Company Act
of 1940 (which includes corporations which are
corporate affiliates of each other);

(ii) an individual, his or her spouse and their
children under twenty-one, purchasing for his,
her or their own account;

(iii) a trustee or other fiduciary purchasing
for a single trust estate or single fiduciary
account (including a pension, profit-sharing,
or other employee benefit trust created
pursuant to a plan qualified under Section 401
of the Internal Revenue Code of 1986, as
amended (the "Code"));

(iv) tax-exempt organizations qualifying under
Section 501(c)(3) of the Internal Revenue Code
(not including taxexempt organizations
qualifying under Section 403(b)(7) (a "403(b)
plan") of the Code; and

(v) employee benefit plans of a single employer or of
affiliated employers, other than 403(b) plans.
A combined purchase currently may also include shares
of any class of other continuously offered Putnam
funds (other than money market funds) purchased at
the same time through a single investment dealer, if
the dealer places the order for such shares directly
with Putnam Mutual Funds.
Cumulative quantity discount (right of accumulation).
A purchaser of class A shares or class M shares may
qualify for a cumulative quantity discount by
combining a current purchase (or combined purchases
as described above) with certain other shares of any
class of Putnam funds already owned. The applicable
sales charge is based on the total of:
(i) the investor's current purchase; and
(ii) the maximum public offering price (at the close of
business on the previous day) of:

(a) all shares held by the investor in
all of the Putnam funds (except money
market funds); and

(b) any shares of money market funds
acquired by exchange from other Putnam
funds; and

(iii) the maximum public offering price of all
shares described in paragraph (ii) owned by
another shareholder eligible to participate
with the investor in a "combined purchase" (see
above).

To qualify for the combined purchase privilege or to
obtain the cumulative quantity discount on a purchase
through an investment dealer, when each purchase is
made the investor or dealer must provide Putnam
Mutual Funds with sufficient information to verify
that the purchase qualifies for the privilege or
discount. The shareholder must furnish this
information to Putnam Investor Services when making
direct cash investments.

Statement of Intention. Investors may also obtain
the reduced sales charges for class A shares or class
M shares shown in the prospectus for investments of a
particular amount by means of a written Statement of
Intention, which expresses the investor's
intention to invest that amount (including certain
"credits," as described below) within a period of 13
months in shares of any class of the fund or any
other continuously offered Putnam fund (excluding
money market funds). Each purchase of class A shares
or class M shares under a Statement of Intention will
be made at the public offering price applicable at
the time of such purchase to a single transaction of
the total dollar amount indicated in the Statement of
Intention. A Statement of Intention may include
purchases of shares made not more than 90 days prior
to the date that an investor signs a Statement;
however, the 13-month period during which the
Statement of Intention is in effect will begin on the
date of the earliest purchase to be included.

An investor may receive a credit toward the amount
indicated in the Statement of Intention equal to the
maximum public offering price as of the close of
business on the previous day of all shares he or she
owns on the date of the Statement of Intention which
are eligible for purchase under a Statement of
Intention (plus any shares of money market funds
acquired by exchange of such eligible shares).
Investors do not receive credit for shares purchased
by the reinvestment of distributions. Investors
qualifying for the "combined purchase privilege" (see
above) may purchase shares under a single Statement
of Intention.

The Statement of Intention is not a binding
obligation upon the investor to purchase the full
amount indicated. The minimum initial investment
under a Statement of Intention is 5% of such amount,
and must be invested immediately. Class A shares or
class M shares purchased with the first 5% of such
amount will be held in escrow to secure payment of
the higher sales charge applicable to the shares
actually purchased if the full amount indicated is
not purchased. When the full amount indicated has
been purchased, the escrow will be released. If an
investor desires to redeem escrowed shares before the
full amount has been purchased, the shares will be
released from escrow only if the investor pays the
sales charge that, without regard to the Statement of
Intention, would apply to the total investment made
to date.

To the extent that an investor purchases more than
the dollar amount indicated on the Statement of
Intention and qualifies for a further reduced sales
charge, the sales charge will be adjusted for the
entire amount purchased at the end of the 13-month
period, upon recovery from the investor's dealer of
its portion of the sales charge adjustment. Once
received from the dealer, which may take a period of
time or may never occur, the sales charge adjustment
will be used to purchase additional shares at the
then current offering price applicable to the actual
amount of the aggregate purchases. These additional
shares will not be considered as part of the total
investment for the purpose of determining the
applicable sales charge pursuant to the Statement of
Intention. No sales charge adjustment will be made
unless and until the investor's dealer returns any
excess commissions previously received.

To the extent that an investor purchases less than
the dollar amount indicated on the Statement of
Intention within the 13month period, the sales charge
will be adjusted upward for the entire amount
purchased at the end of the 13-month period. This
adjustment will be made by redeeming shares from the
account to cover the additional sales charge, the
proceeds of which will be paid to the investor's
dealer and Putnam Mutual Funds in accordance with the
prospectus. If the account exceeds an amount that
would otherwise qualify for a reduced sales charge,
that reduced sales charge will be applied.

Statements of Intention are not available for certain
employee benefit plans.

Statement of Intention forms may be obtained from
Putnam Mutual Funds or from investment dealers.
Interested investors should read the Statement of
Intention carefully.

Group purchases of class A and class M shares.
Members of qualified groups may purchase class A
shares of the fund at a group sales charge rate of
4.50% of the public offering price (4.71% of the net
amount invested). The dealer discount on such sales
is 3.75% of the offering price. Members of qualified
groups may also purchase class M shares at net asset
value.

To receive the class A or class M group rate, group
members must purchase shares through a single
investment dealer designated by the group. The
designated dealer must transmit each member's initial
purchase to Putnam Mutual Funds, together with
payment and completed application forms. After the
initial purchase, a member may send funds for the
purchase of shares directly to Putnam Investor
Services. Purchases of shares are made at the public
offering price based on the net asset value next
determined after Putnam Mutual Funds or Putnam
Investor Services receives payment for the shares.
The minimum investment requirements described above
apply to purchases by any group member. Only shares
purchased under the class A group discount are
included in calculating the purchased amount for the
purposes of these requirements.

Qualified groups include the employees of a
corporation or a sole proprietorship, members and
employees of a partnership or association, or other
organized groups of persons (the members of which may
include other qualified groups) provided that: (i)
the group has at least 25 members of which, with
respect to the class A discount only, at least 10
members participate in the initial purchase; (ii) the
group has been in existence for at least six months;
(iii) the group has some purpose in addition to the
purchase of investment company shares at a reduced
sales charge; (iv) the group's sole organizational
nexus or connection is not that the members are
credit card holders of a company, policy holders of
an insurance company, customers of a bank or broker
dealer, clients of an investment adviser or security
holders of a company; (v) with respect to the class A
discount only, the group agrees to provide its
designated investment dealer access to the group's
membership by means of written communication or
direct presentation to the membership at a meeting on
not less frequently than an annual basis; (vi) the
group or its investment dealer will provide annual
certification in form satisfactory to Putnam Investor
Services that the group then has at least 25 members
and, with respect to the class A discount only, that
at least ten members participated in group purchases
during the immediately preceding 12 calendar months;
and (vii) the group or its investment dealer will
provide periodic certification in form satisfactory
to Putnam Investor Services as to the eligibility of
the purchasing members of the group.

Members of a qualified group include: (i) any group
which meets the requirements stated above and which
is a constituent member of a qualified group; (ii)
any individual purchasing for his or her own account
who is carried on the records of the group or on the
records of any constituent member of the group as
being a good standing employee, partner, member or
person of like status of the group or constituent
member; or (iii) any fiduciary purchasing shares for
the account of a member of a qualified group or a
member's beneficiary. For example, a qualified group
could consist of a trade association which would have
as its
members individuals, sole proprietors, partnerships
and corporations. The members of the group would
then consist of the individuals, the sole proprietors
and their employees, the members of the partnerships
and their employees, and the corporations and their
employees, as well as the trustees of employee
benefit trusts acquiring class A shares for the
benefit of any of the foregoing.

A member of a qualified group may, depending upon the
value of class A shares of the fund owned or proposed
to be purchased by the member, be entitled to
purchase class A shares of the fund at non-group
sales charge rates shown in the prospectus which may
be lower than the group sales charge rate, if the
member qualifies as a person entitled to reduced non-
group sales charges. Such a group member will be
entitled to purchase at the lower rate if, at the
time of purchase, the member or his or her investment
dealer furnishes sufficient information for Putnam
Mutual Funds or Putnam Investor Services to verify
that the purchase qualifies for the lower rate.

Interested groups should contact their investment
dealer or Putnam Mutual Funds. The fund reserves the
right to revise the terms of or to suspend or
discontinue group sales at any time.

Qualified benefit plans; Individual account plans.
The terms "class A qualified benefit plan" and "class
M qualified benefit plan" mean any employer-sponsored
plan or arrangement, whether or not tax-qualified,
for which Putnam Fiduciary Trust Company or its
affiliates provide recordkeeping or other services in
connection with the purchase of class A shares or
class M shares, respectively. The term "affiliated
employer" means employers who are affiliated with
each other within the meaning of Section 2(a)(3)(C)
of the Investment Company Act of 1940. The term
"individual account plan" means any employee benefit
plan whereby (i) class A shares are purchased through
payroll deductions or otherwise by a fiduciary or
other person for the account of participants who are
employees (or their spouses) of an employer, or of
affiliated employers, and (ii) a separate investing
account is maintained in the name of such fiduciary
or other person for the account of each participant
in the plan.

The table of sales charges in the prospectus applies
to sales to employer-sponsored retirement plans that
are not class A qualified benefit plans, except that
the fund may sell class A shares at net asset value
to employee benefit plans, including individual
account plans, of employers or of affiliated
employers which have at least 750 employees to whom
such plan is made available, in connection with a
payroll deduction system of plan funding (or other
system acceptable to Putnam Investor Services) by
which contributions or account information for plan
participation are transmitted to Putnam Investor
Services by methods acceptable to Putnam Investor
Services. The fund may also sell class A shares at
net asset value to employer-sponsored retirement
plans that initially invest at least $1 million in
the fund or that have at least 200 eligible
employees. In addition, the fund may sell class M
shares at net asset value to class M qualified
benefit plans.

An employer-sponsored retirement plan participating
in a "multifund" program approved by Putnam Mutual
Funds may include amounts invested in the other
mutual funds participating in such program for
purposes of determining whether the plan may purchase
class A shares at net asset value based on the size
of the purchase. These investments will also be
included for purposes of the discount privileges and
programs described above.

Additional information about qualified benefit plans
and individual account plans is available from
investment dealers or from Putnam Mutual Funds.

Contingent Deferred Sales Charges; Commissions

Class A shares. Except as described below, a CDSC of
0.75% (1.00% in the case of plans for which Putnam
Mutual Funds and its affiliates do not act as trustee
or record-keeper) of the total amount redeemed is
imposed on redemptions of shares purchased by class A
qualified benefit plans if, within two years of a
plan's initial purchase of class A shares, it redeems
90% or more of its cumulative purchases. Thereafter,
such plan is no longer liable for any CDSC. The two-
year CDSC applicable to class A qualified benefit
plans for which Putnam Mutual Funds or its affiliates
serve as trustee or recordkeeper ("full service
plans") is 0.50% of the total amount redeemed, for
full service plans that initially invest at least $5
million but less than $10 million in Putnam funds and
other investments managed by Putnam Management or its
affiliates ("Putnam Assets"), and is 0.25% of the
total amount redeemed for full service plans that
initially invest at least $10 million but less than
$20 million in Putnam Assets. Class A qualified
benefit plans that initially invest at least $20
million in Putnam Assets, or whose dealer of record
has, with Putnam Mutual Funds' approval, waived its
commission or agreed to refund its commission to
Putnam Mutual Funds in the event a CDSC would
otherwise be applicable, are not subject to any CDSC.

Similarly, class A shares purchased at net asset
value by any investor other than a class A qualified
benefit plan, including purchases pursuant to any
Combined Purchase Privilege, Right of Accumulation or
Statement of Intention, are subject to a CDSC of
1.00% or 0.50%, respectively, if redeemed within the
first or second year after purchase, unless the
dealer of record waived its commission with Putnam
Mutual Funds' approval. The class A CDSC is imposed
on the lower of the cost and the current net asset
value of the shares redeemed.

Except as described below for 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 to
employer-sponsored benefit plans that have at least
200 eligible employees and that are not class A
qualified benefit plans based on cumulative purchases
of such shares, including purchases pursuant to any
Combined Purchase Privilege, Right of Accumulation or
Statement of Intention, during the one-year period
beginning with the date of the initial purchase at
net asset value. Each subsequent one-year measuring
period for these purposes will begin with the first
net asset value purchase following the end of the
prior period. Such commissions are paid at the rate
of 1.00% of the amount under $3 million, 0.50% of the
next $47 million and 0.25% thereafter.

On sales at net asset value to a class A qualified
benefit plan, Putnam Mutual Funds pays commissions to
the dealer of record at the time of the sale on net
monthly purchases at the following rates: 1.00% of
the first $1 million, 0.75% of the next $1 million,
0.50% of the next $3 million, 0.20% of the next $5
million, 0.15% of the next $10 million, 0.10% of the
next $10 million and 0.05% thereafter, except that
commissions on sales to class A qualified benefit
plans initially investing less than $20 million in
Putnam funds and other investments managed by Putnam
Management or its affiliates pursuant to a proposal
made by Putnam Mutual Funds on or before April 15,
1997 are based on cumulative purchases over a one-
year measuring period at the rate of 1.00% of the
first $2 million, 0.80% of the next $1 million,
and 0.50% thereafter. On sales at net asset value to
all other class A qualified benefit plans receiving
proposals from Putnam Mutual Funds on or before April
15, 1997, Putnam Mutual Funds pays commissions on the
initial investment and on subsequent net quarterly
sales (gross sales minus gross redemptions during the
quarter) at the rate of 0.15%. Money market fund
shares are excluded from all commission calculations,
except for determining the amount initially invested
by a qualified benefit plan. Commissions on sales at
net asset value to such plans are subject to Putnam
Mutual Funds' right to reclaim such commissions if
the shares are redeemed within two years.

Different CDSC and commission rates may apply to
shares purchased prior to December 1, 1995.

All shares. Investors who set up an Automatic Cash
Withdrawal Plan ("ACWP") for a share account (see
"Plans available to shareholders -- Automatic Cash
Withdrawal Plan") may withdraw through the ACWP up to
12% of the net asset value of the account (calculated
as set forth below) each year without incurring any
CDSC. Shares not subject to a CDSC (such as shares
representing reinvestment of distributions) will be
redeemed first and will count toward the 12%
limitation. If there are insufficient shares not
subject to a CDSC, shares subject to the lowest CDSC
liability will be redeemed next until the 12% limit
is reached. The 12% figure is calculated on a pro
rata basis at the time of the first payment made
pursuant to an ACWP and recalculated thereafter on a
pro rata basis at the time of each ACWP payment.
Therefore, shareholders who have chosen an ACWP based
on a percentage of the net asset value of their
account of up to 12% will be able to receive ACWP
payments without incurring a CDSC. However,
shareholders who have chosen a specific dollar amount
(for example, $100 per month from a fund that pays
income distributions monthly) for their periodic ACWP
payment should be aware that the amount of that
payment not subject to a CDSC may vary over time
depending on the net asset value of their account.
For example, if the net asset value of the account is
$10,000 at the time of payment, the shareholder will
receive $100 free of the CDSC (12% of $10,000 divided
by 12 monthly payments). However, if at the time of
the next payment the net asset value of the account
has fallen to $9,400, the shareholder will receive
$94 free of any CDSC (12% of $9,400 divided by 12
monthly payments) and $6 subject to the lowest
applicable CDSC. This ACWP privilege may be revised
or terminated at any time.

No CDSC is imposed on shares of any class subject to
a CDSC ("CDSC Shares") to the extent that the CDSC
Shares redeemed (i) are no longer subject to the
holding period therefor, (ii) resulted from
reinvestment of distributions on CDSC Shares, or
(iii) were exchanged for shares of another Putnam
fund, provided that the shares acquired in such
exchange or subsequent exchanges (including shares of
a Putnam money market fund) will continue to remain
subject to the CDSC, if applicable, until the
applicable holding period expires. In determining
whether the CDSC applies to each redemption of CDSC
Shares, CDSC Shares not subject to a CDSC are
redeemed first.

The fund will waive any CDSC on redemptions, in the
case of individual, joint or Uniform Transfers to
Minors Act accounts, in the event of death or post-
purchase disability of a shareholder, for the purpose
of paying benefits pursuant to tax-qualified
retirement plans ("Benefit Payments"), or, in the
case of living trust accounts, in the event of the
death or post-purchase disability of the settlor of
the trust). Benefit payments currently include,
without limitation, (1) distributions from an IRA due
to death or disability, (2) a return of excess
contributions to an IRA or 401(k) plan, and (3)
distributions from retirement plans qualified under
Section 401(a) of the Code or from a 403(b) plan due
to death, disability, retirement or separation from
service. These waivers may be changed at any time.
Additional waivers may apply to IRA accounts opened
prior to February 1, 1994.
DISTRIBUTION PLANS
If the fund or a class of shares of the fund has
adopted a distribution plan, the prospectus describes
the principal features of the plan. This SAI
contains additional information which may be of
interest to investors.
Continuance of a plan is subject to annual approval
by a vote of the Trustees, including a majority of
the Trustees who are not interested persons of the
fund and who have no direct or indirect interest in
the plan or related arrangements (the "Qualified
Trustees"), cast in person at a meeting called for
that purpose. All material amendments to a plan must
be likewise approved by the Trustees and the
Qualified Trustees. No plan may be amended in order
to increase materially the costs which the fund may
bear for distribution pursuant to such plan without
also being approved by a majority of the outstanding
voting securities of the fund or the relevant class
of the fund, as the case may be.
A plan terminates automatically in the event of its
assignment and may be terminated without penalty, at
any time, by a vote of a majority of the Qualified
Trustees or by a vote of a majority of the
outstanding voting securities of the fund or the
relevant class of the fund, as the case may be.

Putnam Mutual Funds compensates qualifying dealers
(including, for this purpose, certain financial
institutions) for sales of shares and the maintenance
of shareholder accounts.

Class A shares:

Putnam Mutual Funds makes quarterly payments to
dealers at the annual rates set forth below (as a
percentage of the average net asset value of class A
shares for which such dealers are designated the
dealer of record) except that payments to dealers for
shares held by class A qualified benefit plans are
made at other rates, as described below. No payments
are made during the first year after purchase on
shares purchased at net asset value by shareholders
investing at least $1 million or by employersponsored
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.

Rate Fund
0.25% All funds except for those listed below
0.50% for shares
purchased on Putnam Diversified Equity Trust
or before 7/1/95 ; 0.25% for
shares purchased after 7/1/95

0.20% Putnam Tax-Free High Yield Fund
Putnam Tax-Free Insured Fund

0.20% for shares purchased on Putnam Balanced Retirement Fund
or before 12/31/89; 0.25% for Putnam Convertible Income-Growth Trust
shares purchased after 12/31/89 The George Putnam Fund of Boston
The Putnam Fund for Growth
and Income Putnam Investors Fund
Putnam Vista Fund
Putnam Voyager Fund Putnam
Global Growth Fund
Putnam Global Natural Resources Fund Putnam
Health Sciences Trust

0.20% for shares purchased on Putnam High Yield Trust
or before 3/31/90; 0.25% for Putnam U.S. Government Income Trust
shares purchased after 3/31/90

0.20% for shares purchased on Putnam Income Fund
or before 3/31/91 ; 0.25% for
shares purchased after 3/31/91

0.20% for shares purchased on Putnam Municipal Income Fund
or before 5/7/92; 0.25% for
shares purchased after 5/7/92

0.15% for shares purchased on Putnam Michigan Tax Exempt Income Fund
or before 3/9/92; 0.20% for Putnam Minnesota Tax Exempt Income Fund
shares purchased after 3/9/92 Putnam Ohio Tax Exempt Income Fund

0.15% for shares purchased on Putnam Massachusetts Tax Exempt Income Fund
or before 5/11/92; 0.20% for
shares purchased after 5/11/92

0.15% for shares purchased on Putnam New York Tax Exempt Opportunities Fund
or before 7/13/92; 0.20% for
shares purchased after 7/13/92

0.15% for shares purchased on Putnam Tax Exempt Income Fund
or before 12/31/92; 0.20% for Putnam California Tax Exempt Income Fund
shares purchased after 12/31/92 Putnam New Jersey Tax Exempt Income Fund
Putnam New York Tax Exempt Income Fund

0.15% for shares purchased on Putnam Arizona Tax Exempt Income Fund
or before 3/5/93; 0.20% for
shares purchased after 3/5/93

0.15% for shares purchased on Putnam Florida Tax Exempt Income Fund
or before 7/8/93; 0.20% for Putnam Pennsylvania Tax Exempt Income Fund
shares purchased after 7/8/93

0.00% Putnam Preferred Income Fund
Putnam New York Money Market Fund
Putnam California Money Market Fund
Putnam Tax Exempt Money Market Fund
Putnam Money Market Fund

Putnam Mutual Funds pays service fees to the dealer
of record for plans for which Putnam Fiduciary Trust
or its affiliates serve as trustee and recordkeeper
at the following annual rates (expressed as a
percentage of the average net asset value of the
plan's class A shares): 0.25% of the first $5
million, 0.20% of the next $5 million, 0.15% of the
next $10 million, 0.10% of the next $30 million, and
0.05% thereafter. For class A qualified benefit
plans for which Putnam Fiduciary Trust Company or its
affiliates provide some services but do not act as
trustee and recordkeeper, Putnam Mutual Funds will
pay service fees to the dealer of record of up to
0.25% of average net assets, depending on the level
of service provided by Putnam Fiduciary Trust Company
or its affiliates, by the dealer of record, and by
third parties. Service fees are paid quarterly to the
dealer of record for that quarter.

Class B shares:

Putnam Mutual Funds makes quarterly payments to
dealers at the annual rates set forth below (as a
percentage of the average net asset value of class B
shares for which such dealers are designated the
dealer of record).

Rate Fund

0.25% All funds except for those listed below

0.25%, but first year ' s Putnam Municipal Income Fund
service fees are prepaid
at time of sale

0.25%, except that the first Putnam Arizona Tax Exempt Income Fund
year ' s service fees of 0.20% Putnam California Tax Exempt Income
Fund
are prepaid at time of sale Putnam Florida Tax Exempt Income Fund
Putnam Massachusetts Tax Exempt Income Fund
Putnam Michigan Tax Exempt Income Fund
Putnam Minnesota Tax Exempt Income Fund
Putnam New Jersey Tax Exempt Income Fund
Putnam New York Tax Exempt Income Fund
Putnam New York Tax Exempt Opportunities Fund
Putnam Ohio Tax Exempt Income Fund
Putnam Pennsylvania Tax Exempt Income Fund
Putnam Tax Exempt Income Fund

0.20% for shares purchased on Putnam Tax-Free Insured Fund
or before 3/31/90; 0.25% for Putnam Tax-Free High Yield
shares purchased after 3/31/90;
first year ' s service fees are prepaid
at time of sale

0.00% Putnam Money Market Fund

Class C shares:

Putnam Mutual Funds makes quarterly payments to
dealers at the annual rates set forth below (as a
percentage of the average net asset value of class C
shares for which such dealers are designated the
dealer of record).

Rate Fund

1.00% All funds except those listed below

1.00% (0.25% is prepaid Putnam Asset Allocation Funds
at time of sale and 0.75% is
paid one year after sale; in subsequent years the
annual rate of 1.00% is applied)

0.50% Putnam Money Market Fund

Class M shares:

Putnam Mutual Funds makes quarterly payments to
dealers at the annual rates set forth below (as a
percentage of the average net asset value of class M
shares for which such dealers are designated the
dealer of record).

Rate Fund

0.65% All growth and growth and income funds

0.45% Putnam Diversified Income Trust

0.40% All income and money market
funds (except for Putnam
Money Market Fund)

0.25% Putnam Preferred Income Fund

0.15% Putnam Money Market Fund

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 the service agreements between the
dealers and Putnam Mutual Funds and any applicable
limits imposed by the National Association of
Securities Dealers, Inc.

Financial institutions receiving payments from Putnam
Mutual Funds as described above may be required to
comply with various state and federal regulatory
requirements, including among others those regulating
the activities of securities brokers or dealers.

Except as otherwise agreed between Putnam Mutual
Funds and a dealer, for purposes of determining the
amounts payable to dealers for shareholder accounts
for which such dealers are designated as the dealer
of record, "average net asset value" means the
product of (i) the average daily share balance in
such account(s) and (ii) the average daily net asset
value of the relevant class of shares over the
quarter.

INVESTOR SERVICES

Shareholder Information

Each time shareholders buy or sell shares, they will
receive a statement confirming the transaction and
listing their current share balance. (Under certain
investment plans, a statement may only be sent
quarterly.) Shareholders will receive a statement
confirming reinvestment of distributions in
additional fund shares (or in shares of other Putnam
funds for Dividends Plus accounts) promptly following
the quarter in which the reinvestment occurs. To
help shareholders take full advantage of their Putnam
investment, they will receive a Welcome Kit and a
periodic publication covering many topics of interest
to investors. The fund also sends annual and
semiannual reports that keep shareholders informed
about its portfolio and performance, and year-end tax
information to simplify their recordkeeping. Easy-to-
read, free booklets on special subjects such as the
Exchange Privilege and IRAs are available from Putnam
Investor Services. Shareholders may call Putnam
Investor Services toll-free weekdays at 1-800-225-
1581 between 8:30 a.m. and 7:00 p.m. Boston time for
more information, including account balances.

Your Investing Account

The following information provides more detail
concerning the operation of a Putnam Investing
Account. For further information or assistance,
investors should consult Putnam Investor Services.
Shareholders who purchase shares through a defined
contribution plan should note that not all of the
services or features described below may be available
to them, and they should contact their employer for
details.

A shareholder may reinvest a cash distribution
without a frontend sales charge or without the
reinvested shares being subject to a CDSC, as the
case may be, by delivering to Putnam Investor
Services the uncashed distribution check, endorsed to
the order of the fund. Putnam Investor Services must
receive the properly endorsed check within 1 year
after the date of the check.

The Investing Account also provides a way to
accumulate shares of the fund. In most cases, after
an initial investment of $500, a shareholder may send
checks to Putnam Investor Services for $50 or more,
made payable to the fund, to purchase additional
shares at the applicable public offering price next
determined after Putnam Investor Services receives
the check. Checks must be drawn on a U.S. bank and
must be payable in U.S. dollars.

Putnam Investor Services acts as the shareholder's
agent whenever it receives instructions to carry out
a transaction on the shareholder's account. Upon
receipt of instructions that shares are to be
purchased for a shareholder's account, shares will be
purchased through the investment dealer designated by
the shareholder. Shareholders may change investment
dealers at any time by written notice to Putnam
Investor Services, provided the new dealer has a
sales agreement with Putnam Mutual Funds.

Shares credited to an account are transferable upon
written instructions in good order to Putnam Investor
Services and may be sold to the fund as described
under "How do I sell fund shares?" in the prospectus.
Money market funds and certain other funds will not
issue share certificates. A shareholder may send to
Putnam Investor Services any certificates which have
been previously issued for safekeeping at no charge
to the
shareholder.

Putnam Mutual Funds, at its expense, may provide
certain additional reports and administrative
material to qualifying institutional investors with
fiduciary responsibilities to assist these investors
in discharging their responsibilities. Institutions
seeking further information about this service should
contact Putnam Mutual Funds, which may modify or
terminate this service at any time.

Putnam Investor Services may make special services
available to shareholders with investments exceeding
$1,000,000. Contact Putnam Investor Services for
details.

The fund pays Putnam Investor Services' fees for
maintaining Investing Accounts.

Reinstatement Privilege

An investor who has redeemed shares of the fund may
reinvest (within 1 year) the proceeds of such sale in
shares of the same class of the fund, or may be able
to reinvest (within 1 year) the proceeds in shares of
the same class of one of the other continuously
offered Putnam funds (through the exchange privilege
described in the prospectus), including, in the case
of shares subject to a CDSC, the amount of CDSC
charged on the redemption. Any such reinvestment
would be at the net asset value of the shares of the
fund(s) the investor selects, next determined after
Putnam Mutual Funds receives a Reinstatement
Authorization. The time that the previous investment
was held will be included in determining any
applicable CDSC due upon redemptions and, in the case
of class B shares, the eight-year period for
conversion to class A shares. Shareholders will
receive from Putnam Mutual Funds the amount of any
CDSC paid at the time of redemption as part of the
reinstated investment, which may be treated as
capital gains to the shareholder for tax purposes.
Exercise of the Reinstatement Privilege does not
alter the federal income tax treatment of any capital
gains realized on a sale of fund shares, but to the
extent that any shares are sold at a loss and the
proceeds are reinvested in shares of the fund, some
or all of the loss may be disallowed as a deduction.
Consult your tax adviser. Investors who desire to
exercise the Reinstatement Privilege should contact
their investment dealer or Putnam Investor Services.

Exchange Privilege

Except as otherwise set forth in this section, by
calling Putnam Investor Services, investors may
exchange shares valued up to $500,000 between
accounts with identical registrations, provided that
no certificates are outstanding for such shares and
no address change has been made within the preceding
15 days.
During periods of unusual market changes and
shareholder activity, shareholders may experience
delays in contacting Putnam Investor Services by
telephone to exercise the Telephone Exchange
Privilege.

Putnam Investor Services also makes exchanges
promptly after receiving a properly completed
Exchange Authorization Form and, if issued, share
certificates. If the shareholder is a corporation,
partnership, agent, or surviving joint owner, Putnam
Investor Services will require additional
documentation of a customary nature. Because an
exchange of shares involves the redemption of fund
shares and reinvestment of the proceeds in shares of
another Putnam fund, completion of an exchange may be
delayed under unusual circumstances if the fund were
to suspend
redemptions or postpone payment for the fund shares
being exchanged, in accordance with federal
securities laws. Exchange Authorization Forms and
prospectuses of the other Putnam funds are available
from Putnam Mutual Funds or investment dealers having
sales contracts with Putnam Mutual Funds. The
prospectus of each fund describes its investment
objective(s) and policies, and shareholders should
obtain a prospectus and consider these objectives and
policies carefully before requesting an exchange.
Shares of certain Putnam funds are not available to
residents of all states. The fund reserves the right
to change or suspend the Exchange Privilege at any
time. Shareholders would be notified of any change
or suspension. Additional information is available
from Putnam Investor Services.

Shareholders of other Putnam funds may also exchange
their shares at net asset value for shares of the
fund, as set forth in the current prospectus of each
fund.

For federal income tax purposes, an exchange is a
sale on which the investor generally will realize a
capital gain or loss depending on whether the net
asset value at the time of the exchange is more or
less than the investor's basis. The Exchange
Privilege may be revised or terminated at any time.
Shareholders would be notified of any such change or
suspension.

Dividends PLUS

Shareholders may invest the fund's distributions of
net investment income or distributions combining net
investment income and short-term capital gains in
shares of the same class of another continuously
offered Putnam fund (the "receiving fund") using the
net asset value per share of the receiving fund
determined on the date the fund's distribution is
payable. No sales charge or CDSC will apply to the
purchased shares unless the fund paying the
distribution is a money market fund. The prospectus
of each fund describes its investment objective(s)
and policies, and shareholders should obtain a
prospectus and consider these objective(s) and
policies carefully before investing their
distributions in the receiving fund. Shares of
certain Putnam funds are not available to residents
of all states.

The minimum account size requirement for the
receiving fund will not apply if the current value of
your account in the fund paying the distribution is
more than $5,000.

Shareholders of other Putnam funds (except for money
market funds, whose shareholders must pay a sales
charge or become subject to a CDSC) may also use
their distributions to purchase shares of the fund at
net asset value.

For federal tax purposes, distributions from the fund
which are reinvested in another fund are treated as
paid by the fund to the shareholder and invested by
the shareholder in the receiving fund and thus, to
the extent comprised of taxable income and deemed
paid to a taxable shareholder, are taxable.

The Dividends PLUS program may be revised or
terminated at any time.

Plans Available To Shareholders

The plans described below are fully voluntary and may
be terminated at any time without the imposition by
the fund or Putnam Investor Services of any penalty.
All plans provide for automatic reinvestment of all
distributions in additional shares
of the fund at net asset value. The fund, Putnam
Mutual Funds or Putnam Investor Services may modify
or cease offering these plans at any time.
Automatic cash withdrawal plan ("ACWP"). An investor
who owns or buys shares of the fund valued at $10,000
or more at the current public offering price may open
an ACWP plan and have a designated sum of money ($50
or more) paid monthly, quarterly, semi-annually or
annually to the investor or another person.
(Payments from the fund can be combined with payments
from other Putnam funds into a single check through a
designated payment plan.) Shares are deposited in a
plan account, and all distributions are reinvested in
additional shares of the fund at net asset value
(except where the plan is utilized in connection with
a charitable remainder trust). Shares in a plan
account are then redeemed at net asset value to make
each withdrawal payment. Payment will be made to any
person the investor designates; however, if shares
are registered in the name of a trustee or other
fiduciary, payment will be made only to the
fiduciary, except in the case of a profit-sharing or
pension plan where payment will be made to a
designee. As withdrawal payments may include a
return of principal, they cannot be considered a
guaranteed annuity or actual yield of income to the
investor.
The redemption of shares in connection with a plan
generally will result in a gain or loss for tax
purposes. Some or all of the losses realized upon
redemption may be disallowed pursuant to the so-
called wash sale rules if shares of the same fund
from which shares were redeemed are purchased
(including through the reinvestment of fund
distributions) within a period beginning 30 days
before, and ending 30 days after, such redemption.
In such a case, the basis of the replacement shares
will be increased to reflect the disallowed loss.
Continued withdrawals in excess of income will reduce
and possibly exhaust invested principal, especially
in the event of a market decline. The maintenance of
a plan concurrently with purchases of additional
shares of the fund would be disadvantageous to the
investor because of the sales charge payable on such
purchases. For this reason, the minimum investment
accepted while a plan is in effect is $1,000, and an
investor may not maintain a plan for the accumulation
of shares of the fund (other than through
reinvestment of distributions) and a plan at the same
time. The cost of administering these plans for the
benefit of those shareholders participating in them
is borne by the fund as an expense of all
shareholders. The fund, Putnam Mutual Funds or
Putnam Investor Services may terminate or change the
terms of the plan at any time. A plan will be
terminated if communications mailed to the
shareholder are returned as undeliverable.

Investors should consider carefully with their own
financial advisers whether the plan and the specified
amounts to be withdrawn are appropriate in their
circumstances. The fund and Putnam Investor Services
make no recommendations or representations in this
regard.

Tax Qualified Retirement Plans; 403(b) and SEP Plans.
(Not offered by funds investing primarily in tax-
exempt securities.) Investors may purchase shares of
the fund through the following Tax Qualified
Retirement Plans, available to qualified individuals
or organizations:

Standard and variable profit-sharing (including
401(k))
and money purchase pension plans; and
Individual Retirement Account Plans (IRAs).
Each of these Plans has been qualified as a prototype
plan by the
Internal Revenue Service. Putnam Investor Services
will furnish services under each plan at a specified
annual cost. Putnam Fiduciary Trust Company serves
as trustee under each of these Plans.

Forms and further information on these Plans are
available from investment dealers or from Putnam
Mutual Funds. In addition, specialized professional
plan administration services are available on an
optional basis; contact Putnam Defined Contribution
Plan Services at 1-800-225-2465, extension 8600.

A 403(b) Retirement Plan is available for employees
of public school systems and organizations which meet
the requirements of Section 501(c)(3) of the Internal
Revenue Code. Forms and further information on the
403(b) Plan are also available from investment
dealers or from Putnam Mutual Funds. Shares of the
fund may also be used in simplified employee pension
(SEP) plans. For further information on the Putnam
prototype SEP plan, contact an investment dealer or
Putnam Mutual Funds.

Consultation with a competent financial and tax
adviser regarding these Plans and consideration of
the suitability of fund shares as an investment under
the Employee Retirement Income Security Act of 1974,
or otherwise, is recommended.

SIGNATURE GUARANTEES

Redemption requests for shares having a net asset
value of $100,000 or more must be signed by the
registered owners or their legal representatives and
must be guaranteed by a bank, broker/dealer,
municipal securities dealer or broker, government
securities dealer or broker, credit union, national
securities exchange, registered securities
association, clearing agency, savings association or
trust company, provided such institution is
acceptable under and conforms with Putnam Fiduciary
Trust Company's signature guarantee procedures. A
copy of such procedures is available upon request.
If you want your redemption proceeds sent to an
address other than your address as it appears on
Putnam's records, you must provide a signature
guarantee. 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.

SUSPENSION OF REDEMPTIONS

The fund may not suspend shareholders' right of
redemption, or postpone payment for more than seven
days, unless the Exchange is closed for other than
customary weekends or holidays, or if permitted by
the rules of the Securities and Exchange Commission
during periods when trading on the Exchange is
restricted or during any emergency which makes it
impracticable for the fund to dispose of its
securities or to determine fairly the value of its
net assets, or during any other period permitted by
order of the Commission for protection of investors.

SHAREHOLDER LIABILITY

Under Massachusetts law, shareholders could, under
certain circumstances, be held personally liable for
the obligations of the fund. However, the Agreement
and Declaration of Trust disclaims shareholder
liability for acts or obligations of the fund and
requires that notice of such disclaimer be given in
each agreement, obligation, or instrument entered
into or executed by the fund or the Trustees. The
Agreement and Declaration of Trust provides for
indemnification out of fund property for all loss
and expense of any shareholder held personally liable
for the obligations of the fund. Thus, the risk of a
shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in
which the fund would be unable to meet its
obligations. The likelihood of such circumstances is
remote.

STANDARD PERFORMANCE MEASURES

Yield and total return data for the fund may from
time to time be presented in Part I of this SAI and
in advertisements. In the case of funds with more
than one class of shares, all performance information
is calculated separately for each class. The data is
calculated as follows.

Total return for one-, five- and ten-year periods (or
for such shorter periods as the fund has been in
operation or shares of the relevant class have been
outstanding) is determined by calculating the actual
dollar amount of investment return on a $1,000
investment in the fund made at the beginning of the
period, at the maximum public offering price for
class A shares and class M shares and net asset value
for other classes of shares, and then calculating the
annual compounded rate of return which would produce
that amount. Total return for a period of one year
is equal to the actual return of the fund during that
period. Total return calculations assume deduction
of the fund's maximum sales charge or CDSC, if
applicable, and reinvestment of all fund
distributions at net asset value on their respective
reinvestment dates.

The fund's yield is presented for a specified thirty-
day period (the "base period"). Yield is based on
the amount determined by (i) calculating the
aggregate amount of dividends and interest earned by
the fund during the base period less expenses for
that period, and (ii) dividing that amount by the
product of (A) the average daily number of shares of
the fund outstanding during the base period and
entitled to receive dividends and (B) the per share
maximum public offering price for class A shares or
class M shares, as appropriate, and net asset value
for other classes of shares on the last day of the
base period. The result is annualized on a
compounding basis to determine the yield. For this
calculation, interest earned on debt obligations held
by the fund is generally calculated using the yield
to maturity (or first expected call date) of such
obligations based on their market values (or, in the
case of receivables-backed securities such as the
Government National Mortgage Association ("GNMAs"),
based on cost). Dividends on equity securities are
accrued daily at their stated dividend rates. The
amount of expenses used in determining the fund's
yield includes, in addition to expenses actually
accrued by the fund, an estimate of the amount of
expenses that the fund would have incurred if
brokerage commissions had not been used to reduce
such expenses.

If the fund is a money market fund, yield is computed
by determining the percentage net change, excluding
capital changes, in the value of an investment in one
share over the seven-day period for which yield is
presented (the "base period"), and multiplying the
net change by 365/7 (or approximately 52 weeks).
Effective yield represents a compounding of the yield
by adding 1 to the number representing the percentage
change in value of the investment during the base
period, raising that sum to a power equal to 365/7,
and subtracting 1 from the result.

If the fund is a tax-exempt fund, the tax-equivalent
yield during the base period may be presented for
shareholders in one or more stated tax brackets. Tax-
equivalent yield is calculated by
adjusting the tax-exempt yield by a factor designed
to show the approximate yield that a taxable
investment would have to earn to produce an after-tax
yield equal, for that shareholder, to the tax-exempt
yield. The tax-equivalent yield will differ for
shareholders in other tax brackets.
At times, Putnam Management may reduce its
compensation or assume expenses of the fund in order
to reduce the fund's expenses. The per share amount
of any such fee reduction or assumption of expenses
during the fund's past five fiscal years (or for the
life of the fund, if shorter) is set forth in the
footnotes to the table in the section entitled
"Financial highlights" in the prospectus. Any such
fee reduction or assumption of expenses would
increase the fund's yield and total return for
periods including the period of the fee reduction or
assumption of expenses.
All data are based on past performance and do not
predict future results.
COMPARISON OF PORTFOLIO PERFORMANCE
Independent statistical agencies measure the fund's
investment performance and publish comparative
information showing how the fund, and other
investment companies, performed in specified time
periods. Three agencies whose reports are commonly
used for such comparisons are set forth below. From
time to time, the fund may distribute these
comparisons to its shareholders or to potential
investors. The agencies listed below measure
performance based on their own criteria rather than
on the standardized performance measures described in
the preceding section.
Lipper Analytical Services, Inc. distributes
mutual fund rankings monthly. The rankings are
based on total return performance calculated by
Lipper, generally reflecting changes in net
asset value adjusted for reinvestment of
capital gains and income dividends. They do
not reflect deduction of any sales charges.
Lipper rankings cover a variety of performance
periods, including year-to-date, 1year, 5-year,
and 10-year performance. Lipper classifies
mutual funds by investment objective and asset
category.
Morningstar, Inc. distributes mutual fund
ratings twice a month. The ratings are divided
into five groups:
highest, above average, neutral, below average
and lowest. They represent a fund's historical
risk/reward ratio relative to other funds in
its broad investment class as determined by
Morningstar, Inc. Morningstar ratings cover a
variety of performance periods, including 1-
year, 3year, 5-year, 10-year and overall
performance. The performance factor for the
overall rating is a weightedaverage assessment
of the fund's 1-year, 3-year, 5-year, and 10-
year total return performance (if available)
reflecting deduction of expenses and sales
charges. Performance is adjusted using
quantitative techniques to reflect the risk
profile of the fund. The ratings are derived
from a purely quantitative system that does not
utilize the subjective criteria customarily
employed by rating agencies such as Standard &
Poor's and Moody's Investor Service, Inc.

CDA/Wiesenberger's Management Results publishes
mutual fund rankings and is distributed
monthly. The rankings are based entirely on
total return calculated by Weisenberger for
periods such as year-to-date, 1-year, 3year, 5-
year and 10-year. Mutual funds are ranked in
general categories (e.g., international bond,
international equity, municipal bond, and
maximum capital gain). Weisenberger rankings
do not reflect deduction of sales charges or
fees.

Independent publications may also evaluate the fund's
performance. The fund may from time to time refer to
results published in various periodicals, including
Barrons, Financial World, Forbes, Fortune, Investor's
Business Daily, Kiplinger's Personal Finance
Magazine, Money, U.S. News and World Report and The
Wall Street Journal.

Independent, unmanaged indexes, such as those listed
below, may be used to present a comparative benchmark
of fund performance. The performance figures of an
index reflect changes in market prices, reinvestment
of all dividend and interest payments and, where
applicable, deduction of foreign withholding taxes,
and do not take into account brokerage commissions or
other costs. Because the fund is a managed portfolio,
the securities it owns will not match those in an
index. Securities in an index may change from time
to time.

The Consumer Price Index, prepared by the U.S.
Bureau of Labor Statistics, is a commonly used
measure of the rate of inflation. The index
shows the average change in the cost of
selected consumer goods and services and does
not represent a return on an investment
vehicle.

The Dow Jones Industrial Average is an index of
30 common stocks frequently used as a general
measure of stock market performance.

The Dow Jones Utilities Average is an index of
15 utility stocks frequently used as a general
measure of stock market performance.

CS First Boston High Yield Index is a market-
weighted index including publicly traded bonds
having a rating below BBB by Standard & Poor's
and Baa by Moody's.

The Lehman Brothers Aggregate Bond Index is an index
composed of securities from The Lehman Brothers
Government/Corporate Bond Index, The Lehman
Brothers Mortgage-Backed Securities Index and
The Lehman Brothers Asset-Backed Securities
Index and is frequently used as a broad market
measure for fixed-income securities.

The Lehman Brothers Asset-Backed Securities
Index is an index composed of credit card,
auto, and home equity loans. Included in the
index are pass-through, bullet (noncallable),
and controlled amortization structured debt
securities; no subordinated debt is included.
All securities have an average life of at least
one year.

The Lehman Brothers Corporate Bond Index is an
index of publicly issued, fixed-rate, non-
convertible investmentgrade domestic corporate
debt securities frequently used as a general
measure of the performance of fixed-income
securities.

The Lehman Brothers Government/Corporate Bond
Index is an index of publicly issued U.S.
Treasury obligations, debt obligations of U.S.
government agencies (excluding mortgage-backed
securities), fixed-rate, non-convertible,
investment-grade corporate debt securities and U.S.
dollardenominated, SEC-registered non-convertible
debt issued by foreign governmental entities or international agencies
used as a general measure of the performance of fixedincome
securities.

The Lehman Brothers Intermediate Treasury Bond Index is an
index of publicly issued U.S. Treasury obligations with
maturities of up to ten years and is used as a general
gauge of the market for intermediate-term fixed-income
securities.

The Lehman Brothers Long-Term Treasury Bond Index is an
index of publicly issued U.S. Treasury obligations
(excluding flower bonds and foreign-targeted issues) that
are U.S. dollar-denominated and have maturities of 10 years
or greater.

The Lehman Brothers Mortgage-Backed Securities Index
includes 15- and 30-year fixed rate securities backed by
mortgage pools of the Government National Mortgage
Association, Federal Home Loan Mortgage Corporation, and
Federal National Mortgage Association.

The Lehman Brothers Municipal Bond Index is an index of
approximately 20,000 investment-grade, fixed-rate taxexempt
bonds.

The Lehman Brothers Treasury Bond Index is an index of
publicly issued U.S. Treasury obligations (excluding flower
bonds and foreign-targeted issues) that are U.S. dollar
denominated, have a minimum of one year to maturity, and
are issued in amounts over $100 million.

The Morgan Stanley Capital International World Index is an
index of approximately 1,482 equity securities listed on
the stock exchanges of the United States, Europe, Canada,
Australia, New Zealand and the Far East, with all values
expressed in U.S. dollars.

The Morgan Stanley Capital International Emerging Markets
Index is an index of approximately 1,100 securities
representing 20 emerging markets, with all values expressed
in U.S. dollars.

The Morgan Stanley Capital International Emerging Markets
Free Index is an index of approximately 1,003 securities
available to non-domestic investors representing 26
emerging markets, with all values expressed in U.S.
dollars.

The Morgan Stanley Capital International EAFE Index is an
index of approximately 1,045 equity securities issued by
companies located in 18 countries and listed on the stock
exchanges of Europe, Australia, and the Far East. All
values are expressed in U.S. dollars.

The Morgan Stanley Capital International Europe Index is an
index of approximately 627 equity securities issued by
companies located in one of 13 European countries, with all
values expressed in U.S. dollars.

The Morgan Stanley Capital International Pacific Index is
an index of approximately 418 equity securities issued by
companies located in 5 countries and listed on the
exchanges of Australia, New Zealand, Japan, Hong Kong,
Singapore/Malaysia. All values are expressed in U.S.
dollars.

The NASDAQ Industrial Average is an index of stocks traded
in The Nasdaq Stock Market, Inc. National Market System.

The Russell 1000 Index is composed of the 1,000 largest
companies in the Russell 3000 Index, representing
approximately 89% of the Russell 3000 total market
capitalization. The Russell 3000 Index is composed of the
3,000 largest U.S. companies ranked by total market
capitalization, representing approximately 98% of the U.S.
investable equity market.

The Russell 2000 Index is composed of the 2,000 smallest
companies in the Russell 3000 Index, representing
approximately 11% of the Russell 3000 total market
capitalization.

The Russell 2000 Growth Index is composed of securities with
greater-than-average growth orientation within the Russell
2000 Index. Each security's growth orientation is
determined by a composite score of the security's price-to
book ratio and forecasted growth rate. Growth stocks tend to
have higher price-to-book ratios and forecasted growth rates
than value stocks. This index is composed of approximately
1,310 companies from the Russell 2000 Index, representing
approximately 50% of the total market capitalization of the
Russell 2000 Index.

The Russell Midcap Index is composed of the 800 smallest
companies in the Russell 1000 Index, representing
approximately 35% of the Russell 1000 total market
capitalization.

The Russell Midcap Growth Index is composed of securities
with greater-than-average growth orientation within the
Russell Midcap Index. Each security's growth orientation is
determined by a composite score of the security's priceto-
book ratio and forecasted growth rate. Growth stocks tend
to have higher price-to-book ratios and forecasted growth
rates than value stocks. This index is composed of
approximately 450 companies from the Russell 1000 Growth
Index, representing 20% of the total market capitalization
of the Russell 1000 Growth Index.

The Salomon Brothers Long-Term High-Grade Corporate Bond
Index is an index of publicly traded corporate bonds
having a rating of at least AA by Standard & Poor's or Aa
by Moody's and is frequently used as a general measure of
the performance of fixed-income securities.

The Salomon Brothers Long-Term Treasury Index is an index
of U.S. government securities with maturities greater than
10 years.

The Salomon Brothers World Government Bond Index is an
index that tracks the performance of the 14 government bond
markets of Australia, Austria, Belgium Canada, Denmark,
France, Germany, Italy, Japan, Netherlands, Spain, Sweden,
United Kingdom and the United States. Country eligibility
is determined by market capitalization and investability
criteria.

The Salomon Brothers World Government Bond Index (non
$U.S.) is an index of foreign government bonds calculated
to provide a measure of performance in the government bond
markets outside of the United States.

Standard & Poor's 500 Composite Stock Price Index is an
index of common stocks frequently used as a general measure
of stock market performance.

Standard & Poor's 40 Utilities Index is an index of 40
utility stocks.
Standard & Poor's/Barra Value Index is an index constructed
by ranking the securities in the Standard & Poor's 500
Composite Stock Price Index by price-to-book ratio and
including the securities with the lowest priceto-book ratios
that represent approximately half of the market
capitalization of the Standard & Poor's 500 Composite Stock
Price Index.
In addition, Putnam Mutual Funds may distribute to shareholders or
prospective investors illustrations of the benefits of reinvesting
tax-exempt or tax-deferred distributions over specified time
periods, which may include comparisons to fully taxable
distributions. These illustrations use hypothetical rates of tax-
advantaged and taxable returns and are not intended to indicate
the past or future performance of any fund.
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.
Ca -- Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or
have other marked shortcomings.
C -- Bonds which are rated C are the lowest rated class of bonds,
and issues so rated can be regarded as having extremely poor
prospects of ever attaining any real investment standing.
Notes (for Money Market funds only)
MIG 1/VMIG 1 -- This designation denotes best quality. There is
present strong protection by established cash flows, superior
liquidity support or demonstrated broad-based access to the market
for refinancing.
MIG 2/VMIG 2 -- This designation denotes high quality. Margins of
protection are ample although not so large as in the preceding
group.
Commercial paper (for Money Market funds only)
Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations.
Prime-1 repayment ability will often be evidenced by the following
characteristics:
- - Leading market positions in well established industries.
- -- High rates of return on funds employed.
- -- Conservative capitalization structure with moderate
reliance on debt and ample asset protection.
- -- Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.
- -- Well established access to a range of financial markets
and assured sources of alternate liquidity.

Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This
will normally be evidenced by many of the characteristics cited
above to a lesser degree. Earnings trends and coverage ratios,
while sound, may be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.

Standard & Poor's

Bonds

AAA -- An obligation rated AAA has the highest rating assigned by
Standard & Poor's. The obligor's capacity to meet its financial
commitment on the obligation is extremely strong.

AA -- An obligation rated AA differs from the highest-rated
obligations only in small degree. The obligor's capacity to meet
its financial commitment on the obligation is very strong.

A -- An obligation rated A is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than obligations in higher-rated categories. However,
the obligor's capacity to meet its financial commitment on the
obligation is still strong.

BBB -- An obligation rated BBB exhibits adequate protection
parameters. However, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity of
the obligor to meet its financial commitment on the obligation.

Obligations rated BB, B, CCC, CC and C are regarded as having
significant speculative characteristics. BB indicates the lowest
degree of speculation and C the highest. While such obligations
will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major exposures to
adverse conditions.

BB -- An obligation rated BB is less vulnerable to nonpayment
than other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial, or
economic conditions which could lead to the obligor's inadequate
capacity to meet its financial commitment on the obligation.

B -- An obligation rated B is more vulnerable to nonpayment than
obligations rated BB, but the obligor currently has the capacity
to meet its financial commitment on the obligations. Adverse
business, financial, or economic conditions will likely impair
the obligor's capacity or willingness to meet its financial
commitment on the obligation.

CCC -- An obligation rated CCC is currently vulnerable to
nonpayment, and is dependent upon favorable business, financial,
and economic conditions for the obligor to meet its financial
commitment on the obligation. In the event of adverse business,
financial, or economic conditions, the obligor is not likely to
have the capacity to meet its financial commitment on the
obligation.

CC -- An obligation rated CC is currently highly vulnerable to
nonpayment.

C -- The C rating may be used to cover a situation where a
bankruptcy petition has been filed, or similar action has been
taken, but payments on this obligation are being continued.

D -- An obligation rated D is in payment default. The D rating
category is used when interest payments or principal payments are
not made on the date due even if the applicable grace period has
not expired, unless Standard & Poor's believes that such payments
will be made during such grace period. The D rating also will be
used upon the filing of a bankruptcy petition, or the taking of a
similar action if payments on an obligation are jeopardized.

Notes (for Money Market funds only)

SP-1 -- Strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics
are given a plus (+) designation.

SP-2 -- Satisfactory capacity to pay principal and interest.

SP-3 -- Speculative capacity to pay principal and interest.

Commercial paper (for Money Market funds only)

A-1 -- This highest category indicates that the degree of safety
regarding timely payment is strong. Those issues determined to
possess extremely strong safety characteristics are denoted with a
plus sign (+) designation.

A-2 -- Capacity for timely payment on issues with this designation
is satisfactory. However, the relative degree of safety is not as
high as for issues designated `A-1'.

A-3 -- Issues carrying this designation have adequate capacity for
timely payment. They are, however, more vulnerable to the adverse
effects of changes in circumstances than obligations carrying the
higher designations.

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.

DD -- Defaulted debt obligations. Issuer failed to meet scheduled
principal and/or interest payments.

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.

CC -- Bonds are minimally protected. Default in payment of
interest and/or principal seems probable.

C -- Bonds are in actual or imminent default in payment of
interest or principal.

DDD -- Bonds are in default and in arrears in interest and/or
principal payments. Such bonds are extremely speculative and
should be valued only on the basis of their value in liquidation
or reorganization of the obligor.

DEFINITIONS

"Putnam Management" - Putnam Investment
Management, Inc., the fund's
investment manager.

"Putnam Mutual Funds" - Putnam Mutual Funds Corp.,
the fund's principal
underwriter.

"Putnam Fiduciary Trust - Putnam Fiduciary Trust
Company,
Company" the fund's custodian.

"Putnam Investor Services" - Putnam Investor Services, a
division of Putnam Fiduciary Trust
Company, the fund's investor
servicing agent.