PUTNAM CAPITAL APPRECIATION FUND
ONE POST OFFICE SQUARE, BOSTON, MA 02109
CLASS A SHARES
INVESTMENT STRATEGY: GROWTH
PROSPECTUS - OCTOBER 18, 1994, AS REVISED JANUARY 1, 1995
This Prospectus explains concisely what you should know before
investing in Class A shares of Putnam Capital
Appreciation Fund (the "Fund) offered without a sales
charge through eligible employer-sponsored defined contribution
plans ("defined contribution plans") . Please read it
carefully and keep it for future reference. You can find
more detailed information about the Fund in the October
18, 1994 Statement of Additional Information, as amended
from time to time. For a free copy of the Statement or
other information, including a Prospectus regarding any other
class of Fund shares or Class A shares for other investors,
call Putnam Investor Services at 1 - 800 -752-9894 .
The Statement has been filed with the Securities and Exchange
Commission and is incorporated into this Prospectus by reference.
The Fund may close to new investments from time to time, if
deemed appropriate by Putnam Management due to unavailability
of portfolio investments suitable for the Fund.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
PUTNAMINVESTMENTS
Putnam Defined
Contribution Plans
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ABOUT THE FUND
Expenses summary.....................................
3
Financial highlights................................. 4
Objective............................................ 4
How objective is pursued............................. 4
Risk factors......................................... 7
How performance is shown............................. 9
How the Fund is managed............................. 10
Organization and history............................ 10
ABOUT YOUR INVESTMENT
How to buy shares................................... 12
Distribution
Plan..................................
12
How to sell shares................................... 13
How to exchange shares............................... 14
How the Fund values its shares....................... 14
How distributions are made; tax information.......... 15
ABOUT PUTNAM INVESTMENTS,
INC. .......................
16
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ABOUT THE FUND
EXPENSES SUMMARY
Expenses are one of several factors to consider when investing
in the Fund. The following table summarizes your
maximum transaction costs from investing in the Fund and
expenses incurred by the Fund based on expenses which the
Fund expects to incur in its first full fiscal year. The
Example shows the cumulative expenses attributable
to a hypothetical $1,000 investment in Class A shares
of the Fund over specified periods.
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees 0.65%
12b - 1 Fees 0.25%
Other Expenses 0.27%
Total Fund Operating Expenses 1.17%
The table is provided to help you understand the expenses of
investing in the Fund and your share of the operating
expenses which the Fund expects to incur during its first
full fiscal year. The 12b - 1 fees shown in the
table reflect the amount to which the Trustees currently
limit payments under the Class A Distribution Plan
. "Other Expenses" are based on estimated
amounts for the Fund's first full fiscal year.
EXAMPLE
Your investment of $1,000 would incur the following expenses,
assuming 5% annual return and redemption at the end of
each period:
1 3
YEAR YEARS
$12 $37
The Example does not represent past or future expense
levels , and actual expenses may be greater or less
than those shown. Federal regulations require the Example
to assume a 5% annual return, but actual annual return will vary.
The Example does not reflect any charges or expenses
related to your employer's plan.
See "Organization and history" for information about any other
class of shares offered by the Fund.
FINANCIAL HIGHLIGHTS
The table below presents per share financial information
for Class A shares. This information has been
derived from the Fund's financial statements, which have been
audited and reported on by the Fund's independent
accountants. The Report of Independent Accountants and
financial statements included in the Fund's Annual Report
to shareholders for the 1994 fiscal year are incorporated
by reference into this Prospectus. The Fund's Annual
Report, which contains additional unaudited performance
information, is available without charge upon request.
Financial highlights
(For a share outstanding throughout the period)
FOR THE PERIOD
AUGUST 5, 1993
(COMMENCEMENT
OF OPERATIONS) TO
MAY 31
1994
NET ASSET VALUE, BEGINNING OF PERIOD $8.53
INVESTMENT OPERATIONS
Net Investment Income .07(a)(b)
Net Realized and Unrealized Gain on Investments 2.27
TOTAL FROM INVESTMENT OPERATIONS 2.34
LESS DISTRIBUTIONS:
From Net Investment Income (.04)
From Net Realized Gain on Investments (.09)
TOTAL DISTRIBUTIONS (.13)
NET ASSET VALUE, END OF PERIOD $10.74
TOTAL INVESTMENT RETURN AT NET ASSET VALUE (%) (C) 33.63(D)
NET ASSETS, END OF PERIOD (IN THOUSANDS) $3,062
Ratio of Expenses to Average Net Assets (%) .95(b)(d)
Ratio of Net Investment Income to Average Net
Assets (%) .89(b)(d)
Portfolio Turnover (%) 102.99(e)
(a) Per share net investment income for the period ended May 31,
1994 has been determined on the basis of the weighted average
number of shares outstanding during the period.
(b) Reflects an expense limitation during the period. As a result
of this limitation, expenses of the fund for the period ended May
31, 1994, reflect a reduction of $.11 per share.
(c) Total investment return assumes dividend reinvestment and
does not reflect the effects of sales charges.
(d) Annualized.
(e) Not annualized.
OBJECTIVE
Putnam Capital Appreciation Fund seeks capital appreciation.
Current income is only an incidental consideration in
selecting investments for the Fund. The Fund is not
intended to be a complete investment program, and there is
no assurance it will achieve its objective.
HOW OBJECTIVE IS PURSUED
BASIC INVESTMENT STRATEGY
UNDER NORMAL MARKET CONDITIONS, THE FUND INVESTS AT LEAST 65%
OF ITS TOTAL ASSETS IN COMMON STOCKS THAT OFFER POTENTIAL
FOR CAPITAL APPRECIATION. In selecting such securities
for the Fund, Putnam Investment Management, Inc., the
Fund's investment manager ("Putnam Management"), will
consider, among other things, an issuer's financial
strength, competitive position and projected future
earnings and dividends. Although common stocks will
normally be the Fund's principal investments, the Fund may
also purchase convertible bonds, convertible preferred
stocks, preferred stocks and debt securities if Putnam
Management believes they would help achieve the Fund's
objective. The Fund may also hold a portion of its assets
in cash or money market instruments.
The Fund will not limit its investments to any particular type
of company. It may invest in companies, large or small,
whose earnings are believed to be in a relatively strong
growth trend, or in companies in which significant further
growth is not anticipated but whose market value per share
is thought to be undervalued. It may invest in small and
relatively less well - known companies. Smaller companies
may present greater opportunities for capital
appreciation, but may also involve greater risks. They
may have limited product lines, markets or financial
resources, or may depend on a limited management group. Their
securities may trade less frequently and in limited volume. As a
result, the prices of these securities may fluctuate more
than prices of securities of larger, more established
companies.
At times Putnam Management may judge that conditions in the
securities markets make pursuing the Fund's basic
investment strategy inconsistent with the best interests of
its shareholders. At such times, Putnam Management may
temporarily use alternative strategies, primarily designed
to reduce fluctuations in the value of the Fund's assets.
In implementing these "defensive" strategies, the Fund may
invest primarily in debt securities, preferred stocks,
U.S. government and agency obligations, cash or money
market instruments, or other securities Putnam Management
considers consistent with such defensive strategies. It
is impossible to predict when, or for how long, the Fund
will use these alternative strategies.
FOREIGN INVESTMENTS
THE FUND MAY INVEST UP TO 20% OF ITS ASSETS IN SECURITIES
PRINCIPALLY TRADED IN FOREIGN MARKETS. The Fund may also
purchase Eurodollar certificates of deposit without regard to
the 20% limit. Since foreign securities are normally
denominated and traded in foreign currencies, the values
of the Fund's assets may be affected favorably or
unfavorably by currency exchange rates and exchange
control regulations. There may be less information
publicly available about a foreign company than about a
U.S. company, and foreign companies 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 companies are less
liquid and at times more volatile than securities of
comparable U.S. companies, especially in emerging markets.
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
domestic investments.
In addition, there may be a possibility of nationalization or
expropriation of assets, imposition of currency exchange
controls, confiscatory taxation, political or financial
instability and diplomatic developments which could affect
the value of the Fund's investments in certain foreign
countries, especially in emerging markets. 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 located in those foreign countries. Special tax
considerations apply to foreign securities.
The Fund may buy or sell foreign currencies, foreign currency
forward contracts and call options on foreign currencies
for hedging purposes in connection with its foreign
investments.
A MORE DETAILED EXPLANATION OF FOREIGN INVESTMENTS, AND THE
RISKS AND SPECIAL TAX CONSIDERATIONS ASSOCIATED WITH THEM,
IS INCLUDED IN THE STATEMENT OF ADDITIONAL INFORMATION.
PORTFOLIO TURNOVER
The length of time the Fund has held a particular security is
not generally a consideration in investment decisions. A
change in the securities held by the Fund is known as
"portfolio turnover." As a result of the Fund's investment
policies, under certain market conditions the Fund's
portfolio turnover rate may be higher than that of other
mutual funds. Portfolio turnover generally involves some
expense to the Fund, including brokerage commissions or
dealer mark - ups and other transaction costs on the sale of
securities and reinvestment in other securities. Such
transactions may result in realization of taxable capital gains.
The portfolio turnover rate for the life of the Fund is shown in
the section "Financial highlights."
STOCK INDEX FUTURES AND OPTIONS
THE FUND MAY BUY AND SELL STOCK INDEX FUTURES CONTRACTS FOR
HEDGING PURPOSES. An "index future" is a contract to buy or
sell units of a particular stock index at an agreed price
on a specified future date. Depending on the change in
value of the index between the time when the Fund enters
into and terminates an index future or option transaction,
the Fund realizes a gain or loss. The Fund may buy and
sell call and put options on index futures or on stock
indices in addition to or as an alternative to purchasing
or selling index futures or, to the extent permitted by
applicable law, to earn additional income.
THE USE OF INDEX FUTURES AND RELATED OPTIONS INVOLVES CERTAIN
SPECIAL RISKS. FUTURES AND OPTIONS TRANSACTIONS INVOLVE
COSTS AND MAY RESULT IN LOSSES. Certain risks arise
because of the possibility of imperfect correlations
between movements in the prices of index futures and
options and movements in the prices of the underlying
stock index or of the common stocks in the Fund's
portfolio that are the subject of a hedge. The successful
use of the strategies described above further depends on
Putnam Management's ability to forecast market movements
correctly. Other risks arise from the Fund's potential
inability to close out its index futures or options
positions, and there can be no assurance that a liquid
secondary market will exist for any index future or option
at any particular time. Certain provisions of the Internal
Revenue Code and certain regulatory requirements may
limit the Fund's ability to engage in index futures and
options transactions.
<PAGE>
A MORE DETAILED EXPLANATION OF INDEX FUTURES AND OPTIONS
TRANSACTIONS, INCLUDING THE RISKS ASSOCIATED WITH THEM, IS
INCLUDED IN THE STATEMENT OF ADDITIONAL INFORMATION.
RISK FACTORS
INVESTMENTS IN FIXED - INCOME SECURITIES. The Fund may
invest in both higher - rated and lower - rated
fixed - income securities, regardless of credit
rating. The values of fixed - income securities
generally fluctuate in response to changes in interest
rates. Thus, a decrease in interest rates will generally
result in an increase in the value of the Fund's assets.
Conversely, during periods of rising interest rates, the
value of the Fund's assets will generally decline. The
values of lower - rated fixed income securities,
commonly known as "junk bonds," generally fluctuate more
than those of higher - rated fixed income securities.
Securities in the lower rating categories may, depending
on the rating, have large uncertainties or major risk
exposure to adverse conditions. The rating services'
descriptions of securities in the various rating categories,
including the speculative characteristics of securities
in the lower rating categories, are set forth in the
Statement of Additional Information.
The lower ratings of these securities reflect a greater
possibility that adverse changes in the financial condition
of their issuers, or in general economic conditions, or
both, or an unanticipated rise in interest rates, may
impair the ability of their issuers to make payments of
interest and principal. In addition, under such
circumstances the values of such securities may be more
volatile, and the markets for such securities may be less
liquid, than those for higher - rated securities, and the
Fund may as a result find it more difficult to determine the
fair value of such securities. When the Fund invests in
securities in the lower rating categories, the achievement
of the Fund's goals is more dependent on Putnam
Management's ability than would be the case if the Fund
were investing in securities in the higher rating
categories.
OTHER INVESTMENT PRACTICES
THE FUND MAY ALSO ENGAGE TO A LIMITED EXTENT IN THE FOLLOWING
INVESTMENT PRACTICES, EACH OF WHICH INVOLVES CERTAIN
SPECIAL RISKS. THE STATEMENT OF ADDITIONAL INFORMATION
CONTAINS MORE DETAILED INFORMATION ABOUT THESE PRACTICES,
INCLUDING LIMITATIONS DESIGNED TO REDUCE THESE RISKS.
OPTIONS. The Fund may seek to increase its current return by
buying and selling covered call and put options on securities
it owns or in which it may invest. The Fund receives a
premium from writing a call or put option, which increases
the Fund's return if the option expires unexercised or is
closed out at a net profit. When the Fund writes a call
option, it gives up the opportunity to profit from any
increase in the price of a security above the exercise
price of the option; when it writes a put option, the Fund
takes the risk that it will be required to purchase a
security from the option holder at a price above the
current market price of the security. The Fund may terminate
an option that it has written prior to its expiration by
entering into a closing purchase transaction in which it
purchases an option having the same terms as the option
written. The Fund may also buy and sell put and call
options for hedging purposes. The Fund may also from time
to time buy and sell combinations of put and call options
on the same underlying security to earn additional income.
The aggregate value of the securities underlying options
written by the Fund may not exceed 25% of the Fund's
assets. The Fund's use of these strategies may be limited
by applicable law.
SECURITIES LOANS, REPURCHASE AGREEMENTS AND FORWARD COMMITMENTS.
The Fund may lend portfolio securities amounting to not
more than 25% of its assets to broker - dealers and
may enter into repurchase agreements on up to 25% of its assets.
These transactions must be fully collateralized at all times.
The Fund may also purchase securities for future delivery, which
may increase its overall investment exposure and involves a risk
of loss if the value of the securities declines prior to the
settlement date. These transactions involve some risk to the
Fund if the other party should default on its obligation and the
Fund is delayed or prevented from recovering the collateral or
completing the transaction.
LIMITING INVESTMENT RISK
SPECIFIC INVESTMENT RESTRICTIONS HELP THE FUND LIMIT
INVESTMENT RISKS FOR ITS SHAREHOLDERS. THESE RESTRICTIONS
PROHIBIT THE FUND FROM: acquiring more than 10% of the
voting securities of any one issuer* and investing more
than: (a) (with respect to 75% of its total assets) 5% of
its total assets in securities of any one issuer (other
than the U.S. government);* (b) 15% of its net assets in
securities restricted as to resale (excluding securities
determined by the Fund's Trustees (or the person
designated by the Fund's Trustees to make such
determinations) to be readily marketable);* (c) 25% of its
total assets in any one industry (other than U.S.
government securities);* (d) 5% of its net assets in
warrants or more than 2% of its net assets in warrants not
listed on the New York or American Stock Exchanges;
or (e) 15% of its net assets in any combination of
securities that are not readily marketable, in securities
restricted as to resale (excluding securities determined
by the Fund's Trustees (or the person designated by the
Fund's Trustees to make such determinations) to be readily
marketable), and in repurchase agreements maturing in more
than seven days.
Restrictions marked with an asterisk (*) above are summaries
of fundamental policies. See the Statement of
Additional Information for the full text of these policies
and the Fund's other fundamental policies. Except for
investment policies designated as fundamental in this
Prospectus or the Statement, the investment policies
described in this Prospectus and in the Statement are not
fundamental policies. The Trustees may change any
non - fundamental investment policies without shareholder
approval. As a matter of policy, the Trustees would not
materially change the Fund's investment objective without
shareholder approval.
HOW PERFORMANCE IS SHOWN
THE FUND'S INVESTMENT PERFORMANCE MAY FROM TIME TO TIME BE
INCLUDED IN ADVERTISEMENTS ABOUT THE FUND. "Total return"
for the one -, five - and ten - year
periods (or for the life of a class, if shorter) through the most
recent calendar quarter represents the average annual compounded
rate of return on an investment of $1,000 in the Fund invested at
the maximum public offering price . Total return
may also be presented for other periods or based on investment at
reduced sales charge levels. Any quotation of investment
performance not reflecting the maximum initial sales charge or
contingent deferred sales charge would be reduced if such sales
charge were used.
ALL DATA IS BASED ON THE FUND'S PAST INVESTMENT RESULTS AND DOES
NOT PREDICT FUTURE PERFORMANCE. Investment performance,
which will vary, is based on many factors, including
market conditions, the composition of the Fund's
portfolio, the Fund's operating expenses and which class
of shares you purchase. Investment performance also often
reflects the risks associated with the Fund's investment
objective and policies. These factors should be
considered when comparing the Fund's investment results to
those of other mutual funds and other investment vehicles.
Quotations of investment performance for any period when an
expense limitation was in effect will be greater than if
the limitation had not been in effect. The Fund's
performance may be compared to various indices. See the
Statement of Additional Information. Because shares
sold through eligible defined contribution plans are sold without
a sales charge, quotations of investment performance reflecting
the deduction of a sales charge will be lower than the actual
investment performance on shares purchased through such
plans.
HOW THE FUND IS MANAGED
THE TRUSTEES OF THE FUND ARE RESPONSIBLE FOR GENERALLY
OVERSEEING THE CONDUCT OF THE FUND'S BUSINESS. Subject to
such policies as the Trustees may determine, Putnam
Management furnishes a continuing investment program for
the Fund and makes investment decisions on its behalf.
Subject to the control of the Trustees, Putnam Management
also manages the Fund's other affairs and business.
Gerald S. Zukowski, Senior Vice President of Putnam
Management and Michael J. Mufson, Vice President of Putnam
Management, each of whom is a Vice President of the Fund,
have been primarily responsible for the
day - to - day management of the Fund's
portfolio since 1993 and 1994, respectively. Messrs.
Zukowski and Mufson have been employed by Putnam Management since
1989 and 1993, respectively. Prior to June 1993, Mr.
Mufson was Senior Equity Analyst at Stein Roe & Farnham.
The Fund pays all expenses not assumed by Putnam Management,
including Trustees' fees, auditing, legal, custodial,
investor servicing and shareholder reporting expenses, and
payments under its Distribution Plans (which are in turn
allocated to the relevant class of shares). The Fund also
reimburses Putnam Management for the compensation and
related expenses of certain officers of the Fund and their
staff who provide administrative services to the Fund.
The total reimbursement is determined annually by the
Trustees.
Putnam Management places all orders for purchases and sales of
the Fund's securities. In selecting broker - dealers,
Putnam Management may consider research and brokerage
services furnished to it and its affiliates. Subject to
seeking the most favorable price and execution available,
Putnam Management may consider sales of shares of the Fund
(and, if permitted by law, of the other Putnam funds) as a
factor in the selection of broker - dealers.
ORGANIZATION AND HISTORY
Putnam Capital Appreciation Fund is a Massachusetts business
trust organized on May 4, 1993. 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. As of August 31,
1994, Putnam Investments, Inc. owned more than 25% of the
shares of the Fund and therefore may be deemed to
"control" the Fund.
The Fund is an open - end, diversified management
investment company with an unlimited number of authorized
shares of beneficial interest. Shares of the Fund may,
without shareholder approval, be divided into two or more
series of shares representing separate investment
portfolios. Any such series of shares may be further
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 currently divided into two classes.
Only the Fund's Class A shares are offered by this Prospectus.
The Fund also offers Class B shares, which bear a higher 12b-1
fee than Class A shares and are subject to a contingent deferred
sales charge. Because Class A shares bear lower expenses than
Class B shares, the investment performance of Class A shares will
be greater than that of Class B shares.
Each share has one vote, with fractional shares voting
proportionally. Shares of each class will vote together as
a single class except when required by law or as determined
by the Trustees. Shares are freely transferable, are
entitled to dividends as declared by the Trustees, and, if
the Fund were liquidated, would receive the net assets of
the Fund. The Fund may suspend the sale of shares at any
time and may refuse any order to purchase shares.
Although the Fund is not required to hold annual meetings
of its shareholders, shareholders holding at least 10% of
the outstanding shares entitled to vote have the right to
call a meeting to elect or remove Trustees, or to take
other actions as provided in the Agreement and
Declaration of Trust.
If you own fewer shares than a minimum amount set by the
Trustees (presently 20 shares), the Fund may choose to
redeem your shares and pay you for them. You will receive
at least 30 days' written notice before the Fund redeems
your shares, and you may purchase additional shares at any
time to avoid a redemption. The Fund may also redeem
shares if you own shares above a maximum amount set by the
Trustees. There is presently no maximum, but the Trustees
may establish one at any time, which could apply to both
present and future shareholders.
THE FUND'S TRUSTEES: GEORGE PUTNAM,* CHAIRMAN. President of
the Putnam funds. Chairman and Director of Putnam
Management and Putnam Mutual Funds Corp. ("Putnam Mutual
Funds"). Director, Marsh & McLennan Companies, Inc.;
WILLIAM F. POUNDS, VICE CHAIRMAN. Professor of
Management, Alfred P. Sloan School of Management, M.I.T.;
JAMESON ADKINS BAXTER, President, Baxter Associates,
Inc.; HANS H. ESTIN, Vice Chairman, North American
Management Corp. ; JOHN A. HILL, Principal and Managing
Director, First Reserve Corporation; ELIZABETH T. KENNAN,
President, Mount Holyoke College; LAWRENCE J. LASSER,*
Vice President of the Putnam funds. President, Chief
Executive Officer and Director of Putnam Investments, Inc.
and Putnam Management. Director, Marsh & McLennan
Companies, Inc.; ROBERT E. PATTERSON, Executive Vice
President, Cabot Partners Limited Partnership; DONALD S.
PERKINS, Director of various corporations, including AT&T,
K mart Corporation and Time Warner Inc.; GEORGE PUTNAM,
III,* President, New Generation Research, Inc.; A.J.C.
SMITH,* Chairman, Chief Executive Officer and Director,
Marsh & McLennan Companies, Inc. and W. NICHOLAS
THORNDIKE, Director of various corporations and charitable
organizations, including Providence Journal Co. Also,
Trustee of Massachusetts General Hospital and Trustee of
Eastern Utilities Associates. The Fund's Trustees are
also Trustees of the other Putnam funds. Those marked
with an asterisk (*) are "interested persons" of the Fund,
Putnam Management or Putnam Mutual Funds.
ABOUT YOUR INVESTMENT
HOW TO BUY SHARES
ALL ORDERS TO PURCHASE SHARES MUST BE MADE THROUGH YOUR
EMPLOYER'S DEFINED CONTRIBUTION PLAN. FOR MORE INFORMATION ABOUT
HOW TO PURCHASE SHARES OF THE FUND THROUGH YOUR EMPLOYER'S PLAN
OR LIMITATIONS ON THE AMOUNT THAT MAY BE PURCHASED, PLEASE
CONSULT YOUR EMPLOYER. Shares are sold to eligible defined
contribution plans at the net asset value per share next
determined after receipt of an order by Putnam Mutual Funds.
Orders must be received by Putnam Mutual Funds before the close
of regular trading on the New York Stock Exchange in order to
receive that day's net asset value. In order to be eligible to
purchase shares at net asset value, defined contribution plans
must initially invest at least $1 million or be sponsored by
companies with more than 750 employees. Eligible plans may make
additional investments of any amount at any time. To eliminate
the need for safekeeping, the Fund will not issue certificates
for your shares. Sales personnel may receive different
compensation depending on which class of shares they sell.
On sales at net asset value to a participant-directed qualified
retirement plan initially investing less than $20 million in
Putnam funds and other investments managed by Putnam Management
or its affiliates (including a plan sponsored by an employer with
more than 750 employees), Putnam Mutual Funds pays commissions on
cumulative purchases during the life of the account at the rate
of 1.00% of the amount under $3 million and 0.50% thereafter. On
sales at net asset value to all other participant-directed
qualified retirement plans, Putnam Mutual Funds pays commissions
on the initial investment and on subsequent net quarterly sales
at the rate of 0.15%. Putnam Mutual Funds may, at its
expense, provide additional promotional incentives or
payments to dealers that sell shares of the Putnam funds.
In some instances, these incentives or payments may be
offered only to certain dealers who have sold or may sell
significant amounts of shares.
DISTRIBUTION PLAN
The Class A Plan provides for payments by the Fund to Putnam
Mutual Funds at the annual rate of up to 0.35% of the
Fund's average net assets attributable to Class A shares.
The Trustees currently limit payments under the Class A
Plan to the annual rate of 0.25% of such assets. Should
the Trustees decide in the future to approve payments in
excess of this amount, shareholders will be notified and
this Prospectus will be revised.
In order to compensate investment dealers (including, for this
purpose, certain financial institutions) for services
provided in connection with sales of Class A shares and
the maintenance of shareholder accounts, Putnam Mutual
Funds makes quarterly payments to qualifying dealers based
on the average net asset value of Class A shares of the
Fund which are attributable to shareholders for whom the
dealers are designated as the dealer of record. This
calculation excludes until one year after purchase shares
purchased at net asset value by shareholders investing $1
million or more and by participant - directed qualified
retirement plans sponsored by employers with more than 750
employees ("NAV Shares"), except for shares owned by
certain investors investing $1 million or more that have
made arrangements with Putnam Mutual Funds and whose
dealer of record waived the sales commission.
Except as stated below, Putnam Mutual Funds makes such
payments at the annual rate of 0.25% of such average net
asset value for Class A shares. For
participant - directed qualified retirement
plans initially investing less than $20 million in Putnam
funds and other investments managed by Putnam Management
or its affiliates, Putnam Mutual Funds' payments to
qualifying dealers on NAV Shares are 100% of the rate
stated above if average plan assets in Putnam funds
(excluding money market funds) during the quarter are less
than $20 million, 60% of the stated rate if average plan
assets are at least $20 million but less than $30
million, and 40% of the stated rate if average plan assets
are $30 million or more. For all other
participant - directed qualified retirement plans
purchasing NAV Shares, Putnam Mutual Funds makes quarterly
payments to qualifying dealers at the annual rate of 0.10%
of the average net asset value of such shares.
Payments under the Plan are intended to compensate
Putnam Mutual Funds for services provided and expenses incurred
by it as principal underwriter of the Fund's shares,
including the payments to dealers mentioned above. Putnam
Mutual Funds may suspend or modify such payments to
dealers. Such payments are also subject to the
continuation of the Distribution Plan, the
terms of Service Agreements between dealers and Putnam
Mutual Funds, and any applicable limits imposed by the
National Association of Securities Dealers, Inc.
HOW TO SELL SHARES
SUBJECT TO ANY RESTRICTIONS IMPOSED BY YOUR EMPLOYER'S PLAN,
YOU CAN SELL YOUR SHARES THROUGH THE PLAN TO THE FUND
ANY DAY THE NEW YORK STOCK EXCHANGE IS OPEN . For more
information about how to sell shares of the Fund
through your employer's plan, including any
charges that may be imposed by the plan, please consult with your
employer.
Your plan administrator must send a signed letter of
instruction to Putnam Investor Services . The
price you will receive is the next net asset value calculated
after the Fund receives your request in proper form .
All requests must be received by the Fund prior to the close of
regular trading on the New York Stock Exchange in order to
receive that day's net asset value . If you
sell shares having a net asset value of $100,000 or more,
the signatures of registered owners or their legal
representatives must be guaranteed by a bank,
broker - dealer or certain other financial
institutions. See the Statement of Additional
Information for more information about where to obtain a
signature guarantee.
THE FUND GENERALLY PROVIDES PAYMENT FOR REDEEMED
SHARES THE BUSINESS DAY AFTER THE REQUEST IS
RECEIVED. Under unusual circumstances, the Fund may
suspend redemptions, or postpone payment for more than
seven days, as permitted by federal securities law.
The Fund will only redeem shares for which it
has received payment.
HOW TO EXCHANGE SHARES
Subject to any restrictions contained in your plan, you
can exchange your shares for shares of other
Putnam funds available through your plan at net asset
value . Contact your plan administrator or Putnam
Investor Services on how to exchange your shares or how to
obtain prospectuses of other Putnam funds in which you may
invest . Shares of certain Putnam funds are not
available to residents of all states.
The exchange privilege is not intended as a vehicle for
short - term trading. Excessive exchange activity may
interfere with portfolio management and have an adverse
effect on all shareholders. In order to limit excessive
exchange activity and in other circumstances where Putnam
Management or the Trustees believe doing so would be in
the best interests of the Fund, the Fund reserves the
right to revise or terminate the exchange privilege, limit
the amount or number of exchanges or reject any exchange.
Shareholders would be notified of any such action to
the extent required by law. Consult Putnam Investor
Services before requesting an exchange. See the Statement
of Additional Information to find out more about the
exchange privilege.
HOW THE FUND VALUES ITS SHARES
THE FUND CALCULATES THE NET ASSET VALUE OF A SHARE OF EACH
CLASS BY DIVIDING THE TOTAL VALUE OF ITS ASSETS, LESS
LIABILITIES, BY THE NUMBER OF ITS SHARES OUTSTANDING.
SHARES ARE VALUED AS OF THE CLOSE OF REGULAR TRADING ON
THE NEW YORK STOCK EXCHANGE EACH DAY THE EXCHANGE IS OPEN.
Portfolio securities for which market quotations are
readily available are stated at market value.
Short - term investments that will mature in 60 days or
less are stated at amortized cost, which approximates
market value. All other securities and assets are valued
at their fair value following procedures approved by the
Trustees.
HOW DISTRIBUTIONS ARE MADE; TAX INFORMATION
The Fund distributes any net investment income and any net
realized capital gains at least annually. Distributions from
net investment income, if any, are expected to be
small. Distributions from net capital gains are made after
applying any available capital loss carryovers.
The terms of your plan will govern how your plan may receive
distributions from the Fund . Generally, periodic
distributions from the Fund to your plan are
reinvested in additional Fund shares , although
your plan may permit Fund distributions from net investment
income to be received by you in cash while reinvesting
capital gains distributions in additional shares or
all Fund distributions to be received in
cash. If another option is not selected ,
all distributions will be reinvested in additional Fund
shares .
The Fund intends to qualify as a "regulated investment
company" for federal income tax purposes and to meet all
other requirements that are necessary for it to be
relieved of federal taxes on income and gains it
distributes . The Fund will distribute
substantially all of its ordinary income and capital
gain net income on a current basis. Generally,
Fund distributions are taxable as ordinary
income, except that any distributions of net
long - term capital gains will be taxed as
such . However, distributions by the
Fund to employer-sponsored defined contribution plans
that qualify for tax-exempt treatment under federal income
tax laws will not be taxable. Special tax rules apply to
investments through such plans . You should consult your tax
adviser to determine the suitability of the Fund as an
investment through such a plan and the tax treatment of
distributions (including distributions of amounts attributable to
an investment in the Fund) from such a plan.
The foregoing is a summary of certain federal income tax
consequences of investing in the Fund. You should consult your
tax adviser to determine the precise effect of an investment
in the Fund on your particular tax situation (including
possible liability for state and local taxes).
<PAGE>
ABOUT PUTNAM INVESTMENTS, INC .
PUTNAM MANAGEMENT HAS BEEN MANAGING MUTUAL FUNDS SINCE 1937.
Putnam Mutual Funds is the principal underwriter of the Fund
and of other Putnam funds. Putnam Defined Contribution
Plans is a division of Putnam Mutual Funds. Putnam Fiduciary
Trust Company is the Fund's custodian. Putnam Investor
Services, a division of Putnam Fiduciary Trust Company, is
the Fund's investor servicing and transfer agent.
Putnam Management, Putnam Mutual Funds and Putnam Fiduciary
Trust Company are located at One Post Office Square,
Boston, Massachusetts, 02109 and are subsidiaries of Putnam
Investments, Inc., which is wholly owned by Marsh
& McLennan Companies, Inc., a publicly - owned holding
company whose principal businesses are international insurance
and reinsurance brokerage, employee benefit consulting and
investment management.
<PAGE>
DIFFERENCES BETWEEN THE TYPESET DEFINED CONTRIBUTION AND CLASS Y
(PRINTED)
PROSPECTUS AND THE EDGAR FILING VERSION.
1. PAGINATION IS DIFFERENT IN PRINTED PROSPECTUS
2. SECTION HEADINGS AND SUBHEADINGS IN THE PRINTED PROSPECTUS
ARE PRINTED IN BOLDFACE TYPE
3. THE FIRST FEW DESCRIPTIVE LINES OF CERTAIN PARAGRAPHS, AND
CERTAIN OTHER EMPHASIZED PHRASES, ARE PRINTED IN BOLDFACE
TYPE
4. IN THE PRINTED PROSPECTUS, THE DASHES AT THE BEGINNING OF
CERTAIN SENTENCES ARE REPLACED BY A SOLID BOX
5. THE FIRST PAGE OF THE PRINTED PROSPECTUS CONTAINS A BOX
WITH AN ILLUSTRATION OF THE BALANCE SCALES, THE PUTNAM
LOGO
<PAGE>
