PROSPECTUS
February 1, 1995 , as
revised September 1, 1995
Putnam Asset Allocation Funds
Putnam Asset Allocation: Growth Portfolio
Putnam Asset Allocation: Balanced Portfolio
Putnam Asset Allocation: Conservative Portfolio
Class A, B , C and M shares
This Prospectus explains concisely what you should know before
investing in Class A, B , C and M shares of Putnam
Asset Allocation Funds (the "Trust"), a series investment company
offering three separate portfolios: Putnam Asset Allocation:
Growth Portfolio, Putnam Asset Allocation: Balanced Portfolio
and Putnam Asset Allocation: Conservative Portfolio (the
"Funds"). Please read it carefully and keep it for future
reference. You can find more detailed information about the
Funds in the February 1, 1995 Statement of Additional
Information, as amended from time to time. For a free copy of
the Statement or other information, including Prospectuses
regarding any other class of shares of the Funds, call Putnam
Investor Services at 1-800-225-1581. The Statement has been
filed with the Securities and Exchange Commission and is
incorporated into this Prospectus by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY FINANCIAL INSTITUTION, ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY, AND INVOLVE RISK, INCLUDING
THE POSSIBLE LOSS OF PRINCIPAL.
BOSTON * LONDON * TOKYO
<PAGE>
ABOUT THE FUNDS
Expenses summary
...................................................... 3
Financial highlights
...................................................... 6
Objectives
...................................................... 8
How objectives are pursued
...................................................... 8
Risk factors
. ..................................................... 13
How performance is shown
. ..................................................... 20
How the Funds are managed
. ..................................................... 21
Organization and history
. ..................................................... 22
ABOUT YOUR INVESTMENT
Alternative sales arrangements
. ..................................................... 24
How to buy shares
. ..................................................... 25
Distribution Plans
. ..................................................... 30
How to sell shares
. ..................................................... 32
How to exchange shares
. ..................................................... 34
How each Fund values its shares
. ..................................................... 34
How distributions are made; tax information
. ..................................................... 35
ABOUT PUTNAM INVESTMENTS, INC. 36
APPENDIX
Fixed-income security ratings ......................... 37
<PAGE>
About the Funds
EXPENSES SUMMARY
Expenses are one of several factors to consider when investing in
a Fund. The following table summarizes your maximum transaction
costs from investing in a Fund and expenses which each Fund
expects to incur in its first full fiscal year. The Examples
show the cumulative expenses attributable to a hypothetical
$1,000 investment over specified periods.
Class A Class B
Class C Class M
Shares Shares Shares
Shares
Shareholder Transaction
Expenses
Maximum Sales Charge
Imposed on Purchases
(as a percentage
of offering price) 5.75% NONE* NONE*
3.50%*
5.0% in the
Deferred Sales Charge first year, 1.00% in
(as a percentage of the declining to 1.0%the first
lower of the original in the sixth year,
ye ar and
purchase price or and eliminated eliminated
redemption proceeds) NONE** thereafter thereafter
NONE
Annual Fund Operating Expenses
(as a percentage of average net assets)
Class A Shares
--------------
Growth Balanced
Conservative
Portfolio Portfolio Portfolio
------- ------- -------
Management Fees 0.70% 0.70% 0.33%+
12b-1 Fees 0.25% 0.25% 0.25%
Other Expenses 0.63% 0.30% 0.67%
Total Fund Operating Expenses 1.58% 1.25% 1.25%+
+ after expense limitation discussed below
Class B and Class C Shares
--------------------------
Growth Balanced Conservative
Portfolio Portfolio Portfolio
------- ------- -------
Management Fees 0.70% 0.70% 0.33%+
12b-1 Fees 1.00% 1.00% 1.00%
Other Expenses 0.63% 0.30% 0.67%
Total Fund Operating Expenses 2.33% 2.00% 2.00%+
Class M Shares
--------------
Growth Balanced Conservative
Portfolio Portfolio Portfolio
--------- --------- -----------
Management Fees 0.70% 0.70% 0.33%+
12b-1 Fees 0.75% 0.75% 0.75%
Other Expenses 0.63% 0.30% 0.67%
Total Fund Operating Expenses 2.08% 1.75%
1.75%+
+ After expense limitation discussed below.
The tables are provided to help you understand the expenses of
investing in each Fund and your share of the operating expenses
which each Fund expects to incur during its first full fiscal
year. The estimated management fees shown in the table for the
Conservative Portfolio reflect an expense limitation currently
in effect. In the absence of the expense limitation, estimated
management fees and total operating expenses for Class A shares
of the Conservative Portfolio would be 0.70% and 1.62%,
respectively, estimated management fees and total
operating expenses for Class B and C shares would be 0.70% and
2.37%, respectively and estimated management fees and total
operating expenses for Class M shares would be 0.70% and
2.12%, respectively. The 12b-1 fees shown in the table
reflect the amount to which the Trustees currently limit
payments under the Class A and Class M Distribution
Plans and the maximum amount permitted under the Class B
and Class C Distribution Plans. "Management fees and "Other
expenses" are based on estimated amounts for each Fund's first
full fiscal year and , for the Growth and Balanced
Portfolios, do not reflect an expense limitation terminated as
of December 31, 1994.
Examples
Your investment of $1,000 would incur the following expenses,
assuming 5% annual return and redemption at the end of
each period:
1 year 3 years
Growth Portfolio ------ -------
----------------
Class A $73 $105
Class B $74 $103
Class C $34 $73
Class M $55 $98
Balanced Portfolio
------------------
Class A $70 $95
Class B $70 $93
Class C $30 $63
Class M $52 $88
Conservative Portfolio
----------------------
Class A $70 $95
Class B $70 $93
Class C $30 $63
Class M $52 $88
Your investment of $1000 would incur the following
expenses, assuming 5% annual return but no redemption:
1 year 3 years
Growth Portfolio ------ -------
----------------
Class A $73 $105
Class B $24 $73
Class C $24 $73
Class M $55 $98
Balanced Portfolio
------------------
Class A $70 $95
Class B $20 $63
Class C $20 $63
Class M $52 $88
Conservative Portfolio
----------------------
Class A $70 $95
Class B $20 $63
Class C $20 $63
Class M $52 $88
The Examples do not represent past or future expense levels.
Actual expenses may be more or less than those shown. Federal
regulations require the Examples to assume a 5% annual return,
but actual annual return will vary.
* The higher 12b-1 fees borne by Class B,
Class C and Class M shares may cause long-
term shareholders to pay more than the economic
equivalent of the maximum permitted front-end
sales charge on Class A shares .
** A deferred sales charge of up to 1.00% is
assessed on certain redemptions of Class A shares
that were purchased without an initial sales
charge as part of an investment of $1 million or
more. See "How to buy shares -- Class A shares."
See "Organization and history" for information about any other
classes of shares offered by the Funds.
FINANCIAL HIGHLIGHTS
The tables on the following pages present per share financial
information for Class A, B and C shares. No Class M shares
were outstanding during these periods. This information has
been derived from the Trust's financial statements which have
been audited and reported on by the Trust's independent
accountants. The Report of Independent Accountants and
financial statements included in the Trust's Annual Report to
shareholders for the 1994 fiscal period are incorporated
by reference into this Prospectus. The Trust's Annual Report
is available without charge upon request.
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
Putnam Asset Allocation: Growth
Portfolio
(For a share outstanding throughout the period)
For the period For the period
For the period
September 1, 1994 February 16, 1994
February 8, 1994
(commencement (commencement
(commencement
of operations) of operations)
of operations)
to Sept. 30 to Sept. 30
to Sept. 30
1994 1994
1994
Class C Class B
Class A
<S> <C> <C>
<C>
Net Asset Value, Beginning
of Period $8.46 $8.50
$8.50
Investment Operations
Net Investment Income* .01(a) .06(a)
.10(a)
Net Realized and Unrealized Gain
(Loss) on Investments (.08) (.17)
(.17)
Total from Investment Operations* (.07)(a) (.11)(a)
(.07)(a)
Net Asset Value, End of Period $8.39 $8.39
$8.43
Total Investment Return at
Net Asset Value (%) (b)(c) (.83) (1.29)
(.82)
Net Assets, End of Period
(in thousands) $385 $50,664
$43,669
Ratio of Expenses to Average
Net Assets (%) .15(a)(c) 1.21(a)(c)
.78(a)(c)
Ratio of Net Investment Income
to Average Net Assets (%) .14(a)(c) .80(a)(c)
1.31(a)(c)
Portfolio Turnover (%) 39.9(c) 39.9(c)
39.9(c)
* Per share net investment income for the period ended
September 30, 1994 has been
determined on the basis of the weighted average number of
shares outstanding during the
period.
(a) Reflects an absorption of expenses incurred by the Fund. As a
result of this limitation,
expenses for the period ended September 30, 1994 reflect a
reduction of $.05, $.05
and $.01 for Class A, Class B, Class C shares, respectively.
(b) Total investment return assumes dividend reinvestment and
does not reflect the effect of
sales charges.
(c) Not annualized.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS Putnam Asset Allocation:
Balanced Portfolio
(For a share outstanding throughout the period)
For the period Forthe period
For the period
September 1, 1994 February 11, 1994
February 7, 1994
(commencement (commencement
(commencement
of operations) of operations)
of operations)
to Sept. 30 to Sept. 30
to Sept. 30
1994 1994
1994
Class C Class B
Class A
<S> <C> <C>
<C>
Net Asset Value, Beginning
of Period $8.41 $8.50
$8.50
Investment Operations
Net Investment Income* .01(a) .11(a)
.16(a)
Net Realized and Unrealized Gain
(Loss) on Investments (.08) (.27)
(.28)
Total from Investment Operations* (.07) (.16)
(.12)
Less Distributions From:
Net Investment Income (.03) (.03)
(.05)
Net Asset Value, End of Period $8.31 $8.31
$8.33
Total Investment Return at
Net Asset Value (%) (b)(c) (.84) (1.89)
(1.47)
Net Assets, End of Period
(in thousands) $441 $81,093
$54,483
Ratio of Expenses to Average
Net Assets (%) .16(a)(c) 1.23(a)(c)
0.83(a)(c)
Ratio of Net Investment Income
to Average Net Assets (%) .11(a)(c) 1.41(a)(c)
2.13(a)(c)
Portfolio Turnover (%) 52.62(c) 52.62(c)
52.62(c)
<FN>
* Per share net investment income for the period ended
September 30, 1994 has been
determined
on the basis of the weighted average number of shares
outstanding during the period.
(a) Reflects an absorption of expenses incurred by the Fund. As a
result of this limitation,
expenses for the period ended September 30, 1994, reflect a
reduction of $.05, $.03 and $.01
for Class A, Class B and Class C shares, respectively.
(b) Total investment return assumes dividend reinvestment and
does not reflect the effect of sales
charges.
(c) Not annualized.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS Putnam Asset Allocation:
Conservative Portfolio
(For a share outstanding throughout the period)
For the period For the period
For the period
September 1, 1994 February 16, 1994
February 8, 1994
(commencement (commencement
(commencement
of operations) of operations)
of operations)
to Sept. 30 to Sept. 30
to Sept. 30
1994 1994
1994
Class C Class B
Class A
<S> <C> <C>
<C>
Net Asset Value, Beginning
of Period $8.33 $8.50
$8.50
Investment Operations
Net Investment Income* .03 .15
.18
Net Realized and Unrealized Gain
(Loss) on Investments (.10) (.39)
(.39)
Total from Investment Operations* (.07) (.24)
(.21)
Less Distributions From:
Net Investment Income (.04) (.04)
(.06)
Net Asset Value, End of Period $8.22 $8.22
$8.23
Total Investment Return at
Net Asset Value (%) (b) (.80) (2.79)
(2.47)
Net Assets, End of Period
(in thousands) $273 $38,711
$25,782
Ratio of Expenses to Average
Net Assets (%) .16(a)(c) 1.21(a)(c)
.75(a)(c)
Ratio of Net Investment Income
to Average Net Assets (%) .48(a)(c) 1.92(a)(c)
2.41(a)(c)
Portfolio Turnover (%) 59.27(c) 59.27(c)
59.27(c)
<FN>
* Per share net investment income for the period ended
September 30, 1994 has been
determined
on the basis of the weighted average number of shares
outstanding during the period.
(a) Reflects an absorption of expenses incurred by the Fund. As a
result of this limitation,
expenses
for the period ended September 30, 1994, reflect a reduction
of $.05 and $.04 for Class A and
Class B shares, respectively.
(b) Total investment return assumes dividend reinvestment and
does not reflect the effect of sales
charges.
(c) Not annualized.
/TABLE
<PAGE>
OBJECTIVES
Putnam Asset Allocation: Growth Portfolio seeks capital
appreciation.
Putnam Asset Allocation: Balanced Portfolio seeks total
return.
Putnam Asset Allocation: Conservative Portfolio seeks total
return consistent with preservation of capital.
Each Fund is represented by a separate series of shares of
beneficial interest and pursues its investment objective
through its separate investment policies. None of the Funds is
intended to be a complete investment program, and there is no
assurance that any Fund will achieve its objective.
HOW OBJECTIVES ARE PURSUED
Basic investment strategy
Each Fund has a different strategic allocation which indicates
the typical percentage allocation of its investments between
equity securities and fixed income securities (including money
market instruments), although Putnam Investment Management,
Inc., the Funds' investment manager ("Putnam Management"), may
adjust these allocations within the ranges described below.
The Funds' different strategic allocations generally correlate
to different levels of investment risk. The strategic
allocation and the range of active allocation are shown below:
Growth Balanced Conservative
Portfolio Portfolio Portfolio
----------------- ----------------- -----------------
Strategic Strategic Strategic
Allocation Range Allocation Range Allocation Range
----------------- ----------------- -----------------
EQUITY
CLASS 80% 65-95% 65% 50-75% 35% 25-45%
FIXED
INCOME
CLASS 20% 5-35% 35% 25-50% 65% 55-75%
The percentage limitations are applied at the time of purchase.
Each Fund may also select other investments that do not fall
within the asset classes listed above.
Under normal market conditions, Putnam Management will allocate
the assets of each Fund within the specified ranges above or
below the strategic allocation whenever, based on Putnam
Management's experience in qualitative analysis and disciplined
quantitative techniques, its research and analysis indicate
changes in financial markets that reflect changed valuations
within and between the asset classes. Allocating assets within
a specified range above or below a strategic allocation permits
each Fund to attempt to optimize performance consistent with
its investment objective. The risks of each asset class vary.
For example, the values of equity securities change in response
to general market and economic conditions and the activities
and changing circumstances of individual issuers, and the
values of fixed income securities change in response to changes
in economic conditions, interest rates and the credit
worthiness of individual issuers. A significant portion of
each Fund's equity and fixed income investments may consist of
foreign securities which involve the risks set forth in "Risk
factors" below.
EQUITY CLASS
Each Fund will invest its assets allocated to the Equity Class
in a diversified portfolio of equity securities that Putnam
Management believes have the potential for capital
appreciation. These may include widely traded common stocks of
larger companies, as well as common stocks of smaller, less
well-known companies. In selecting equity securities for a
Fund, Putnam Management will consider, among other things, an
issuer's financial strength, competitive position and projected
future earnings and dividends. Common stocks are normally the
main type of each Fund's equity investments. However, each
Fund may purchase preferred stocks, convertible securities and
warrants.
Each Fund may invest a portion of its assets in common stocks
Putnam Management believes are significantly undervalued. In
selecting such securities, Putnam Management will focus on
industries and issuers it considers to have particular
possibilities for long-term capital appreciation due to
potential growth of earnings which, in the judgment of Putnam
Management, is not fully reflected in current market prices.
In selecting undervalued securities, Putnam Management may
consider investment judgments contrary to those of most
investors.
<PAGE>
Investing in securities of smaller, less well-known companies
may present greater opportunities for capital appreciation, but
may also involve greater risks. These companies 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.
FIXED INCOME CLASS
Each Fund will invest its assets allocated to the Fixed Income
Class in a diversified portfolio of debt securities, including
both U.S. and foreign government obligations and corporate
obligations.
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 a Fund's assets allocated to the Fixed Income Class.
Conversely, during periods of rising interest rates, the value
of a Fund's assets allocated to such Class will generally
decline. The magnitude of these fluctuations will generally be
greater for securities with longer maturities. Debt securities
are subject to varying degrees of risk of default depending
upon, among other factors, the credit worthiness of the
issuer and the ability of the borrower to meet its obligations.
Each Fund may invest in lower-rated fixed income securities.
Lower-rated fixed income securities are generally regarded as
those rated below Baa by Moody's Investors Service, Inc.
("Moody's") or BBB by Standard & Poor's ("S &P") or
securities of comparable quality as determined by Putnam
Management. No Fund will purchase fixed income securities
rated at the time of purchase lower than Caa by Moody's or CCC
by S &P, or, if unrated, determined by Putnam Management to be
of comparable quality, if, as a result, more than 5% of the
Fund's total assets would be invested in securities of that
quality. Such securities may be in default and are generally
regarded by the rating agencies as having extremely
poor prospects of ever attaining any real investment standing.
In addition, the Conservative Portfolio and the Balanced
Portfolio will not purchase fixed income securities rated at
the time of purchase below Baa by Moody's or BBB by S &P, or if
unrated, determined to be of comparable quality by Putnam
Management , if, as a result, more than 10% of the
Conservative Portfolio's or 35% of the Balanced Portfolio's
total assets would be invested in securities of that quality.
Securities rated Baa or BBB, while considered investment-grade,
are more vulnerable to adverse economic conditions than
securities in the higher-rated categories and have speculative
elements. The values of lower-rated fixed income securities,
commonly known as "junk bonds," generally fluctuate more than
those of higher-rated fixed income securities. In addition,
the lower rating reflects a greater possibility that the
financial condition of the issuer, or adverse changes in
general economic conditions, or both, may impair the ability of
the issuer to make payments of interest and repayments of
principal. The rating services' descriptions of debt
securities are included in the Appendix to this Prospectus. A
Fund will not necessarily dispose of a security when its rating
is reduced below its rating at the time of purchase, although
Putnam Management will monitor the investment to determine
whether continued investment in the security will assist in
meeting that Fund's investment objective.
Putnam Management may take full advantage of the entire range
of fixed income securities and may adjust the average maturity
of a Fund's portfolio from time to time depending on its
assessment of relative yields on securities of different
maturities and its expectations of future changes in interest
rates.
At times, some or all of each Fund's fixed income assets may be
invested in securities as to which that Fund, by itself or
together with other funds and accounts managed by Putnam
Management and its affiliates, holds a major portion or all of
such securities. Under adverse market or economic conditions
or in the event of adverse changes in the financial condition
of the issuer, a 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. Under such
circumstances, it may also be more difficult to determine the
fair value of such securities for purposes of computing a
Fund's net asset value. In order to enforce its rights in the
event of a default under such securities, the Fund may be
required to take possession of and manage assets securing the
issuer's obligations on such securities, which may increase the
Fund's operating expenses and adversely affect the Fund's net
asset value.
Putnam Management seeks to minimize the risks of investing in
lower-rated securities through investment analysis and
attention to current developments in interest rates and
economic conditions. The lower ratings of certain fixed income
securities held by a Fund 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 a Fund may
as a result find it more difficult to determine the fair value
of such securities. When a Fund invests in fixed income
securities in the lower rating categories, the achievement of
that Fund's goals is more dependent on Putnam Management's
investment analysis than would be the case if the Fund was
investing in fixed income securities in the higher rating
categories.
Each Fund may at times invest in so-called "zero-coupon" bonds
and "payment-in-kind" bonds. Zero-coupon bonds are issued at a
significant discount from their principal amount and pay
interest only at maturity rather than at intervals during the
life of the security. Payment-in-kind bonds allow the issuer,
at its option, to make current interest payments on the bonds
either in cash or in additional bonds. The values of zero-
coupon bonds and payment-in-kind bonds are subject to greater
fluctuation in response to changes in market interest rates
than bonds which pay interest in cash currently. Both zero-
coupon bonds and payment-in-kind bonds allow an issuer to avoid
the need to generate cash to meet current interest payments.
Accordingly, such bonds may involve greater credit risks than
bonds paying interest currently. Even though such bonds do not
pay current interest in cash, a Fund is nonetheless required to
accrue interest income on such investments and to distribute
such amounts at least annually to shareholders. Thus, a Fund
could be required at times to liquidate other investments in
order to satisfy its distribution requirements.
Certain securities held by a Fund may permit the issuer at its
option to "call," or redeem, its securities. If an issuer
were to redeem securities held by a Fund during a time of
declining interest rates, that Fund might not be able to
reinvest the proceeds in securities providing the same
investment return as the securities redeemed.
For additional information concerning the risks associated with
investments by each Fund in securities in the lower rating
categories, see the Statement of Additional Information.
<PAGE>
Asset-backed and mortgage-backed securities. Each Fund may
invest some or all of its assets allocated to the Fixed Income
Class in asset-backed and mortgage-backed securities, such as
collateralized mortgage obligations. Mortgage-backed
securities represent a participation in, or are secured by,
mortgage loans and include securities issued or guaranteed by
the U. S. government or its agencies or
instrumentalities; securities issued by private issuers that
represent an interest in or are collateralized by mortgage-
backed securities issued or guaranteed by the U.S. government
or its agencies or instrumentalities; or securities
issued by private issuers that represent an interest in or are
collateralized by mortgage loans or mortgage-backed securities
without a government guarantee but usually having some form of
private credit enhancement.
Asset-backed securities are structured like mortgage-backed
securities, but instead of mortgage loans or interests in
mortgage loans, the underlying assets may include 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.
Due to the risk of voluntary prepayment, especially when
interest rates decline, 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
and, as a result, may have less potential for capital
appreciation during periods of declining interest rates than
other securities of comparable maturity. If a
Fund purchases mortgage-backed and asset-backed securities at a
premium above their par value, unscheduled prepayments made at
par will cause the Fund to suffer a loss equal to any
unamortized premium.
Money market instruments. Each Fund may invest in high quality
money market obligations that present minimal credit risk and
may include U.S. government obligations, certificates of
deposit, bankers' acceptances, bank deposits, other financial
institution obligations, and commercial paper and other short-
term corporate obligations. These instruments have various
maturities and may have fixed or variable interest rates. Each
Fund may also hold a portion of its assets in cash.
<PAGE>
RISK FACTORS
Investments in foreign securities. The Conservative Portfolio
may invest up to 30% of its assets, and the Growth and Balanced
Portfolios may invest up to 40% of their assets, in securities
principally traded in foreign markets. Each Fund may also
purchase Eurodollar certificates of deposit without regard to
these limits. Foreign investments involve certain risks not
present in domestic securities. Because each Fund intends to
purchase securities that are normally denominated and traded in
foreign currencies, the values of these assets and any
investment income derived from them may be affected favorably
or unfavorably by currency exchange rates and exchange control
regulations. In addition, although a portion of each Fund's
investment income may be received or realized in such foreign
currencies, each Fund will be required to compute and
distribute its income in U.S. dollars, which may subject the
Fund to various risks due to currency fluctuations. For
example, if the exchange rate for any such currency declines
after such Fund's income has been earned and translated into
U.S. dollars but before payment, the Fund could be required to
liquidate portfolio securities to make such distributions. The
values of foreign fixed income securities will fluctuate in
response to changes in U.S. and foreign interest rates. Income
received by each Fund from sources within foreign countries may
be reduced by withholding and other taxes imposed by such
countries. Tax conventions between certain countries and the
United States may reduce or eliminate such taxes. Any such
taxes paid by a Fund will reduce its net income available for
distribution to shareholders. Putnam Management will consider
available yields, net of any required taxes, in selecting
foreign securities.
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 a Fund's assets held abroad) and expenses not
present in the settlement of domestic investments.
<PAGE>
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 a Fund's investments in certain foreign countries.
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 a
Fund's ability to invest in securities of certain issuers
located in those foreign countries. Special tax considerations
apply to foreign securities.
The risks described above are typically increased to the extent
that a Fund invests in securities traded in under-developed and
developing nations, which are sometimes referred to as
"emerging markets."
For more information concerning the risks associated with
investing in foreign securities, see the Statement of
Additional Information.
Investments in premium securities
Each Fund may invest some or all of its assets allocated to the
Fixed Income Class in securities bearing coupon rates higher
than prevailing market rates. Such "premium" securities are
typically purchased at prices greater than the principal
amounts payable on maturity. A Fund does not amortize the
premium paid for such securities in calculating its net
investment income. As a result, the purchase of such
securities provides a Fund a higher level of investment income
distributable to shareholders on a current basis than if that
Fund had purchased securities bearing current market rates of
interest. Because the value of premium securities tends to
approach the principal amount as they approach maturity (or
call price in the case of securities approaching their first
call date), the purchase of such securities may increase a
Fund's risk of capital loss if such securities are held to
maturity (or first call date).
During a period of declining interest rates, some of each
Fund's portfolio investments will likely bear coupon rates
which are higher than the current market rates, regardless of
whether such securities were originally purchased at a premium.
Such securities would generally carry premium market values
which would be reflected in the net asset value of a Fund's
shares. As a result, an investor who purchases shares of a
Fund during such periods would initially receive higher taxable
distributions (derived from the higher coupon rates payable on
that Fund's investments) than might be available from
alternative investments bearing current market interest rates,
but may face an increased risk of capital loss as these higher
coupon securities approach maturity (or first call date). In
evaluating the potential performance of an investment in a
Fund, investors may find it useful to compare that Fund's
current dividend rate with that Fund's "yield," which is
computed on a yield-to-maturity basis in accordance with SEC
regulations and which reflects amortization of market premiums.
See "How performance is shown."
Foreign currency exchange transactions. Putnam Management may
engage in foreign currency exchange transactions to protect
against uncertainty in the level of future exchange rates.
Putnam Management may engage in foreign currency exchange
transactions in connection with the purchase and sale of
portfolio securities ("transaction hedging") and to protect the
value of specific portfolio positions ("position hedging").
Each Fund may engage in transaction hedging to protect against
a change in the foreign currency exchange rate between the date
on which the Fund contracts to purchase or sell the security
and the settlement date, or to "lock in" the U.S. dollar
equivalent of a dividend or interest payment in a foreign
currency. Each Fund may purchase or sell a foreign currency on
a spot (or cash) basis at the prevailing spot rate as part of
its transaction hedging strategies.
If conditions warrant, each Fund may also enter into contracts
to purchase or sell foreign currencies at a future date
("forward contracts") and may purchase and sell foreign
currency futures contracts as part of its transaction hedging
strategies. 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. Each Fund may
also purchase exchange-listed and over-the-counter call and put
options on foreign currency futures contracts and on foreign
currencies.
<PAGE>
Each Fund may engage in "position hedging" to protect against
the 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 foreign currencies
for securities which the Fund intends to buy, when the Fund
holds cash reserves or short-term investments). For position
hedging purposes, each Fund may purchase or sell foreign
currency futures contracts, foreign currency forward contracts,
and put and call options on foreign currency futures contracts
and on foreign currencies on exchanges or over-the-counter
markets. In connection with position hedging, each Fund may
also purchase or sell foreign currencies on a spot basis.
Each 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 a Fund. Cross hedging transactions by a 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.
Hedging transactions involve costs and may result in losses.
There is no assurance that appropriate foreign currency
exchange transactions will be available with respect to all
currencies in which a Fund's investments may be denominated. A
Fund's ability to engage in hedging transactions may be limited
by tax considerations. A Fund's hedging transactions may
affect the character or amount of such Fund's distributions.
For more information relating to foreign currency exchange
transactions, see the Statement of Additional Information. For
more information about futures contracts and related options,
see "Financial futures and options" below.
<PAGE>
Defensive strategies
At times Putnam Management may judge that conditions in the
securities markets make pursuing a 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 a Fund's assets. In implementing
these "defensive" strategies, depending on the circumstances, a
Fund may invest without regard to the ranges described above
for investments in the various asset classes and may invest
primarily in equity securities, debt securities, preferred
stocks, U.S. government and agency obligations, cash or money
market instruments, or in other securities Putnam Management
considers consistent with such defensive strategies. It is
impossible to predict when, or for how long a Fund will use
such alternative strategies.
Portfolio turnover. The length of time a Fund has held a
particular security is not generally a consideration in
investment decisions. A change in the securities held by a
Fund is known as "portfolio turnover." As a result of a Fund's
investment policies, under certain market conditions that
Fund's portfolio turnover rate may be higher than that of other
mutual funds. Portfolio turnover generally involves some
expense to a Fund, including brokerage commissions or dealer
mark-ups and other transaction costs on the sale of securities
and reinvestment in other securities. Such transactions may
result in realization of taxable capital gains. Portfolio
turnover rates for the life of the Funds are shown in the
section "Financial highlights."
Financial futures and options
Each Fund may buy and sell financial futures contracts on stock
indexes, U.S. government securities, foreign fixed
income securities and on foreign currencies. A futures
contract is a contract to buy or sell units of a particular
stock index (an "Index Future"), or a certain amount of a U.S.
government security, foreign fixed income security or
foreign currency, at an agreed price on a specified future
date. Depending on the change in value of the index, security
or currency between the time when a Fund enters into and
terminates a futures contract, such Fund realizes a gain or
loss. Each Fund may purchase and sell futures contracts for
hedging purposes and to adjust that Fund's exposure to the
relevant stock or bond markets. For example, when Putnam
Management wants to increase the Fund's exposure to equity
securities, it may do so by taking long positions in futures
contracts on equity indices such as futures contracts on the
Standard & Poor's 500 Composite Stock Price
Index. Similarly, when Putnam Management wants to increase the
Fund's exposure to fixed income securities, it may do so by
taking long positions in futures contracts relating to fixed
income securities such as futures contracts on U.S. Treasury
bonds or notes. Each Fund may buy and sell call and put
options on futures contracts or on stock indices in addition to
or as an alternative to purchasing or selling futures contracts
or, to the extent permitted by applicable law, to earn
additional income.
The use of futures and 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
financial futures and options and movements in the prices of
the underlying stock index, securities, or currencies or of the
securities or currencies which are the subject of the hedge.
The successful use of futures and options further depends on
Putnam Management's ability to forecast market or interest rate
movements correctly. Other risks arise from a Fund's potential
inability to close out its futures or related options
positions, and there can be no assurance that a liquid
secondary market will exist for any futures contract or option
at a particular time. A Fund's ability to terminate option
positions established in the over-the-counter market may be
more limited than for exchange-traded options and may also
involve the risk that securities dealers participating in such
transactions would fail to meet their obligations to that Fund.
The use of futures or options on futures for purposes other
than hedging may be regarded as speculative.
Because the markets for options and futures on foreign equity
and fixed income securities and foreign currencies are
relatively new and still developing, each Fund's ability to
engage in such transactions may be limited. Certain provisions
of the Internal Revenue Code and certain regulatory
requirements may also limit a Fund's ability to engage in
futures and options transactions.
A more detailed explanation of futures and options
transactions, including the risks associated with them, is
included in the Statement of Additional Information.
<PAGE>
Other investment practices
Each 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. Each 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 and on foreign currencies. A
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 a Fund
writes a call option, it gives up the opportunity to profit
from any increase in the price of a security or currency above
the exercise price of the option; when it writes a put option,
a Fund takes the risk that it will be required to purchase a
security or currency from the option holder at a price above
the current market price of the security or currency. A 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. Each Fund may also buy and sell put and call
options for hedging purposes. Each Fund may also from time to
time buy and sell combinations of put and call options on the
same underlying security or currency to earn additional income.
The aggregate value of the securities and foreign currencies
underlying options written by a Fund may not exceed 25% of
such Fund's assets. Each Fund's use of options strategies may
be limited by applicable law.
Securities loans, repurchase agreements and forward
commitments. Each 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.
Each 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 a
Fund if the other party should default on its obligation and
such Fund is delayed or prevented from recovering the
collateral or completing the transaction.
<PAGE>
Limiting investment risk
Specific investment restrictions help the Funds limit
investment risks for their shareholders. These restrictions
prohibit each Fund from: acquiring more than 10% of the voting
securities of any one issuer* and investing more than: (a) 5%
of its total assets (taken at current value) in securities of
any one issuer (other than the U.S. government or its agencies
or instrumentalities or, with respect to 25% of that Fund's
total assets, securities issued by or backed by the credit of,
any foreign government, its agencies or instrumentalities);*
(b) 15% of its net assets in securities restricted as to resale
(excluding securities determined by the Trustees (or the person
designated by the Trustees to make such determinations) to be
readily marketable);* (c) 25% of its total assets in any one
industry (securities of the U.S. government, its agencies or
instrumentalities, or of any foreign government, its agencies
or instrumentalities, securities of supranational entities, and
securities backed by the credit of a governmental entity are
not considered to represent industries);* (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
Trustees (or the person designated by the Trustees to make such
determinations) to be readily marketable), and in repurchase
agreements maturing in more than seven days.
Restrictions marked with an asterisk (*) above are summaries of
fundamental investment policies. See the Statement of
Additional Information for the full text of these policies and
the Funds' other fundamental investment 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
investment policies. The Trustees may change any non-
fundamental investment policies without shareholder approval.
As a matter of policy, the Trustees would not materially change
a Fund's investment objective without shareholder approval.
HOW PERFORMANCE IS SHOWN
Each Fund's investment performance may from time to time be
included in advertisements about that Fund. "Yield" for each
class of shares is calculated by dividing the annualized net
investment income per share during a recent 30-day period by
the maximum public offering price per share of that class on
the last day of that period. For this purpose, net investment
income is calculated in accordance with SEC regulations and may
differ from net investment income as determined for financial
reporting purposes. SEC regulations require that net
investment income be calculated on a "yield-to-maturity" basis,
which has the effect of amortizing any premiums or discounts in
the current market value of fixed-income securities. The
current dividend rate is based on net investment income as
determined for financial statement purposes which may not
reflect amortization in the same manner. See "How objectives
are pursued --Investments in premium securities." Yield
reflects the deduction of the maximum initial sales charge in
the case of Class A and Class M shares, but does not
reflect the deduction of any contingent deferred sales charge
in the case of Class B shares and Class C shares.
"Total return" for the one-, five- and ten-year periods through
the most recent calendar quarter represents the average annual
compounded rate of return on an investment of $1,000 in
a Fund invested at the maximum public offering price (in
the case of Class A and Class M shares) or reflecting
the deduction of any applicable contingent deferred sales
charge (in the case of Class B and Class C shares). Total
return may also be presented for other periods or based on
investment at reduced sales charge levels. Any quotation of
investment performance not reflecting the maximum initial sales
charge or contingent deferred sales charge would be reduced if
such sales charge were used.
All data is based on each 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 a Fund's portfolio, a Fund's
operating expenses and which class of shares you purchase.
Investment performance also often reflects the risks associated
with each Fund's investment objective and policies. These
factors should be considered when comparing each 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. Each
Fund's performance may be compared to various indices. See the
Statement of Additional Information.
<PAGE>
HOW THE FUNDS ARE MANAGED
The Trustees are responsible for generally overseeing the
conduct of each Fund's business. Subject to such policies as
the Trustees may determine, Putnam Management furnishes a
continuing investment program for each Fund and makes
investment decisions on its behalf. Subject to the control of
the Trustees, Putnam Management also manages the Funds' other
affairs and business. Putnam Management's Global Asset
Allocation Committee has primary responsibility for the
day-to-day management of the Funds'
portfolios.
Under a Management Contract dated November 8, 1993, the Trust
pays a quarterly fee to Putnam Management based on the average
net assets of each Fund, as determined at the close of each
business day during the quarter, at an annual rate of 0.70% of
the first $500 million of the average net asset value of the
Fund, 0.60% of the next $500 million, 0.55% of the next $500
million and 0.50% of any excess over $1.5 billion.
In order to limit the Conservative Portfolio's expenses, Putnam
Management has agreed to limit its compensation (and, to the
extent necessary, bear other expenses of the Fund) until
September 30 , 1995, to the extent that expenses of the
Fund (exclusive of brokerage, interest, taxes, deferred
organizational and extraordinary expenses, and payments under
the Fund's Distribution Plans) would exceed an annual rate of
1.00% of the Fund's average net assets. 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. With Trustee
approval, this expense limitation may be terminated earlier, in
which event shareholders would be notified and this Prospectus
would be revised.
The Trust 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). Expenses of the
Trust directly charged or attributable to a Fund will be
paid from the assets of the Fund. General expenses of the
Trust will be allocated among and charged to the assets of the
Funds and any other portfolio of the Trust on a basis
that the Trustees deem fair and equitable, which may be based
on the relative assets of the Funds or the nature of the
services performed and relative applicability to each
Fund. The Trust also reimburses Putnam Management for the
compensation and related expenses of certain officers of the
Trust and their staff who provide administrative services to
the Trust. The total reimbursement is determined annually by
the Trustees.
Putnam Management places all orders for purchases and sales of
the Funds' 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 Funds (and, if permitted by
law, of the other Putnam funds) as a factor in the selection of
broker-dealers.
ORGANIZATION AND HISTORY
The Trust is a Massachusetts business trust organized on
November 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.
The Trust is an open-end, diversified management investment
company with an unlimited number of authorized shares of
beneficial interest. Shares of the Trust may, without
shareholder approval, be divided into two or more series of
shares representing separate investment portfolios and are
currently divided into three series of shares representing the
Funds. Any such series of shares 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. Each Fund currently offers five
classes of shares: Class A, Class B, Class C, Class M and Class
Y. Class A, Class B , Class C and Class M shares
are offered by this Prospectus. Class Y shares are
offered by another Prospectus to defined contribution plans
that initially invest at least $250 million in a combination of
Putnam funds and other investments managed by Putnam Management
or its affiliates. Class Y shares, which are sold at net asset
value, are generally subject to the same expenses as other
classes of shares but do not bear a 12b-1 fee.
Each share has one vote, with fractional shares voting
proportionally. Shares will vote in the aggregate as a single
class without regard to Funds or classes of shares on all
matters except, (i) when required by the Investment Company Act
of 1940 or when the Trustees have determined that the matter
affects the interests of one or more Funds or classes
materially differently, shares will be voted by individual
series or class; and (ii) when the Trustees have determined
that the matter affects only the interest of one or more Funds
or classes, then only shareholders of such Funds or classes
shall be entitled to vote thereon. Shares are freely
transferable, are entitled to dividends as declared by the
Trustees, and, if a Fund were liquidated, would receive the net
assets of that Fund. The Funds may suspend the sale of shares
at any time and may refuse any order to purchase shares.
Although the Trust 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), a Fund may choose to redeem
your shares and pay you for them. You will receive at least 30
days' written notice before a Fund redeems your shares, and you
may purchase additional shares at any time to avoid a
redemption. A 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 Trust's Trustees: George Putnam,* Chairman. President of
the Putnam funds. Chairman and Director of Putnam Management
and Putnam Mutual Funds Corp. ("Putnam Mutual Funds").
Director, Marsh & McLennan Companies, Inc.; William F. Pounds,
Vice Chairman. Professor of Management, Alfred P. Sloan School
of Management, Massachusetts Institute of Technology ;
Jameson Adkins Baxter, President, Baxter Associates, Inc.; Hans
H. Estin, Vice Chairman, North American Management Corp.; John
A. Hill, Principal and Managing Director, First Reserve
Corporation; Elizabeth T. Kennan, President Emeritus and
Professor , Mount Holyoke College; Lawrence J. Lasser,* Vice
President of the Putnam funds. President, Chief Executive
Officer and Director of Putnam Investments, Inc. and Putnam
Management. Director, Marsh & McLennan Companies, Inc.;
Robert E. Patterson, Executive Vice President, Cabot Partners
Limited Partnership; Donald S. Perkins * , Director of
various corporations, including AT&T, Kmart Corporation
and Time Warner Inc.; George Putnam, III,* President, New
Generation Research, Inc. ; Eli Shapiro, Alfred P. Sloan
Professor of Management, Emeritus, Alfred P. Sloan School of
Management, Massachusetts Institute of Technology ; 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 Data General Corporation, Bradley Real Estate, Inc.
and Providence Journal Co. Also, Trustee of Massachusetts
General Hospital and Eastern Utilities Associates.
The Trust's Trustees are also Trustees of the other Putnam
funds. Those marked with an asterisk (*) are "interested
persons" of the Trust, Putnam Management or Putnam Mutual
Funds.
About Your Investment
ALTERNATIVE SALES ARRANGEMENTS
This Prospectus offers investors four classes of shares
which bear sales charges in different forms and amounts and
which bear different levels of expenses:
Class A shares. An investor who purchases Class A shares pays
a sales charge at the time of purchase. As a result, Class A
shares are not subject to any charges when they are redeemed
(except for sales at net asset value in excess of $1 million
which are subject to a contingent deferred sales charge).
Certain purchases of Class A shares qualify for reduced sales
charges. Class A shares currently bear a 12b-1 fee at the
annual rate of 0.25% of a Fund's average net assets
attributable to Class A shares. See "How to buy shares - Class
A shares."
Class B shares. Class B shares are sold without an initial
sales charge, but are subject to a contingent deferred sales
charge of up to 5% if redeemed within six years. Class B
shares also bear a higher 12b-1 fee than Class A shares,
currently at the annual rate of 1.00% of a Fund's average net
assets attributable to Class B shares. Class B shares will
automatically convert into Class A shares, based on relative
net asset value, approximately eight years after purchase.
Class B shares provide an investor the benefit of putting all
of the investor's dollars to work from the time the investment
is made, but (until conversion) will have a higher expense
ratio and pay lower dividends than Class A shares due to the
higher 12b-1 fee. See "How to buy shares --Class B shares."
Class C shares. Like Class B shares, Class C shares are sold
without an initial sales charge and bear a 1.00% 12b-1 fee.
Class C shares are subject only to a 1.00% contingent deferred
sales charge if redeemed within one year of purchases. Class C
shares have no conversion feature, and purchasers of Class C
shares should expect to bear the 1.00% Class C 12b-1 fee
indefinitely. See "How to buy shares - Class C shares."
Class M shares. An investor who purchases Class M shares
pays a sales charge at the time of purchase which is lower than
the sales charge applicable to Class A shares. Class M shares
are not subject to any contingent deferred sales charge when
they are redeemed. Certain purchases of Class M shares qualify
for reduced sales charges. Class M shares currently bear a
12b-1 fee at the annual rate of 0.75% of a Fund's average net
assets attributable to Class M shares. See "How to buy shares
- Class M shares."
Which arrangement is better for you? The decision as to which
class of shares provides a more suitable investment for an
investor depends on a number of factors, including the amount
and intended length of the investment. Investors making
investments that qualify for reduced sales charges might
consider Class A or Class M shares. Investors who
prefer not to pay an initial sales charge might consider Class
B or Class C shares. Orders for Class B shares for $250,000 or
more or orders for Class C and Class M shares for
$1,000,000 or more will be treated as orders for Class A shares
or declined. For more information about these sales
arrangements, consult your investment dealer or Putnam Investor
Services. Sales personnel may receive different compensation
depending on which class of shares they sell. Shares may only
be exchanged for shares of the same class of another Putnam
fund. See "How to exchange shares."
HOW TO BUY SHARES
You can open a Fund account with as little as $500 (in the
case of Class A shares , Class B shares and Class
M shares) and make additional investments at any time with
as little as $50. The minimum initial investment for Class C
shares is $10,000. You can buy Fund shares three ways - through
most investment dealers, through Putnam Mutual Funds (at 1-800-
225-1581), or through a systematic investment plan. If you do
not have a dealer, Putnam Mutual Funds can refer you to one.
Buying shares through Putnam Mutual Funds. Complete an order
form and return it with a check payable to the Fund to Putnam
Mutual Funds, which will act as your agent in purchasing shares
through your designated investment dealer.
Buying shares through systematic investing. You can make
regular investments of $25 or more per month through automatic
deductions from your bank checking account. Application forms
are available from your investment dealer or through Putnam
Investor Services.
Shares are sold at the public offering price based on the net
asset value next determined after Putnam Investor Services
receives your order. In most cases, in order to receive that
day's public offering price, Putnam Investor Services must
receive your order before the close of regular trading on the
New York Stock Exchange. If you buy shares through your
investment dealer, the dealer must receive your order before
the close of regular trading on the New York Stock Exchange to
receive that day's public offering price.
Class A shares
The public offering price of Class A shares is the net asset
value plus a sales charge. The Fund in which you are investing
receives the net asset value. The sales charge varies
depending on the size of your purchase and is allocated between
your investment dealer and Putnam Mutual Funds. The current
sales charges are:
Amount
of
Sales charge
sales charge
Amount of as a percentage of: reallowed
to
transaction ------------------- dealers
as a
at offering Net amountOffering percentage
of
price invested price offering
price*
---------------------------------------------------------------
Less than $ 50,000 6.10% 5.75% 5.00%
$ 50,000 but less than $ 100,000
4.71 4.50 3.75
100,000 but less than 250,000 3.63 3.50 2.75
250,000 but less than 500,000 2.56 2.50 2.00
500,000 but less than 1,000,000 2.04 2.00 1.75
---------------------------------------------------------------
* At the discretion of Putnam Mutual Funds, however, the entire
sales charge may at times be reallowed to dealers. The Staff
of the Securities and Exchange Commission has indicated that
dealers who receive more than 90% of the sales charge may be
considered underwriters.
There is no initial sales charge on purchases of Class A shares
of $1 million or more. However, a contingent deferred sales
charge ("CDSC") of 1.00% or 0.50%, respectively, is imposed on
redemptions of such shares within the first or second year
after purchase, based on the lower of the shares' cost and
current net asset value. Any shares acquired by reinvestment
of distributions will be redeemed without a CDSC. In addition,
shares purchased by certain investors investing $1 million or
more that have made arrangements with Putnam Mutual Funds and
whose dealer of record waived the commission as described below
are not subject to the CDSC. In determining whether a CDSC is
payable, the Fund will first redeem shares not subject to any
charge. Putnam Mutual Funds receives the entire amount of any
CDSC you pay. See the Statement of Additional Information for
more information about the CDSC.
Except as stated below, Putnam Mutual Funds pays investment
dealers of record commissions on sales of Class A shares of $1
million or more based on an investor's cumulative purchases
during the one-year period beginning with the date of the
initial purchase at net asset value. Each subsequent one-year
measuring period for these purposes will begin with the
first net asset value purchase following the end of the prior
period. Such commissions are paid at the rate of 1.00% of the
amount under $3 million, 0.50% of the next $47 million and
0.25% thereafter. 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%.
<PAGE>
Class B shares
Class B shares are sold without an initial sales charge,
although a CDSC will be imposed if you redeem shares within six
years of purchase. The following types of shares may be
redeemed without charge at any time: (i) shares acquired by
reinvestment of distributions and (ii) shares otherwise exempt
from the CDSC, as described in "How to buy shares-General"
below. For other shares, the amount of the charge is
determined as a percentage of the lesser of the current market
value or the cost of the shares being redeemed. The amount of
the CDSC will depend on the number of years since you invested
and the dollar amount being redeemed, according to the
following table:
Contingent Deferred
Sales
Charge
as a
Percentage of
Years Since Dollar Amount
Payment Made Subject to Charge
------------------------------------- -----------------------
-
0-1 5.0%
1-2 4.0%
2-3 3.0%
3-4 3.0%
4-5 2.0%
5-6 1.0%
6 and thereafter NONE
In determining whether a CDSC is payable on any redemption, a
Fund will first redeem shares not subject to any charge, and
then shares held longest during the six-year period. For this
purpose, the amount of any increase in a share's value above
its initial purchase price is not regarded as a share exempt
from the CDSC. Thus, when a share that has appreciated in
value is redeemed during the six-year period, a CDSC is
assessed on its initial purchase price. For information on how
sales charges are calculated if you exchange your shares, see
"How to exchange shares." Putnam Mutual Funds receives the
entire amount of any CDSC you pay.
Conversion of Class B shares. Class B shares will
automatically convert into Class A shares at the end of the
month eight years after the purchase date, except as noted
below. 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 continuing availability of a ruling from the Internal
Revenue Service or an opinion of counsel that such conversions
will not constitute taxable events for federal tax purposes.
There can be no assurance that such ruling or opinion will be
available, and the conversion of Class B shares to Class A
shares will not occur if such ruling or opinion is not
available. In such event, Class B shares would continue to be
subject to higher expenses than Class A shares for an
indefinite period.
Class C shares
Class C shares are sold without an initial sales charge,
although a 1.00% CDSC is imposed if you redeem your shares
within one year of purchase. No sales charge is imposed on
increases in net asset value above the initial purchase price.
In determining whether a CDSC is payable on any redemption, the
Fund will first redeem shares not subject to any charge, and
then shares held longest during the one-year period. The
following type of shares may be redeemed without charge at any
time: (i) shares acquired by reinvestment of distributions and
(ii) shares otherwise exempt from the CDSC, as described below.
Subject to the foregoing exclusions, the amount of the charge
is determined as a percentage of the lesser of the current
market value or the cost of the shares being redeemed.
For information on how sales charges are calculated if you
exchange your shares, see "How to exchange shares." Putnam
Mutual Funds receives the entire amount of any CDSC you pay.
Class C shares have no conversion feature and therefore will be
subject to a higher 12b-1 fee than Class A shares indefinitely.
Class M shares
The public offering price of Class M shares is the net asset
value plus a sales charge. A Fund receives the net asset
value. The sales charge varies depending on the size of your
purchase and is allocated between your investment dealer and
Putnam Mutual Funds. The current sales charges are:
<PAGE>
Amount of
Sales charge sales charge
Amount of as a percentage of: reallowed to
transaction ------------------- dealers as a
at offering Net amount Offering percentage of
price invested price offering price*
---------------------------------------------------------------
Less than $50,000 3.63% 3.50% 3.00%
$50,000 but less than $100,000 2.56 2.50 2.00
100,000 but less than 250,000 1.52 1.50 1.00
250,000 but less than 500,000 1.01 1.00 1.00
500,000 but less than 1,000,000 0.00 0.00 0.00
---------------------------------------------------------------
* At the discretion of Putnam Mutual Funds, however, the entire
sales charge may at times be reallowed to dealers. The Staff
of the Securities and Exchange Commission has indicated that
dealers who receive more than 90% of the sales charge may be
considered underwriters.
Class M shares do not convert into any other class of shares.
General
You may be eligible to buy Class A shares and Class M shares at
reduced sales charges. Consult your investment dealer or
Putnam Mutual Funds for details about Putnam's Combined
Purchase Privilege, Cumulative Quantity Discount, Statement of
Intention, Group Sales Plan, Employee Benefit Plans and other
plans. Descriptions are also included in the order form and in
the Statement of Additional Information. In addition, sales
charges will not apply to Class M shares purchased with
redemption proceeds received within the prior ninety days from
non-Putnam mutual funds on which the investor paid a front-end
or contingent deferred sales charge.
General
Each Fund may sell Class A, Class B , Class C or
Class M shares at net asset value without an initial sales
charge or CDSC to the current and retired Trustees (and their
families), current and retired employees (and their families)
of Putnam Management and affiliates, registered representatives
and other employees (and their families) of broker-dealers
having sales agreements with Putnam Mutual Funds, employees
(and their families) of financial institutions having sales
agreements with Putnam Mutual Funds (or otherwise having an
arrangement with a broker-dealer or financial institution with
respect to sales of Fund shares), financial institution trust
departments investing an aggregate of $1 million or more in
Putnam funds, clients of certain administrators of
tax-qualified plans, employee benefit plans of companies with
more than 750 employees, tax-qualified plans when proceeds from
repayments of loans to participants are invested (or
reinvested) in Putnam funds, "wrap accounts" for the benefit of
clients of broker-dealers, financial institutions or financial
planners adhering to certain standards established by Putnam
Mutual Funds, and investors meeting certain requirements who
sold shares of certain Putnam closed-end funds pursuant to a
tender offer by the closed-end fund. In addition, the Funds
may sell shares at net asset value without an initial sales
charge or a CDSC in connection with the acquisition by the
Funds of assets of an investment company or personal holding
company, and the CDSC will be waived on redemptions of shares
arising out of death or disability or in connection with
certain withdrawals from IRA or other retirement plans. Up to
12% of the value of Class B and Class C shares subject
to a Systematic Withdrawal Plan may also be redeemed each year
without a CDSC. See the Statement of Additional Information.
Shareholders of other Putnam funds may be entitled to exchange
their shares for, or reinvest distributions from their funds
in, shares of the Funds at net asset value.
If you are considering redeeming or exchanging shares or
transferring shares to another person shortly after purchase,
you should pay for those shares with a certified check to avoid
any delay in redemption, exchange or transfer. Otherwise a
Fund may delay payment until the purchase price of those shares
has been collected or, if you redeem by telephone, until 15
calendar days after the purchase date.
To eliminate the need for safekeeping, no Fund will issue
certificates for your shares unless you request them. 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. Certain dealers may
not sell all classes of shares.
<PAGE>
DISTRIBUTION PLANS
Class A Distribution Plan. The Class A Plan provides for
payments by each Fund to Putnam Mutual Funds at the annual rate
of up to 0.35% of that 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 each 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.
<PAGE>
Class B , Class C and Class M Distribution Plans.
The Class B Plan , the Class C Plan and the Class
M Plan provide for payments by each Fund to Putnam Mutual
Funds at the annual rate of up to 1.00% of that Fund's average
net assets attributable to Class B shares , Class C
shares and Class M shares , as the case may be. The
Trustees currently limit payments under the Class M Plan to the
annual rate of 0.75% of such average net 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.
Although Class B shares and Class C shares are sold without an
initial sales charge, Putnam Mutual Funds pays a sales
commission equal to 4.00% of the amount invested to dealers who
sell Class B shares and 1.00% of the amount invested to dealers
who sell Class C shares (which includes a prepaid service fee
of 0.25% in the case of Class C shares). These commissions are
not paid on exchanges from other Putnam funds and sales to
investors exempt from the CDSC. The amount paid to dealers
at the time of the sale of Class M shares is set forth above
under "How to buy shares - Class M shares." In addition,
in order to further compensate dealers (including, for this
purpose, certain financial institutions) for services provided
in connection with sales of Class B shares , Class C
shares and Class M 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 B shares , Class C shares and Class
M shares which are attributable to shareholders for whom
the dealers are designated as the dealer of record, except
that no payment will be made with respect to the first
four quarters following the sale of a Class C share. Putnam
Mutual Funds makes such payments at an annual rate of 0.25% of
such average net asset value of Class B shares , Class C
shares and Class M shares , as the case may be. In
addition, Putnam Mutual Funds also pays to dealers beginning
one year after purchase, as additional compensation with
respect to the sale of Class C shares, 0.75% of such average
net asset value of Class C shares. For Class C shares, the
total annual payment beginning one year after purchase equals
1.00% of such average net asset value attributable to Class C
shares. Putnam Mutual Funds also pays to dealers, as
additional compensation with respect to the sale of Class M
shares, 0.40% of such average net asset value of Class M
shares. For Class M shares, the total annual payment to
dealers equals 0.65% of such average net asset value.
<PAGE>
General. Payments under the Plans are intended to compensate
Putnam Mutual Funds for services provided and expenses incurred
by it as principal underwriter of the Funds' 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 relevant
Distribution Plan, the terms of Service Agreements between
dealers and Putnam Mutual Funds, and any applicable limits
imposed by the National Association of Securities Dealers, Inc.
HOW TO SELL SHARES
You can sell your shares to a Fund any day the New York Stock
Exchange is open, either directly to the Fund or through
your investment dealer. A Fund will only redeem shares for
which it has received payment.
Selling shares directly to a Fund. Send a signed letter of
instruction or stock power form to Putnam Investor Services,
along with any certificates that represent shares you want to
sell. The price you will receive is the next net asset value
calculated after a Fund receives your request in proper form
less any applicable CDSC. In order to receive that day's net
asset value, Putnam Investor Services must receive your request
before the close of regular trading on the New York Stock
Exchange. If you sell shares having a net asset value of
$100,000 or more, the signatures of registered owners or their
legal representatives must be guaranteed by a bank, broker-
dealer or certain other financial institutions. See the
Statement of Additional Information for more information about
where to obtain a signature guarantee. Stock power forms are
available from your investment dealer, Putnam Investor Services
and many commercial banks. If you want your redemption
proceeds sent to an address other than your address as it
appears on Putnam's records, a signature guarantee is required.
Putnam Investor Services usually requires additional
documentation for the sale of shares by a corporation,
partnership, agent or fiduciary, or a surviving joint owner.
Contact Putnam Investor Services for details.
A Fund generally sends you payment for your shares the business
day after your request is received. Under unusual
circumstances, a Fund may suspend redemptions, or postpone
payment for more than seven days, as permitted by federal
securities law.
You may use Putnam's Telephone Redemption Privilege to
redeem shares valued up to $100,000 from your account unless
you
have notified Putnam Investor Services of an address
change within the preceding 15 days. Unless an investor
indicates otherwise on the Account Application, Putnam Investor
Services will be authorized to act upon redemption and transfer
instructions received by telephone from a shareholder, or any
person claiming to act as his or her representative, who can
provide Putnam Investor Services with his or her account
registration and address as it appears on Putnam Investor
Services' records. Putnam Investor Services will employ these
and other reasonable procedures to confirm that instructions
communicated by telephone are genuine; if it fails to employ
reasonable procedures, Putnam Investor Services may be liable
for any losses due to unauthorized or fraudulent instructions.
For information, consult Putnam Investor Services. During
periods of unusual market changes and shareholder activity, you
may experience delays in contacting Putnam Investor Services by
telephone in which case you may wish to submit a written
redemption request, as described above, or contact your
investment dealer, as described below. The Telephone
Redemption Privilege is not available if you were issued
certificates for your shares which remain outstanding. The
Telephone Redemption Privilege may be modified or terminated
without notice.
Selling shares through your investment dealer. Your dealer
must receive your request before the close of regular trading
on the New York Stock Exchange to receive that day's net asset
value. Your dealer will be responsible for furnishing all
necessary documentation to Putnam Investor Services, and may
charge you for its services.
HOW TO EXCHANGE SHARES
You can exchange your Class A shares , Class B shares
or Class M shares for shares of the same class of another
Putnam fund at net asset value beginning 15 days after
purchase. Not all Putnam funds offer all classes of shares.
Class C shares may only be exchanged for Class C shares of one
of the other funds described in this Prospectus. If you
exchange shares subject to a CDSC, the transaction will not be
subject to the CDSC. However, when you redeem the shares
acquired through the exchange, the redemption may be subject to
the CDSC, depending upon when you originally purchased the
shares and using the schedule of any fund into or from which
you have exchanged your shares that would result in your paying
the highest CDSC applicable to your class of shares. For
purposes of computing the CDSC, the length of time you have
owned your shares will be measured from the date of original
purchase and will not be affected by any exchange.
To exchange your shares, simply complete an Exchange
Authorization Form and send it to Putnam Investor Services.
Exchange Authorization Forms are available by calling or
writing Putnam Investor Services. For federal income tax
purposes, an exchange is treated as a sale of shares and
generally results in a capital gain or loss. A Telephone
Exchange Privilege is currently available for amounts up to
$500,000. Putnam Investor Services' procedures for telephonic
transactions are described above under "How to sell shares."
The Telephone Exchange Privilege is not available if you were
issued certificates for shares which remain outstanding. Ask
your investment dealer or Putnam Investor Services for
prospectuses of other Putnam funds. Shares of certain Putnam
funds are not available to residents of all states.
The exchange privilege is not intended as a vehicle for short-
term trading. Excessive exchange activity may interfere with
portfolio management and have an adverse effect on all
shareholders. In order to limit excessive exchange activity and
in other circumstances where Putnam Management or the Trustees
believe doing so would be in the best interests of a Fund, a
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 EACH FUND VALUES ITS SHARES
Each 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 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.
HOW DISTRIBUTIONS ARE MADE; TAX INFORMATION
The Growth Portfolio distributes any net investment income at
least annually. The Conservative Portfolio and the Balanced
Portfolio distribute any net investment income at least
quarterly. Each of the Funds distributes any net realized
capital gains at least annually. Distributions from net
capital gains are made after applying any available capital
loss carryovers. Distributions paid by each Fund with respect
to Class A shares will generally be greater than those paid
with respect to Class B shares , Class C shares and
Class M shares because expenses attributable to Class B
shares , Class C shares and Class M shares will
generally be higher.
You can choose from three distribution options: (1) reinvest
all distributions from a Fund in additional shares of that Fund
without a sales charge; (2) receive distributions from net
investment income in cash while reinvesting net capital gains
distributions in additional shares of that Fund without a sales
charge; or (3) receive all distributions in cash. You can
change your distribution option by notifying Putnam Investor
Services in writing. If you do not select an option when you
open your account, all distributions will be reinvested. All
distributions not paid in cash will be reinvested in shares of
the class on which the distributions are paid. You will
receive a statement confirming reinvestment of distributions
from a Fund in additional shares of that Fund (or in shares of
other Putnam funds for Dividends Plus accounts) promptly
following the quarter in which the reinvestment occurs.
If a check representing a Fund distribution is not cashed
within a specified period, Putnam Investor Services will notify
you that you have the option of requesting another check or
reinvesting the distribution in the Fund or in another Putnam
fund. If Putnam Investor Services does not receive your
election, the distribution will be reinvested in the Fund.
Similarly, if correspondence sent by a Fund or Putnam Investor
Services is returned as "undeliverable," Fund distributions
will automatically be reinvested in that Fund or in another
Putnam fund.
Each Fund intends to qualify as a "regulated investment
company" for federal income tax purposes and to meet all other
requirements that are necessary for it to be relieved of
federal taxes on income and gains it distributes to
shareholders. Each Fund will distribute substantially all of
its ordinary income and capital gain net income on a current
basis.
Each Fund's distributions will be taxable to you as ordinary
income, except that any distributions of net long-term capital
gains will be taxable as such, regardless of how long you have
held the shares. Distributions will be taxable as described
above whether received in cash or in shares through the
reinvestment of distributions.
Early in each year your Fund will notify you of the amount and
tax status of distributions paid to you by the Fund for the
preceding year.
The foregoing is a summary of certain federal income tax
consequences of investing in a Fund. You should consult your
tax adviser to determine the precise effect of an investment in
a Fund on your particular tax situation (including possible
liability for state and local taxes).
About Putnam Investments, Inc.
Putnam Management has been managing mutual funds since 1937.
Putnam Mutual Funds is the principal underwriter of the Funds
and of other Putnam funds. Putnam Fiduciary Trust Company is
the Funds' custodian. Putnam Investor Services, a division of
Putnam Fiduciary Trust Company, is the Funds' investor
servicing and transfer agent.
Putnam Management, Putnam Mutual Funds, and Putnam Fiduciary
Trust Company are subsidiaries of Putnam Investments, Inc.,
which is wholly owned by Marsh & McLennan Companies, Inc., a
publicly-owned holding company whose principal businesses are
international insurance and reinsurance brokerage, employee
benefit consulting and investment management.
<PAGE>
APPENDIX
The ratings services describe securities as follows:
Moody's Investors Service, Inc.:
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-edge." Interest payments
are protected by a large or by an exceptionally stable margin
and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of
such issues.
Aa -- 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 risks appear somewhat
larger than in 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.
Standard & Poor's :
AAA -- Bonds rated AAA have the highest rating assigned by
Standard & Poor's. Capacity to pay interest and repay
principal is extremely strong.
AA -- Bonds rated AA have a very strong capacity to pay
interest and repay principal and differ from the highest rated
issues only in small degree.
A -- Bonds rated A have a strong capacity to pay interest and
repay principal although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than bonds in higher rated categories.
BBB -- Bonds rated BBB are regarded as having an adequate
capacity to pay interest and repay principal. Whereas they
normally exhibit adequate protection parameters, adverse
economic conditions or changing circumstances are more likely
to lead to a weakened capacity to pay interest and repay
principal for bonds in this category than in higher rated
categories.
BB-B-CCC-CC-C -- Bonds rated BB, B, CCC, CC and C are regarded,
on balance, as predominantly speculative with respect to the
issuer's capacity to pay interest and repay principal in
accordance with the terms of the obligation. While such bonds
will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
D - Bonds rated D are 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 on the filing of a bankruptcy petition
if debt service payments are jeopardized.
Make the most of your Putnam privileges
The following services are available to you as a Putnam mutual
fund shareholder.
SYSTEMATIC INVESTMENT PLAN Invest as much as you wish ($25 or
more) on any day of the month except for the 29th, 30th, or
31st. The amount will be automatically transferred from your
checking or savings account.
SYSTEMATIC WITHDRAWAL Make regular withdrawals of $50 or more
monthly, quarterly, or semiannually from an account valued at
$10,000 or more. You may establish your withdrawal on any 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.
Investors may not maintain, within the same fund, simultaneous
plans for systematic investment or exchange and systematic
withdrawal or exchange. These privileges are subject to change
or termination.
For more information about any of these services and
privileges, call your investment advisor or a Putnam customer
service representative toll-free at 1-800-225-1581.
<PAGE>
PUTNAM ASSET ALLOCATION FUNDS
PUTNAM ASSET ALLOCATION: GROWTH PORTFOLIO
PUTNAM ASSET ALLOCATION: BALANCED PORTFOLIO
PUTNAM ASSET ALLOCATION: CONSERVATIVE PORTFOLIO
One Post Office Square
Boston, MA 02109
FUND INFORMATION:
INVESTMENT MANAGER
Putnam Investment Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
INVESTOR SERVICING AGENT
Putnam Investor Services
Mailing address:
P.O. Box 41203
Providence, RI 02940-1203
CUSTODIAN
Putnam Fiduciary Trust Company
One Post Office Square
Boston, MA 02109
LEGAL COUNSEL
Ropes & Gray
One International Place
Boston, MA 02110
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110
PUTNAM INVESTMENTS
One Post Office Square
Boston, Massachusetts 02109
Toll-free 1-800-225-1581<PAGE>
Differences between the typeset (printed) prospectus and the
EDGAR filing version.
1. Each interior page of the prospectus includes the word
"prospectus" at the bottom of the page.
2. Pagination is different in printed prospectus.
3. Section headings and subheadings in the printed prospectus
are printed in boldface type with colored ink.
4. The first page of the printed prospectus contains an
illustration of balanced scales, Putnam's logo.
5. The last page of the printed prospectus contains a graphic
recyclable logo.<PAGE>
