PROSPECTUS
FEBRUARY 1, 1995
PUTNAM ASSET ALLOCATION FUNDS
PUTNAM ASSET ALLOCATION: GROWTH PORTFOLIO
PUTNAM ASSET ALLOCATION: BALANCED PORTFOLIO
PUTNAM ASSET ALLOCATION: CONSERVATIVE PORTFOLIO
CLASS A, B AND C SHARES
This Prospectus explains concisely what you should know before
investing in Class A, B or C 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
......................................................
Financial highlights
......................................................
Objectives
......................................................
How objectives are pursued
......................................................
Risk factors
.......................................................
How performance is shown
.......................................................
How the Funds are managed
.......................................................
Organization and history
.......................................................
ABOUT YOUR INVESTMENT
Alternative sales arrangements
.......................................................
How to buy shares
.......................................................
Distribution Plans
.......................................................
How to sell shares
.......................................................
How to exchange shares
.......................................................
How each Fund values its shares
.......................................................
How distributions are made; tax information
.......................................................
ABOUT PUTNAM INVESTMENTS, INC.
APPENDIX
Fixed-income security ratings
<PAGE>
<TABLE>
<CAPTION>
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 SHARES CLASS B SHARES CLASS C SHARES
<C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed
on Purchases(as a percentage
of offering price) 5.75% NONE* NONE*
Deferred Sales Charge (as a 5.0% in the 1.00% in the first
percentage of the lower first year, year and eliminated
of the original purchase NONE** declining to thereafter
price or redemption 1.0% in the
proceeds) sixth year, and
eliminated thereafter
/TABLE
<PAGE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
CLASS A SHARES
<C><C> <C> <C>
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%+
/TABLE
<PAGE>
<TABLE>
<CAPTION>
CLASS B AND CLASS C SHARES
<C> <C> <C> <C>
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%+
+ After expense limitation discussed below.
/TABLE
<PAGE>
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, and estimated management fees and total operating
expenses for Class B and C shares would be 0.70% and 2.37%,
respectively. The 12b-1 fees shown in the table reflect the
amount to which the Trustees currently limit payments under the
Class A Distribution Plan 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..
<PAGE>
<TABLE>
<CAPTION>
EXAMPLES
Your investment of $1,000 would incur the following expenses, assuming
5% annual return and redemption at the end of each period:
<C> <C> <C>
1 YEAR 3 YEARS
GROWTH PORTFOLIO
CLASS A $73 $105
CLASS B $74 $103
CLASS C $34 $73
BALANCED PORTFOLIO
CLASS A $70 $95
CLASS B $70 $93
CLASS C $30 $63
<PAGE>
CONSERVATIVE PORTFOLIO
CLASS A $70 $95
CLASS B $70 $93
CLASS C $30 $63
Your investment of $1,000 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
BALANCED PORTFOLIO
CLASS A $70 $95
CLASS B $20 $63
CLASS C $20 $63
CONSERVATIVE PORTFOLIO
CLASS A $70 $95
CLASS B $20 $63
CLASS C $20 $63
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.
/TABLE
<PAGE>
* Class B and Class C shares are sold without a
front-end sales charge, but their higher 12b-1 fees
may cause long-term shareholders to pay more than
the economic equivalent of the maximum permitted
front-end sales charge.
** 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. Each Fund also offers
other classes of shares pursuant to other prospectuses including
Class M shares, which have a lower front-end sales charge than
Class A shares and which bear a higher 12b-1 fee than Class A
shares.
FINANCIAL HIGHLIGHTS
The tables on the following pages present per share financial
information for Class A, B and C shares. 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 year are incorporated by reference into this
Prospectus. The Trust's Annual Report is available without
charge upon request.
Financial highlights
(for a share outstanding throughout the period)
(THE TABLE IS INCORPORATED BY REFERENCE FROM POST-EFFECTIVE
AMENDMENT NO. 2 TO THE FUNDS' REGISTRATION STATEMENT, FILE NO.
33-51017.)
<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 creditworthiness 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.
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 creditworthiness 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 Corporation
("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.
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 United States
government or one of 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 one of 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 maturities. If the 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.
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.
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.
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.
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 Stock 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.
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.
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 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 that Fund
invested at the maximum public offering price (in the case of
Class A 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.
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 March
31, 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. Putnam Management currently intends
to recommend the extention of the expense limitation through the
Conservative Portfolio's fiscal year. 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 the 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 Fund 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 Fund
or the nature of the services performed and relative
applicability to the 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 and Class C shares are offered by this Prospectus.
Class M shares are offered by another prospectus. Class M shares
have a lower front-end sales charge than Class A shares and bear
a higher 12b-1 fee than Class A shares. 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, M.I.T.; JAMESON ADKINS BAXTER, President, Baxter
Associates, Inc.; HANS H. ESTIN, Vice Chairman, North American
Management Corp.; JOHN A. HILL, Principal and Managing Director,
First Reserve Corporation; ELIZABETH T. KENNAN, President, Mount
Holyoke College; LAWRENCE J. LASSER,* Vice President of the
Putnam funds. President, Chief Executive Officer and Director of
Putnam Investments, Inc. and Putnam Management. Director, Marsh
& McLennan Companies, Inc.; ROBERT E. PATTERSON, Executive Vice
President, Cabot Partners Limited Partnership; DONALD S. PERKINS,
Director of various corporations, including AT&T, K mart
Corporation and Time Warner Inc.; GEORGE PUTNAM, III,*
President, New Generation Research, Inc.; A.J.C. SMITH,*
Chairman, Chief Executive Officer and Director, Marsh & McLennan
Companies, Inc.; and W. NICHOLAS THORNDIKE, Director of various
<PAGE>
corporations and charitable organizations, including Data General
Corporation, Bradley Real Estate, Inc. and Providence Journal Co.
Also, Trustee of Massachusetts General Hospital and Trustee of
Eastern Utilities Associates.
ABOUT YOUR INVESTMENT
ALTERNATIVE SALES ARRANGEMENTS
This Prospectus offers investors three 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."
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
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 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 and Class B 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.
<PAGE>
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.
<PAGE>
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:
<PAGE>
<TABLE>
<CAPTION>
SALES CHARGE AMOUNT OF
AS A PERCENTAGE OF: SALES CHARGE
------------------- REALLOWED
NET TO DEALERS
AMOUNT OF TRANSACTION AMOUNT OFFERING AS A PERCENTAGE
AT OFFERING PRICE INVESTED PRICE OF OFFERING PRICE*
-----------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
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
- -----------------------------------------------------------------------------------------
/TABLE
<PAGE>
* 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 begins 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%.
YOU MAY BE ELIGIBLE TO BUY CLASS A 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. Shares may be sold at net asset value to
certain categories of investors, and the CDSC may be waived under
certain circumstances. See "How to buy shares -- General" below.
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.
GENERAL
Each Fund may sell Class A, Class B or Class C 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 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.
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.
CLASS B AND CLASS C DISTRIBUTION PLANS. The Class B Plan and the
Class C 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 and Class C shares, as
the case may be.
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. 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 and Class C 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 and Class C shares which are
attributable to shareholders for whom the dealers are designated
as the dealer of record , except 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
and Class C 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.
<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 a 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 or Class B 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 and Class C shares because expenses
attributable to Class B shares and Class C 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.
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.
<PAGE>
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 CORPORATION:
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.
<PAGE>
MAKE THE MOST OF YOUR PUTNAM PRIVILEGES
As a Putnam mutual fund shareholder, you have access to a number
of services that can help you build a more effective and flexible
financial program. Here are some of the ways you can use these
privileges to make the most of your Putnam mutual fund investment
SYSTEMATIC INVESTMENT PLAN
Invest as much as you wish ($25 or more) on any 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.
DIVIDENDS PLUS
Diversify your portfolio by investing dividends and other
distributions from one Putnam fund automatically into another at
net asset value.
STATEMENT OF INTENTION
To reduce a front-end sales charge, you agree to invest a minimum
dollar amount over 13 months. Depending on your fund, the
minimum is $25,000, $50,000, or $100,000. Whenever you make an
investment under this arrangement, you or your investment advisor
should notify Putnam that a Statement of Intention is in effect.
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>
