PUTNAM ASSET ALLOCATION FUNDS
Putnam Asset Allocation: Growth Portfolio
Putnam Asset Allocation: Balanced Portfolio
Putnam Asset Allocation: Conservative Portfolio
Prospectus Supplement dated March 20, 1997 to
Prospectuses dated January 30, 1997
The section of the Prospectus entitled "How the funds pursue
their objectives -- Foreign investments" is replaced with the
following:
Foreign investments
Each fund may invest in securities of foreign issuers that are
not actively traded in U.S. markets. These foreign investments
involve certain special risks described below.
Foreign securities are normally denominated and traded in foreign
currencies. As a result, the value of a fund's foreign
investments and the value of its shares may be affected favorably
or unfavorably by changes in currency exchange rates relative to
the U.S. dollar. Each fund may engage in a variety of foreign
currency exchange transactions in connection with its foreign
investments, including transactions involving futures contracts,
forward contracts and options.
Investments in foreign securities may subject a fund to other
risks as well. For example, 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
investments in U.S. markets.
In addition, a fund's investments in foreign securities may be
subject to the risk of nationalization or expropriation of
assets, imposition of currency exchange controls or restrictions
on the repatriation of foreign currency, confiscatory taxation,
political or financial instability and diplomatic developments
which could affect the value of that fund's investments in
certain foreign countries. Dividends or interest on, or proceeds
from the sale of, foreign securities may be subject to foreign
withholding taxes, and special U.S. tax considerations may apply.
Legal remedies available to investors in certain foreign
countries may be more limited than those available with respect
to investments in the United States or in other foreign
countries. The laws of some foreign countries may limit a fund's
ability to invest in securities of certain issuers organized
under the laws of those foreign countries.
The risks described above are typically increased in connection
with investments in less developed and developing nations, which
are sometimes referred to as "emerging markets." For example,
political and economic structures in these countries may be in
their infancy and developing rapidly, causing instability. High
rates of inflation or currency devaluations may adversely affect
the economies and securities markets of such countries.
Investments in emerging markets may be considered speculative.
The Conservative Portfolio expects that its investments in
foreign securities generally will not exceed 40% of its total
assets and each of the Growth Portfolio and the Balanced
Portfolio expect that its investments in foreign securities will
not exceed 60% of its total assets, although each fund's
investments in foreign securities may exceed these amounts from
time to time. Certain of the foregoing risks may also apply to
some extent to securities of U.S. issuers that are denominated in
foreign currencies or that are traded in foreign markets, or
securities of U.S. issuers having significant foreign operations.
For more information about foreign securities and the risks
associated with investment in such securities, see the SAI.
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