1
Prospectus Supplement dated February 1, 1999 to the Prospectuses
of Putnam Diversified Equity Trust, Putnam Municipal Income Fund,
Putnam Research Fund, Putnam Growth Opportunities Fund, Putnam
Global Growth Fund, Putnam Equity Income Fund, Putnam Strategic
Income Fund, Putnam Tax-Free High Yield Fund, Putnam Voyager Fund
II and Putnam Growth and Income Fund II (the "Funds")
Each Fund will offer Class C shares beginning February 1,
1999. Information about Class C shares may be found in this
Supplement.
1. The section entitled "EXPENSES SUMMARY" is supplemented by
the following information about Class C shares:
Expenses are one of several factors to consider when investing.
The following table summarizes your maximum transaction costs
from investing in Class C shares of a fund and expenses based on
the most recent fiscal year. The examples show the cumulative
expenses attributable to a hypothetical $1,000 investment over
specified periods.
SHAREHOLDER TRANSACTION
EXPENSES
Maximum sales charge
imposed on purchases
(as a percentage
of offering price) NONE*
Deferred sales charge 1.0% in
(as a percentage of the the first
lower of original year and
purchase price or eliminated
redemption proceeds) thereafter
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Total fund
Management 12b-1 Other operating
fees fees expenses expenses
---------- ----- -------- -----------
Diversified Equity 0.69% 1.00% 0.31% 2.00%
Equity Income 0.56% 1.00% 0.18% 1.74%
Global Growth 0.63% 1.00% 0.30% 1.93%
Growth and Income II 0.51% 1.00% 0.20% 1.71%
Growth Opportunities 0.70% 1.00% 0.34% 2.04%
Municipal Income 0.58% 1.00% 0.12% 1.70%
Research 0.54% 1.00% 0.47% 2.01%
Strategic Income 0.70% 1.00% 0.44% 2.14%
Tax-Free High Yield 0.54% 1.00% 0.14% 1.68%
Voyager II 0.65% 1.00% 0.32% 1.97%
The figures listed under "Class C 12b-1 fees" and "Total
operating expenses" reflect estimated Class C 12b-1 fees of 1.00%
and actual expenses of the Fund's Class A shares for its most
recent fiscal year. The table is provided to help you understand
the expenses of investing and your share of fund operating
expenses. The expenses shown in the table do not reflect the
application of credits that reduce fund expenses.
EXAMPLES
Your investment of $1,000 in Class C shares would incur the
following expenses, assuming 5% annual return and, except as
indicated, redemption at the end of each period:
1 year 1 3 5 10
no redemption year years years
years
DIVERSIFIED EQUITY $20 $30 $63 $108 $233
EQUITY INCOME $18 $28 $55 $94 $205
GLOBAL GROWTH $20 $30 $61 $104 $225
GROWTH & INCOME II $17 $27 $54 $93 $202
GROWTH OPPORTUNITIES $21 $31 $64 $110 $237
MUNICIPAL INCOME $17 $27 $54 $92 $201
RESEARCH $20 $30 $63 $108 $234
STRATEGIC INCOME $22 $32 $67 $115 $247
TAX FREE HIGH YIELD $17 $27 $53 $91 $199
VOYAGER II $20 $30 $62 $106 $230
The examples do not represent past or future expense levels.
Actual expenses may be greater or less than those shown. Federal
regulations require the examples to assume a 5% annual return,
but actual annual return varies.
The higher 12b-1 fees borne by class B, class C and class M
shares may cause long-term shareholders to pay more than the
economic equivalent of the maximum permitted front-end sales
charge on class A shares.
2. THE SECOND PARAGRAPH OF THE SECTION "ORGANIZATION AND
HISTORY" IS REPLACED BY THE FOLLOWING:
The Trust is an open-end, diversified management investment
company with an unlimited number of authorized shares of
beneficial interest. The Trustees may, without shareholder
approval, create two or more series of shares representing
separate investment portfolios. Any such series of shares may be
divided without shareholder approval into two or more classes of
shares having such preferences and special or relative rights and
privileges as the Trustees determine. The Trust's shares are not
currently divided into series. Only class A, B, C and M shares
are offered by this prospectus. Each fund may also offer other
classes of shares with different sales charges and expenses.
Because of these different sales charges and expenses, the
investment performance of the classes will vary. For more
information, including your eligibility to purchase any other
class of shares, contact your investment dealer or Putnam Mutual
Funds (at 1-800-225-1581).
3. THE SECTION "ABOUT YOUR INVESTMENT ALTERNATIVE SALES
ARRANGEMENTS" IS REPLACED BY THE FOLLOWING:
CLASS A SHARES. If you purchase class A shares, you will
generally pay a sales charge at the time of purchase and, as a
result, will not have to pay any charges when you redeem the
shares. If you purchase class A shares at net asset value you
may have to pay a contingent deferred sales charge ("CDSC") when
you redeem the shares. Certain purchases of class A shares
qualify for reduced sales charges. Class A shares pay lower 12b-1
fees than class B, class C and class M shares. See "How to buy
shares -- Class A shares" and "Distribution plans."
CLASS B SHARES. If you purchase class B shares, you will not pay
an initial sales charge, but you may have to pay a CDSC if you
redeem the shares within six years. Class B shares also pay a
higher 12b-1 fee than class A and class M shares. Class B shares
automatically convert into class A shares, based on relative net
asset value, approximately eight years after purchase. For more
information about the conversion of class B shares, including
information about how shares acquired through reinvestment of
distributions are treated and certain circumstances under which
class B shares may not convert into class A shares, see the SAI.
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. Until conversion, class B shares will have a higher
expense ratio and pay lower dividends than class A and class M
shares because of the higher 12b-1 fee. See "How to buy shares -
- - Class B shares" and "Distribution plans."
CLASS C SHARES. Like class B shares, class C shares are sold
without an initial sales charge and are subject to a CDSC if
redeemed within one year of purchase. Class C shares also bear a
higher 12b-1 fee than class A and class M shares. Unlike class B
shares, class C shares do not convert into any other class of
shares. Like class B shares, class C shares provide an investor
the benefit of putting all of the investor's dollars to work from
the time the investment is made. See "How to buy shares -- Class
C shares" and "Distribution plans."
CLASS M SHARES. If you purchase class M shares, you will
generally pay a sales charge at the time of purchase that is
lower than the sales charge you would pay for class A shares.
Certain purchases of class M shares qualify for reduced sales
charges. Class M shares pay 12b-1 fees that are lower than class
B and class C shares but higher than class A shares. You will
not have to pay any charges when you redeem class M shares, but
class M shares will not convert into any other class of shares.
See "How to buy shares -- Class M shares" and "Distribution
plans."
WHICH CLASS IS BEST FOR YOU? Which class of shares provides the
most suitable investment for you depends on a number of factors,
including the amount you intend to invest and how long you intend
to hold the shares. If your intended purchase qualifies for
reduced sales charges, you might consider class A or class M
shares. If you prefer not to pay a sales charge at the time of
purchase, you might consider class B or class C shares. Orders
for class B shares for $250,000 or more will be treated as orders
for class A shares or declined. In the case of class C shares,
orders of $1,000,000 or more and orders which because of a right
of accumulation or statement of intent would qualify for the
class A shares breakpoint of $1,000,000 will be treated as orders
for class A shares or declined. See the SAI for more
information. For more information about these sales
arrangements, consult your investment dealer or Putnam Investor
Services. Shares may only be exchanged for shares of the same
class of another Putnam fund. See "How to exchange shares."
4. THE SECTION "HOW TO BUY SHARES" IS SUPPLEMENTED BY THE
FOLLOWING:
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. Class C shares have no conversion feature and
therefore will be subject to a higher 12b-1 fee than class A
shares indefinitely.
Putnam Mutual Funds pays a sales commission equal to 1.00% of the
amount invested to dealers who sell class C shares. These
commissions are not paid on sales to investors exempt from the
CDSC.
5. THE SECTION "HOW TO BUY SHARES GENERAL" IS REPLACED BY THE
FOLLOWING:
YOU MAY BE ELIGIBLE TO BUY FUND SHARES AT REDUCED SALES CHARGES
OR TO SELL FUND SHARES WITHOUT A CDSC.
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, employer-
sponsored retirement plans and other plans. Descriptions are
also included in the order form and in the SAI.
Each fund may sell class A, class B, class C and class M shares
at net asset value without an initial sales charge or a CDSC to
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, 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, each fund may sell shares at net asset value without
an initial sales charge or a CDSC in connection with the
acquisition by the fund of assets of an investment company or
personal holding company. The CDSC will be waived on redemptions
of shares arising out of the death or post-purchase disability of
a shareholder or settlor of a living trust account, and on
redemptions in connection with certain withdrawals from IRA or
other retirement plans. Up to 12% of the value of shares subject
to a systematic withdrawal plan may also be redeemed each year
without a CDSC. The SAI contains additional information about
purchasing shares at reduced sales charges.
In determining whether a CDSC is payable on any redemption,
shares not subject to any charge will be redeemed first, followed
by shares held longest during the CDSC period. Any CDSC will be
based on the lower of the shares' cost and net asset value. 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 you redeem a share that has appreciated in
value during the CDSC period, a CDSC is assessed on its initial
purchase price. Shares acquired by reinvestment of distributions
may be redeemed without a CDSC at any time. 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. See the SAI for more
information about the CDSC.
Shareholders of other Putnam funds may be entitled to exchange
their shares for, or reinvest distributions from their funds in,
fund shares at net asset value.
If you are considering redeeming 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 or
transfer. Otherwise, payment may be delayed 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, certificates will not be
issued for your shares unless you request them.
Putnam Mutual Funds will from time to time, at its expense,
provide additional promotional incentives or payments to dealers
that sell shares of the Putnam funds. These incentives or
payments may include payments for travel expenses, including
lodging, incurred in connection with trips taken by invited
registered representatives and their guests to locations within
and outside the United States for meetings or seminars of a
business nature. 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.
6. THE SECTION "DISTRIBUTION PLANS" IS REPLACED BY THE
FOLLOWING:
The funds have adopted distribution plans to compensate Putnam
Mutual Funds for services provided and expenses incurred by it as
principal underwriter of fund shares, including the payments to
dealers mentioned below. The plans provide for payments by each
fund to Putnam Mutual Funds at the annual rates (expressed as a
percentage of average net assets) of up to 0.35% on class A
(0.65% in the case of Diversified Equity Trust) shares and up to
1.00% on class B, class C and class M shares. The Trustees
currently limit payments on class A and class M shares to 0.25%
(0.50% in the case of Diversified Equity Trust) and 0.75% (0.50%
in the case of the Municipal Income, Tax-Free High Yield and
Strategic Income Funds) of average net assets, respectively.
The Trustees currently limit payments on class B shares of the
Municipal Income Fund to 0.85% and class B Shares of the Tax-Free
High Yield Fund to 0.70%.
Putnam Mutual Funds compensates qualifying dealers (including,
for this purpose, certain financial institutions) for sales of
shares and the maintenance of shareholder accounts.
Putnam Mutual Funds makes quarterly payments to dealers at the
annual rate of 0.25% of the average net asset value of class A
shares for which such dealers are designated as the dealer of
record, except that payments to dealers for shares held by class
A qualified benefit plans are made at reduced rates, as described
in the SAI. No payments are made during the first year after
purchase on shares purchased at net asset value by shareholders
investing $1 million or more or by employer-sponsored retirement
plans that have at least 200 eligible employees or that are class
A qualified benefit plans, unless the shareholder has made
arrangements with Putnam Mutual Funds and the dealer of record
has waived the sales commission.
Putnam Mutual Funds makes quarterly payments to dealers at the
annual rates of 0.25%, 0.75% and 0.65% (0.40% in the case of the
Municipal Income, Strategic Income and Tax-Free High Yield Funds)
of the average net asset value of class B, class C and class M
shares, respectively, for which such dealers are designated as
the dealer of record, provided, however, no payment will be made
with respect to the first four quarters following the sale of
class C shares.
Putnam Mutual Funds may suspend or modify its payments to
dealers. The payments are also subject to the continuation of
the relevant distribution plan, the terms of service agreements
between dealers and Putnam Mutual Funds, and any applicable
limits imposed by the National Association of Securities Dealers,
Inc.
7. THE THIRD PARAGRAPH OF THE SECTION "HOW EACH FUND MAKES
DISTRIBUTIONS TO SHAREHOLDERS; TAX INFORMATION" IS REPLACED
BY THE FOLLOWING:
Distributions paid on class A shares will generally be greater
than those paid on class B shares, class C shares and class M
shares because expenses attributable to class B shares, class C
shares and class M shares will generally be higher.
