Prospectus
MARCH 30, 2000
AS REVISED MAY 15, 2000
Putnam Classic Equity Fund
Class A, B, C and M shares
Investment Category: Growth and Income
This prospectus explains what you should know about this mutual fund
before you invest. Please read it carefully.
Putnam Investment Management, Inc. (Putnam Management), which has
managed mutual funds since 1937, manages the fund.
These securities have not been approved or disapproved by the Securities
and Exchange Commission nor has the Commission passed upon the accuracy or
adequacy of this prospectus. Any statement to the contrary is a crime.
CONTENTS
[ ] Fund summary
[ ] Goal
[ ] Main investment strategies
[ ] Main risks
[ ] Performance information
[ ] Fees and expenses
[ ] What are the fund's main investment strategies and related risks?
[ ] Who manages the fund?
[ ] How does the fund price its shares?
[ ] How do I buy fund shares?
[ ] How do I sell fund shares?
[ ] How do I exchange fund shares?
[ ] Fund distributions and taxes
[ ] Financial highlights
[SCALE LOGO OMITTED]
Fund summary
GOAL
The fund seeks capital growth. Current income is a secondary goal.
MAIN INVESTMENT STRATEGIES - VALUE STOCKS
We invest mainly in common stocks of U.S. companies, with a focus on
value stocks that may also offer the potential for current income. Value
stocks are those- stocks we believe are currently undervalued by the
market. We look for companies undergoing positive change. If we are
correct and other investors recognize the value of the company, the
price of the stock may rise. We invest mainly in midsized and large
companies.
MAIN RISKS
The main risks that could adversely affect the value of the fund's
shares and the total return on your investment include:
* The risk that the stock price of one or more of the companies in the
fund's portfolio will fall, or will fail to rise. Many factors can
adversely affect a stock's performance, including both general financial
market conditions and factors related to a specific company or industry.
This risk is generally greater for small and midsized companies, which
tend to be more vulnerable to adverse developments.
* The risk that movements in financial markets will adversely affect the
price of the fund's investments, regardless of how well the companies in
which we invest perform. The market as a whole may not favor the types
of investments we make.
You can lose money by investing in the fund. The fund may not achieve
its goals, and is not intended as a complete investment program. An
investment in the fund is not a deposit in a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
PERFORMANCE INFORMATION
The following information provides some indication of the fund's risks.
The chart shows year-to-year changes in the performance of one of the
fund's classes of shares, class A shares. The table following the chart
compares the fund's performance to that of a broad measure of market
performance. Of course, a fund's past performance is not an indication
of future performance.
[GRAPHIC OMITTED: CALENDAR YEAR TOTAL RETURNS FOR CLASS A SHARES]
CALENDAR YEAR TOTAL RETURNS FOR CLASS A SHARES
1999 -0.91%
1998 12.46%
1997 24.86%
1996 21.19%
Performance figures in the bar chart do not reflect the impact of sales
charges. If they did, performance would be less than that shown. During
the periods shown in the bar chart, the highest return for a quarter was
17.02% (quarter ending 12/31/98) and the lowest return for a quarter was
- -12.01% (quarter ending 09/30/99).
Average Annual Total Returns (for periods ending 12/31/99)
- ------------------------------------------------------------------------
Since
Past inception
1 year (1/05/95)
- ------------------------------------------------------------------------
Class A -6.60% 16.27%
Class B -6.02% 16.55%
Class C -2.45% 16.80%
Class M -4.83% 16.23%
S&P 500 Index 21.04% 28.58%
- ------------------------------------------------------------------------
Unlike the bar chart, this performance information reflects the impact
of sales charges. Both class A and class M share performance reflect the
current maximum initial sales charges; both class B and class C share
performance reflect the maximum applicable deferred sales charge if
shares had been redeemed on 12/31/99. For periods before the inception
of class B shares (1/05/95), class C shares (2/1/99) and class M shares
(01/05/95), performance shown for these classes in the table is based on
the performance of the fund's class A shares, adjusted to reflect the
appropriate sales charge and the higher 12b-1 fees paid by the class B,
class C and class M shares. The fund's performance is compared to the
S&P 500 Index, an unmanaged index of common stocks frequently used as a
general measure of U.S. stock market performance.
FEES AND EXPENSES
This table summarizes the fees and expenses you may pay if you invest in
the fund. Expenses are based on the fund's last fiscal year.
Shareholder Fees (fees paid directly from your investment)
- ------------------------------------------------------------------------
Class A Class B Class C Class M
- ------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Purchases (as a
percentage of the
offering price) 5.75% NONE NONE 3.50%
- ------------------------------------------------------------------------
Maximum Deferred Sales
Charge (Load) (as a percentage
of the original purchase
price or redemption proceeds,
whichever is lower) NONE* 5.00% 1.00% NONE
- ------------------------------------------------------------------------
Annual Fund Operating Expenses
(expenses that are deducted from fund assets)
- ------------------------------------------------------------------------
Total Annual
Management Distribution Other Fund Operating
Fees (12b-1) Fees Expenses Expenses
- ------------------------------------------------------------------------
Class A .51% .25% .14% .90%
Class B .51% 1.00% .14% 1.65%
Class C .51% 1.00% .14% 1.65%
Class M .51% .75% .14% 1.40%
- ------------------------------------------------------------------------
* A deferred sales charge of up to 1% may be imposed on certain
redemptions of class A shares bought without an initial sales charge.
EXAMPLE
The example translates the expenses shown in the preceding table into
dollar amounts. By doing this, you can more easily compare the cost of
investing in the fund to the cost of investing in other mutual funds.
The example makes certain assumptions. It assumes that you invest
$10,000 in the fund for the time periods shown and then, except as shown
for class B and class C shares, redeem all your shares at the end of
those periods. It also assumes a 5% return on your investment each year
and that the fund's operating expenses remain the same. The example is
hypothetical; your actual costs and returns may be higher or lower.
- ------------------------------------------------------------------------
1 year 3 years 5 years 10 years
- ------------------------------------------------------------------------
Class A $662 $845 $1,045 $1,619
Class B $668 $820 $1,097 $1,754*
Class B (no redemption) $168 $520 $897 $1,754*
Class C $268 $520 $897 $1,955
Class C (no redemption) $168 $520 $897 $1,955
Class M $488 $778 $1,089 $1,971
- ------------------------------------------------------------------------
* Reflects the conversion of class B shares to class A shares, which pay
lower 12b-1 fees. Conversion occurs no more than eight years after
purchase.
What are the fund's main investment strategies and related risks?
Any investment carries with it some level of risk that generally
reflects its potential for reward. We pursue the fund's goal by
investing mainly in value stocks. Value stocks may also offer the
potential for current income. We will consider, among other things, a
company's financial strength, competitive position in its industry,
projected future earnings, cash flows and dividends when deciding
whether to buy or sell investments. A description of the risks
associated with the fund's main investment strategies follows.
* Common stocks. Common stock represents an ownership interest in a
company. The value of a company's stock may fall as a result of factors
relating directly to that company, such as decisions made by its
management or lower demand for the company's products or services. A
stock's value may also fall because of factors affecting not just the
company, but also companies in the same industry or in a number of
different industries, such as increases in production costs. The value
of a company's stock may also be affected by changes in financial
markets that are relatively unrelated to the company or its industry,
such as changes in interest rates or currency exchange rates. In
addition, a company's stock generally pays dividends only after the
company invests in its own business and makes required payments to
holders of its bonds and other debt. For this reason, the value of a
company's stock will usually react more strongly than its bonds and
other debt to actual or perceived changes in the company's financial
condition or prospects. Stocks of smaller companies may be more
vulnerable to adverse developments than those of larger companies.
Companies whose stock we believe is undervalued by the market may have
experienced adverse business developments or may be subject to special
risks that have caused their stocks to be out of favor. If our
assessment of a company's prospects is wrong, or if other investors do
not similarly recognize the value of the company, then the price of the
company's stock may fall or may not approach the value that we have
placed on it.
* Foreign investments. We may invest in securities of foreign issuers.
Foreign investments involve certain special risks. For example, their
values may decline in response to changes in currency exchange rates,
unfavorable political and legal developments, unreliable or untimely
information, and economic and financial instability. In addition, the
liquidity of these investments may be more limited than for U.S.
investments, which means we may at times be unable to sell them at
desirable prices. Foreign settlement procedures may also involve
additional risks. These risks are generally greater in the case of
developing (also known as emerging) markets with less developed legal
and financial systems.
Certain of these risks may also apply to U.S. investments that are
denominated in foreign currencies or that are traded in foreign markets,
or to securities of U.S. companies that have significant foreign
operations.
* Smaller companies. We may invest in smaller and midsized companies.
Smaller companies, which may have a market capitalization of less than
$1 billion, are more likely than larger companies to have limited
product lines, markets or financial resources, or to depend on a small,
inexperienced management group. Stocks of these companies often trade
less frequently and in limited volume, and their prices may fluctuate
more than stocks of larger companies. Stocks of smaller and midsized
companies may therefore be more vulnerable to adverse developments than
those of larger companies.
* Other investments. In addition to the main investment strategies
described above, we may make other investments, such as investments in
preferred stocks, convertible securities, debt instruments and
derivatives, which may be subject to other risks, as described in the
fund's statement of additional information (SAI).
* Alternative strategies. At times we may judge that market conditions
make pursuing the fund's usual investment strategies inconsistent with
the best interests of its shareholders. We then may temporarily use
alternative strategies that are mainly designed to limit losses.
However, we may choose not to use these strategies for a variety of
reasons, even in very volatile market conditions. These strategies may
cause the fund to miss out on investment opportunities, and may prevent
the fund from achieving its goal.
* Changes in policies. The fund's Trustees may change the fund's goal,
investment strategies and other policies without shareholder approval,
except as otherwise indicated.
Who manages the fund?
The fund's Trustees oversee the general conduct of the fund's business.
The Trustees have retained Putnam Management to be the fund's investment
manager, responsible for making investment decisions for the fund and
managing the fund's other affairs and business. The fund pays Putnam
Management a quarterly management fee for these services based on the
fund's average net assets. The fund paid Putnam Management a management
fee of 0.51% of average net assets for the fund's last fiscal year.
Putnam Management's address is One Post Office Square, Boston, MA 02109.
The following officer of Putnam Management has had primary
responsibility for the day-to-day management of the fund's portfolio
since the year shown below. Her experience as portfolio manager or
investment analyst over at least the last five years is also shown.
- ------------------------------------------------------------------------
Manager Since Experience
- ------------------------------------------------------------------------
Deborah Kuenstner 2000 March 1997 - Present Putnam Management
Managing Director Prior to March 1997 Senior Portfolio
Manager at Dupont
Pension Fund Investment
- ------------------------------------------------------------------------
How does the fund price its shares?
The price of the fund's shares is based on its net asset value (NAV).
The NAV per share of each class equals the total value of its assets,
less its liabilities, divided by the number of its outstanding shares.
Shares are only valued as of the close of regular trading on the New
York Stock Exchange each day the exchange is open.
The fund values its investments for which market quotations are readily
available at market value. It values short-term investments that will
mature within 60 days at amortized cost, which approximates market
value. It values all other investments and assets at their fair value.
The fund translates prices for its investments quoted in foreign
currencies into U.S. dollars at current exchange rates. As a result,
changes in the value of those currencies in relation to the U.S. dollar
may affect the fund's NAV. Because foreign markets may be open at
different times than the New York Stock Exchange, the value of the
fund's shares may change on days when shareholders are not able to buy
or sell them. If events materially affecting the values of the fund's
foreign investments occur between the close of foreign markets and the
close of regular trading on the New York Stock Exchange, these
investments will be valued at their fair value.
How do I buy fund shares?
You can open a fund account with as little as $500 and make additional
investments at any time with as little as $50 ($25 through systematic
investing). The fund sells its shares at the offering price, which is
the NAV plus any applicable sales charge. Your financial advisor or
Putnam Investor Services generally must receive your completed buy order
before the close of regular trading on the New York Stock Exchange for
your shares to be bought at that day's offering price.
You can buy shares
* Through a financial advisor. Your advisor will be responsible for
furnishing all necessary documents to Putnam Investor Services, and may
charge you for his or her services.
* Through systematic investing. You can make regular investments of $25
or more per month through automatic deductions from your bank checking
or savings account. Application forms are available through your advisor
or Putnam Investor Services at 1-800-225-1581.
You may also complete an order form and write a check for the amount you
wish to invest, payable to the fund. Return the check and completed form
to Putnam Mutual Funds.
The fund may periodically close to new purchases of shares or refuse any
order to buy shares if the fund determines that doing so would be in the
best interests of the fund and its shareholders.
WHICH CLASS OF SHARES IS BEST FOR ME?
This prospectus offers you a choice of four classes of fund shares: A,
B, C and M. This allows you to choose among different types of sales
charges and different levels of ongoing operating expenses, as
illustrated in the "Fees and expenses" section. The class of shares that
is best for you depends on a number of factors, including the amount you
plan to invest and how long you plan to hold the shares. Here is a
summary of the differences among the classes of shares:
Class A shares
* Initial sales charge of up to 5.75%
* Lower sales charge for investments of $50,000 or more
* No deferred sales charge (except on certain redemptions of shares
bought without an initial sales charge)
* Lower annual expenses, and higher dividends, than class B, C or M
shares because of lower 12b-1 fee
Class B shares
* No initial sales charge; your entire investment goes to work for you
* Deferred sales charge of up to 5.00% if you sell shares within 6 years
after purchase
* Higher annual expenses, and lower dividends, than class A or M shares
because of higher 12b-1 fee
* Convert automatically to class A shares after 8 years, reducing the
future 12b-1 fee (may convert sooner in some cases)
* Orders for class B shares for $250,000 or more are treated as orders
for class A shares or refused
Class C shares
* No initial sales charge; your entire investment goes to work for you
* Deferred sales charge of 1.00% if you sell shares within one year
after purchase
* Higher annual expenses, and lower dividends, than class A or M shares
because of higher 12b-1 fee
* No conversion to class A shares, so future 12b-1 fee does not decrease
* Orders of $1,000,000 or more and orders that, because of a right of
accumulation or statement of intent, would qualify for the purchase of
class A shares without an initial sales charge will be treated as orders
for class A shares or refused
Class M shares
* Initial sales charge of up to 3.50%
* Lower sales charge for investments of $50,000 or more
* No deferred sales charge
* Lower annual expenses, and higher dividends, than class B or C shares
because of lower 12b-1 fee
* Higher annual expenses, and lower dividends, than class A shares
because of higher 12b-1 fee
* No conversion to class A shares, so future 12b-1 fee does not decrease
Initial sales charges for class A and M shares
- ------------------------------------------------------------------------
Class A sales charge Class M sales charge
as a percentage of: as a percentage of:
- ------------------------------------------------------------------------
Amount of purchase Net amount Offering Net amount Offering
at offering price ($) invested price* invested price*
- ------------------------------------------------------------------------
Under 50,000 6.10% 5.75% 3.63% 3.50%
50,000 but
under 100,000 4.71 4.50 2.56 2.50
100,000 but
under 250,000 3.63 3.50 1.52 1.50
250,000 but
under 500,000 2.56 2.50 1.01 1.00
500,000 but
under 1,000,000 2.04 2.00 NONE NONE
1,000,000 and above NONE NONE NONE NONE
- ------------------------------------------------------------------------
* Offering price includes sales charge.
Deferred sales charges for class B, class C and certain class A shares
If you sell (redeem) class B shares within six years after you bought
them, you will generally pay a deferred sales charge according to the
following schedule.
Year after purchase 1 2 3 4 5 6 7+
- ------------------------------------------------------------------------
Charge 5% 4% 3% 3% 2% 1% 0%
A deferred sales charge of 1% will apply to class C shares if redeemed
within one year of purchase. A deferred sales charge of up to 1% may
apply to class A shares purchased without an initial sales charge, if
redeemed within two years of purchase.
Deferred sales charges will be based on the lower of the shares' cost
and current NAV. Shares not subject to any charge will be redeemed
first, followed by shares held longest. You may sell shares acquired by
reinvestment of distributions without a charge at any time.
* You may be eligible for reductions and waivers of sales charges. Sales
charges may be reduced or waived under certain circumstances and for
certain groups. Information about reductions and waivers of sales
charges is included in the SAI. You may consult your financial advisor
or Putnam Mutual Funds for assistance.
* Distribution (12b-1) plans. The fund has adopted distribution plans to
pay for the marketing of fund shares and for services provided to
shareholders. The plans provide for payments at annual rates (based on
average net assets) of up to 0.35% on class A shares and 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 % and 0.75% of average net assets,
respectively. Because these fees are paid out of the fund's assets on an
ongoing basis, they will increase the cost of your investment. The
higher fees for class B, class C and class M shares may cost you more
than paying the initial sales charge for class A shares. Because class C
and class M shares, unlike class B shares, do not convert to class A
shares, class C and class M shares may cost you more over time than
class B shares.
How do I sell fund shares?
You can sell your shares back to the fund any day the New York Stock
Exchange is open, either through your financial advisor or directly to
the fund. Payment for redemptions may be delayed until the fund collects
the purchase price of shares, which may take up to 15 calendar days
after the purchase date.
* Selling shares through your financial advisor. Your advisor must
receive your request in proper form before the close of regular trading
on the New York Stock Exchange for you to receive that day's NAV, less
any applicable deferred sales charge. Your advisor will be responsible
for furnishing all necessary documents to Putnam Investor Services on a
timely basis and may charge you for his or her services.
* Selling shares directly to the fund. Putnam Investor Services must
receive your request in proper form before the close of regular trading
on the New York Stock Exchange in order to receive that day's NAV, less
any applicable sales charge.
By mail. Send a letter of instruction signed by all registered owners or
their legal representatives to Putnam Investor Services. If you have
certificates for the shares you want to sell, you must include them
along with completed stock power forms.
By telephone. You may use Putnam's telephone redemption privilege to
redeem shares valued at less than $100,000 unless you have notified
Putnam Investor Services of an address change within the preceding 15
days, in which case other requirements may apply. Unless you indicate
otherwise on the account application, Putnam Investor Services will be
authorized to accept redemption instructions received by telephone.
The telephone redemption privilege is not available if there are
certificates for your shares. The telephone redemption privilege may be
modified or terminated without notice.
* Additional requirements. In certain situations, for example, if you
sell shares with a value of $100,000 or more, the signatures of all
registered owners or their legal representatives must be guaranteed by a
bank, broker-dealer or certain other financial institutions. In
addition, Putnam Investor Services usually requires additional documents
for the sale of shares by a corporation, partnership, agent or
fiduciary, or a surviving joint owner. For more information concerning
Putnam's signature guarantee and documentation requirements, contact
Putnam Investor Services.
* When will the fund pay me? The fund generally sends you payment for
your shares the business day after your request is received. Under
unusual circumstances, the fund may suspend redemptions, or postpone
payment for more than seven days, as permitted by federal securities
law.
* Redemption by the fund. If you own fewer shares than the minimum set
by the Trustees (presently 20 shares), the fund may redeem your shares
without your permission and send you the proceeds. The fund may also
redeem shares if you own more than a maximum amount set by the Trustees.
There is presently no maximum, but the Trustees could set a maximum that
would apply to both present and future shareholders.
How do I exchange fund shares?
If you want to switch your investment from one Putnam fund to another,
you can exchange your fund shares for shares of the same class of
another Putnam fund at NAV. Not all Putnam funds offer all classes of
shares or are open to new investors. If you exchange shares subject to a
deferred sales charge, the transaction will not be subject to the
deferred sales charge. When you redeem the shares acquired through the
exchange, the redemption may be subject to the deferred sales charge,
depending upon when you originally purchased the shares. The deferred
sales charge will be computed using the schedule of any fund into or
from which you have exchanged your shares that would result in your
paying the highest deferred sales charge applicable to your class of
shares. For purposes of computing the deferred sales charge, 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 subsequent exchanges
among funds.
To exchange your shares, complete an Exchange Authorization Form and
send it to Putnam Investor Services. The form is available from Putnam
Investor Services. A telephone exchange privilege is currently available
for amounts up to $500,000. The telephone exchange privilege is not
available if the fund issued certificates for your shares. Ask your
financial advisor or Putnam Investor Services for prospectuses of other
Putnam funds. Some Putnam funds are not available in 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 otherwise to promote the best
interests of the fund, the fund reserves the right to revise or
terminate the exchange privilege, limit the amount or number of
exchanges or reject any exchange. The fund into which you would like to
exchange may also reject your exchange. These actions may apply to all
shareholders or only to those shareholders whose exchanges Putnam
Management determines are likely to have a negative effect on the fund
or other Putnam funds. Consult Putnam Investor Services before
requesting an exchange.
Fund distributions and taxes
The fund normally distributes any net investment income quarterly and
any net realized capital gains annually. You may choose to:
* reinvest all distributions in additional shares;
* receive any distributions from net investment income in cash while
reinvesting capital gains distributions in additional shares; or
* receive all distributions in cash.
If you do not select an option when you open your account, all
distributions will be reinvested. If you do not cash a distribution
check within a specified period or notify Putnam Investor Services to
issue a new check, the distribution will be reinvested in the fund. You
will not receive any interest on uncashed distribution or redemption
checks. Similarly, if any correspondence sent by the fund or Putnam
Investor Services is returned as "undeliverable," fund distributions
will automatically be reinvested in the fund or in another Putnam fund.
For federal income tax purposes, distributions of investment income are
taxable as ordinary income. Taxes on distributions of capital gains are
determined by how long the fund owned the investments that generated
them, rather than how long you have owned your shares. Distributions are
taxable to you even if they are paid from income or gains earned by the
fund before your investment (and thus were included in the price you
paid). Distributions of gains from investments that the fund owned for
more than one year will be taxable as capital gains. Distributions of
gains from investments that the fund owned for one year or less will be
taxable as ordinary income. Distributions are taxable whether you
received them in cash or reinvested them in additional shares.
The fund's investments in foreign securities may be subject to foreign
withholding taxes. In that case, the fund's return on those investments
would be decreased. Shareholders generally will not be entitled to claim
a credit or deduction with respect to foreign taxes. In addition, the
fund's investment in foreign securities or foreign currencies may
increase the amount of taxes payable by shareholders.
Any gain resulting from the sale or exchange of your shares will
generally also be subject to tax. You should consult your tax advisor
for more information on your own tax situation, including possible
foreign, state and local taxes.
Financial highlights
The financial highlights table is intended to help you understand the
fund's recent financial performance. Certain information reflects
financial results for a single fund share. The total returns represent
the rate that an investor would have earned or lost on an investment in
the fund, assuming reinvestment of all dividends and distributions. This
information for the year ended November 30, 1999 has been derived from
the fund's financial statements, which have been audited by KPMG LLP.
Its report and the fund's financial statements are included in the
fund's annual report to shareholders, which is available upon request.
The information for all periods prior to the year ended November 30,
1999 has been derived from the fund's financial statements which have
been audited by the fund's previous independent accountants.
<TABLE>
<CAPTION>
CLASS A
(For a share outstanding throughout the period)
- --------------------------------------------------------------------------------------------------------------------------
For the period
Jan. 5, 1995+
Year ended November 30 to Nov. 30
- --------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value beginning of period $14.82 $14.87 $13.11 $11.01 $8.53
- --------------------------------------------------------------------------------------------------------------------------
Investment operations
- --------------------------------------------------------------------------------------------------------------------------
Net investment income .17 (c) .15 (c) .19 (c) .23 .15
- --------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments .30 1.32 2.52 2.41 2.45
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations .47 1.47 2.71 2.64 2.60
- --------------------------------------------------------------------------------------------------------------------------
Less distributions:
- --------------------------------------------------------------------------------------------------------------------------
From net investment income (.17) (.14) (.20) (.21) (.12)
- --------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments (1.17) (1.38) (.75) (.33) --
- --------------------------------------------------------------------------------------------------------------------------
Total distributions (1.34) (1.52) (.95) (.54) (.12)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value end of period $13.95 $14.82 $14.87 $13.11 $11.01
- --------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- --------------------------------------------------------------------------------------------------------------------------
Total return at net asset value (%)(a) 3.55 10.97 22.29 24.95 30.62*
- --------------------------------------------------------------------------------------------------------------------------
Net assets end of period (in thousands) $1,285,330 $1,241,384 $1,051,276 $637,204 $250,328
- --------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(b) .90 .96 1.00 1.09 1.35*
- --------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.19 1.04 1.40 1.92 2.03*
- --------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 80.27 81.62 74.51 83.97 64.18*
- --------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets includes amounts paid through expense offset arrangements and brokerage
service arrangements.
(c) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding
during the period.
</TABLE>
<TABLE>
<CAPTION>
CLASS B
(For a share outstanding throughout the period)
- --------------------------------------------------------------------------------------------------------------------------
For the period
Jan. 5, 1995+
Year ended November 30 to Nov. 30
- --------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value beginning of period $14.70 $14.77 $13.03 $10.96 $8.53
- --------------------------------------------------------------------------------------------------------------------------
Investment operations
- --------------------------------------------------------------------------------------------------------------------------
Net investment income .06 (c) .04 (c) .09 (c) .15 .11
- --------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments .29 1.30 2.51 2.39 2.42
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations .35 1.34 2.60 2.54 2.53
- --------------------------------------------------------------------------------------------------------------------------
Less distributions:
- --------------------------------------------------------------------------------------------------------------------------
From net investment income (.06) (.03) (.11) (.14) (.10)
- --------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments (1.17) (1.38) (.75) (.33) --
- --------------------------------------------------------------------------------------------------------------------------
Total distributions (1.23) (1.41) (.86) (.47) (.10)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value end of period $13.82 $14.70 $14.77 $13.03 $10.96
- --------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- --------------------------------------------------------------------------------------------------------------------------
Total return at net asset value (%)(a) 2.72 10.07 21.42 23.98 29.72*
- --------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $1,406,793 $1,480,683 $1,242,817 $763,438 $259,789
- --------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(b) 1.65 1.71 1.75 1.84 2.03*
- --------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .44 .29 .65 1.17 1.36*
- --------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 80.27 81.62 74.51 83.97 64.18*
- --------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets includes amounts paid through expense offset arrangements and brokerage
service arrangements.
(c) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding
during the period.
</TABLE>
<TABLE>
<CAPTION>
CLASS C
(For a share outstanding throughout the period)
- --------------------------------------------------------------------------------------------------------------------------
For the period
February 1, 1999+
to Nov 30
- --------------------------------------------------------------------------------------------------------------------------
1999
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value beginning of period $14.21
- --------------------------------------------------------------------------------------------------------------------------
Investment operations
- --------------------------------------------------------------------------------------------------------------------------
Net investment income (c) .06
- --------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments (.25)
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations (.19)
- --------------------------------------------------------------------------------------------------------------------------
Less distributions:
- --------------------------------------------------------------------------------------------------------------------------
From net investment income (.11)
- --------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments --
- --------------------------------------------------------------------------------------------------------------------------
Total distributions (.11)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value,end of period $13.91
- --------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- --------------------------------------------------------------------------------------------------------------------------
Total return at net asset value (%)(a) (1.36)*
- --------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $33,369
- --------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.37*
- --------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .42*
- --------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 80.27
- --------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets includes amounts paid through expense offset arrangements and brokerage
service arrangements
(c) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding
during the period.
</TABLE>
<TABLE>
<CAPTION>
CLASS M
For a share outstanding throughout the period)
- --------------------------------------------------------------------------------------------------------------------------
For the period
Jan. 5, 1995+
Year ended November 3 to Nov. 30
- --------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $14.75 $14.81 $13.06 $10.98 $8.53
- --------------------------------------------------------------------------------------------------------------------------
Investment operations
- --------------------------------------------------------------------------------------------------------------------------
Net investment income .10 (c) .08 (c) .13 (c) .18 .12
- --------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments .29 1.31 2.51 2.39 2.43
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations .39 1.39 2.64 2.57 2.55
- --------------------------------------------------------------------------------------------------------------------------
Less distributions:
- --------------------------------------------------------------------------------------------------------------------------
From net investment income (.10) (.07) (.14) (.16) (.10)
- --------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments (1.17) (1.38) (.75) (.33) --
- --------------------------------------------------------------------------------------------------------------------------
Total distributions (1.27) (1.45) (.89) (.49) (.10)
- --------------------------------------------------------------------------------------------------------------------------
Net Asset value end of period $13.87 $14.75 $14.81 $13.06 $10.98
- --------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- --------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 2.97 10.37 21.73 24.28 30.04*
- --------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $164,524 $169,631 $151,359 $95,576 $33,406
- --------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.40 1.46 1.50 1.59 1.80*
- --------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .69 .54 .90 1.42 1.58*
- --------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 80.27 81.62 74.51 83.97 64.18*
- --------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets includes amounts paid through expense offset arrangements and brokerage
service arrangements
(c) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding
during the period.
</TABLE>
For more information about
Putnam Classic Equity Fund
The fund's statement of additional information (SAI) and annual and
semi-annual reports to shareholders include additional information about
the fund. The SAI, and the independent accountants' reports and
financial statements included in the fund's two most recent annual
reports to its shareholders, are incorporated by reference into this
prospectus, which means they are part of this prospectus for legal
purposes. The fund's annual report discusses the market conditions and
investment strategies that significantly affected the fund's performance
during its last fiscal year. You may get free copies of these materials,
request other information about the fund and other Putnam funds, or make
shareholder inquiries, by contacting your financial advisor, by visiting
Putnam's Web site, or by calling Putnam toll-free at 1-800-225-1581.
You may review and copy information about the fund, including its SAI,
at the Securities and Exchange Commission's public reference room in
Washington, D.C. You may call the Commission at 1-202-942-8090 for
information about the operation of the public reference room. You may
also access reports and other information about the fund on the EDGAR
Database on the Commission's Internet site at http://www.sec.gov. You
may get copies of this information, with payment of a duplication fee,
by electronic request at the following E-mail address:
publicinfosec.gov, or by writing the Commission's Public Reference
Section, Washington, D.C. 20549-0102. You may need to refer to the
fund's file number.
PUTNAM INVESTMENTS
One Post Office Square
Boston, Massachusetts 02109
1-800-225-1581
Address correspondence to
Putnam Investor Services
P.O. Box 989
Boston, Massachusetts 02103
www.putnaminv.com
File No. 811 - 7223 xxxxx x/xx
Prospectus
MARCH 30, 2000
AS REVISED MAY 15, 2000
Putnam Classic Equity Fund
Class A shares - for eligible retirement plans
Investment Category: Growth and Income
This prospectus explains what you should know about this mutual fund
before you invest. Please read it carefully. This prospectus only offers
class A shares of the fund without a sales charge to eligible retirement
plans.
Putnam Investment Management, Inc. (Putnam Management), which has
managed mutual funds since 1937, manages the fund.
These securities have not been approved or disapproved by the Securities
and Exchange Commission nor has the Commission passed upon the accuracy
or adequacy of this prospectus. Any statement to the contrary is a
crime.
CONTENTS
[ ] Fund summary
[ ] Goal
[ ] Main investment strategies
[ ] Main risks
[ ] Performance information
[ ] Fees and expenses
[ ] What are the fund's main investment strategies and related risks?
[ ] Who manages the fund?
[ ] How does the fund price its shares?
[ ] How do I buy fund shares?
[ ] How do I sell fund shares?
[ ] How do I exchange fund shares?
[ ] Fund distributions and taxes
[ ] Financial highlights
Putnam Defined Contribution Plans
[SCALE LOGO OMITTED]
Fund summary
GOAL
The fund seeks capital growth. Current income is a secondary goal.
MAIN INVESTMENT STRATEGIES - VALUE STOCKS
We invest mainly in common stocks of U.S. companies, with a focus on value
stocks that may offer the potential for current income. Value-
stocks we believe are currently undervalued by the market. We look for
companies undergoing positive change. If we are correct and other
investors recognize the value of the company, the price of the stock may
rise. We invest mainly in midsized and large companies.
MAIN RISKS
The main risks that could adversely affect the value of the fund's
shares and the total return on your investment include:
* The risk that the stock price of one or more of the companies in the
fund's portfolio will fall, or will fail to rise. Many factors can
adversely affect a stock's performance, including both general financial
market conditions and factors related to a specific company or industry.
This risk is generally greater for small and midsized companies, which
tend to be more vulnerable to adverse developments.
* The risk that movements in financial markets will adversely affect the
price of the fund's investments, regardless of how well the companies in
which we invest perform. The market as a whole may not favor the types
of investments we make.
You can lose money by investing in the fund. The fund may not achieve
its goals, and is not intended as a complete investment program. An
investment in the fund is not a deposit in a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
PERFORMANCE INFORMATION
The following information provides some indication of the fund's risks.
The chart shows year-to-year changes in the performance of the fund's
class A shares. The table following the chart compares the fund's
performance to that of a broad measure of market performance. Of course,
a fund's past performance is not an indication of future performance.
[GRAPHIC OMITTED: CALENDAR YEAR TOTAL RETURNS FOR CLASS A SHARES]
CALENDAR YEAR TOTAL RETURNS FOR CLASS A SHARES
1999 -0.91%
1998 12.46%
1997 24.86%
1996 21.19%
During the periods shown in the bar chart, the highest return for a
quarter was 17.02% (quarter ending 12/31/98 and the lowest return for
a quarter was -12.01% (quarter ending 09/30/99).
Average Annual Total Returns (for periods ending 12/31/99)
- ------------------------------------------------------------------------
Since
Past inception
1 year (1/05/95)
- ------------------------------------------------------------------------
Class A -0.91% 17.65%
S&P 500 Index 21.04% 28.58%
- ------------------------------------------------------------------------
Class A share performance reflects the waiver of sales charges for
purchases through eligible retirement plans. The fund's performance is
compared to the S&P 500 Index, an unmanaged index of common stocks
frequently used as a general measure of U.S. stock market performance.
FEES AND EXPENSES
This table summarizes the fees and expenses you may pay if you invest
in class A shares of the fund. Expenses are based on the fund's last
fiscal year.
Shareholder Fees (fees paid directly from your investment)
- ------------------------------------------------------------------------
Maximum Sales Charge (Load) NONE
- ------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) 0.75%*
- ------------------------------------------------------------------------
Annual Fund Operating Expenses
(expenses that are deducted from fund assets)
- ------------------------------------------------------------------------
Total Annual
Management Distribution Other Fund Operating
Fees (12b-1) Fees Expenses Expenses
- ------------------------------------------------------------------------
Class A .51% .25% .14% .90%
- ------------------------------------------------------------------------
* The deferred sales charge is applicable only to a plan that redeems
90% or more of its cumulative purchases within two years of its
initial purchase, and only if Putnam Mutual Funds paid a commission on
the plan's purchases.
EXAMPLE
The example translates the expenses shown in the preceding table into
dollar amounts. By doing this, you can more easily compare the cost of
investing in the fund to the cost of investing in other mutual funds.
The example makes certain assumptions. It assumes that you invest
$10,000 in the fund for the time periods shown and then redeem all your
shares at the end of those periods. It also assumes a 5% return on your
investment each year and that the fund's operating expenses remain the
same. The example is hypothetical; your actual costs and returns may be
higher or lower.
- ------------------------------------------------------------------------
1 year 3 years 5 years 10 years
- ------------------------------------------------------------------------
Class A $167 $287 $498 $1,108
- ------------------------------------------------------------------------
What are the fund's main investment strategies and related risks?
Any investment carries with it some level of risk that generally
reflects its potential for reward. We pursue the fund's goal by
investing mainly in value stocks. Value stocks may also offer the
potential for current income. We will consider, among other things, a
company's financial strength, competitive position in its industry,
projected future earnings, cash flows and dividends when deciding
whether to buy or sell investments. A description of the risks
associated with the fund's main investment strategies follows.
* Common stocks. Common stock represents an ownership interest in a
company. The value of a company's stock may fall as a result of factors
relating directly to that company, such as decisions made by its
management or lower demand for the company's products or services. A
stock's value may also fall because of factors affecting not just the
company, but also companies in the same industry or in a number of
different industries, such as increases in production costs. The value
of a company's stock may also be affected by changes in financial
markets that are relatively unrelated to the company or its industry,
such as changes in interest rates or currency exchange rates. In
addition, a company's stock generally pays dividends only after the
company invests in its own business and makes required payments to
holders of its bonds and other debt. For this reason, the value of a
company's stock will usually react more strongly than bonds and other
debt to actual or perceived changes in the company's financial condition
or prospects. Stocks of smaller companies may be more vulnerable to
adverse developments than those of larger companies.
Companies whose stock we believe is undervalued by the market may have
experienced adverse business developments or may be subject to special
risks that have caused their stocks to be out of favor. If our
assessment of a company's prospects is wrong, or if other investors do
not similarly recognize the value of the company, then the price of the
company's stock may fall or may not approach the value that we have
placed on it.
* Foreign investments. We may invest in securities of foreign issuers.
Foreign investments involve certain special risks. For example, their
values may decline in response to changes in currency exchange rates,
unfavorable political and legal developments, unreliable or untimely
information, and economic and financial instability. In addition, the
liquidity of these investments may be more limited than for U.S.
investments, which means we may at times be unable to sell them at
desirable prices. Foreign settlement procedures may also involve
additional risks. These risks are generally greater in the case of
developing (also known as emerging) markets with less developed legal
and financial systems.
Certain of these risks may also apply to U.S. investments that are
denominated in foreign currencies or that are traded in foreign markets,
or to securities of U.S. companies that have significant foreign
operations.
* Smaller companies. We may invest in smaller and midsized companies.
Smaller companies, which may have a market capitalization of less than
$1 billion, are more likely than larger companies to have limited
product lines, markets or financial resources, or to depend on a small,
inexperienced management group. Stocks of these companies often trade
less frequently and in limited volume, and their prices may fluctuate
more than stocks of larger companies. Stocks of smaller and midsized
companies may therefore be more vulnerable to adverse developments than
those of larger companies.
* Other investments. In addition to the main investment strategies
described above, we may make other investments, such as investments in
preferred stocks, convertible securities, debt instruments and
derivatives, which may be subject to other risks, as described in the
fund's statement of additional information (SAI).
* Alternative strategies. At times we may judge that market conditions
make pursuing the fund's usual investment strategies inconsistent with
the best interests of its shareholders. We then may temporarily use
alternative strategies that are mainly designed to limit losses.
However, we may choose not to use these strategies for a variety of
reasons, even in very volatile market conditions. These strategies may
cause the fund to miss out on investment opportunities, and may prevent
the fund from achieving its goal.
* Changes in policies. The fund's Trustees may change the fund's goal,
investment strategies and other policies without shareholder approval,
except as otherwise indicated.
Who manages the fund?
The fund's Trustees oversee the general conduct of the fund's business.
The Trustees have retained Putnam Management to be the fund's investment
manager, responsible for making investment decisions for the fund and
managing the fund's other affairs and business. The fund pays Putnam
Management a quarterly management fee for these services based on the
fund's average net assets. The fund paid Putnam Management a management
fee of 0.51% of average net assets for the fund's last fiscal year.
Putnam Management's address is One Post Office Square, Boston, MA 02109.
The following officer of Putnam Management has had primary
responsibility for the day-to-day management of the fund's portfolio
since the year shown below. Her experience as portfolio manager or
investment analyst over at least the last five years is also shown.
- ------------------------------------------------------------------------
Manager Since Experience
- ------------------------------------------------------------------------
Deborah Kuenstner 2000 March 1997 - Present Putnam Management
Managing Director Prior to March 1997 Senior Portfolio
Manager at Dupont
Pension Fund Investment
- ------------------------------------------------------------------------
How does the fund price its shares?
The price of the fund's shares is based on its net asset value (NAV).
The NAV per share of each class equals the total value of its assets,
less its liabilities, divided by the number of its outstanding shares.
Shares are only valued as of the close of regular trading on the New
York Stock Exchange each day the exchange is open.
The fund values its investments for which market quotations are readily
available at market value. It values short-term investments that will
mature within 60 days at amortized cost, which approximates market
value. It values all other investments and assets at their fair value.
The fund translates prices for its investments quoted in foreign
currencies into U.S. dollars at current exchange rates. As a result,
changes in the value of those currencies in relation to the U.S. dollar
may affect the fund's NAV. Because foreign markets may be open at
different times than the New York Stock Exchange, the value of the
fund's shares may change on days when shareholders are not able to buy
or sell them. If events materially affecting the values of the fund's
foreign investments occur between the close of foreign markets and the
close of regular trading on the New York Stock Exchange, these
investments will be valued at their fair value.
How do I buy fund shares?
All orders to purchase shares must be made through your employer's
retirement plan. For more information about how to purchase shares of
the fund through your employer's plan or limitations on the amount that
may be purchased, please consult your employer.
Putnam Mutual Funds Corp. (Putnam Mutual Funds) generally must receive
your plan's completed buy order before the close of regular trading on
the New York Stock Exchange for shares to be bought at that day's
offering price.
To eliminate the need for safekeeping, the fund will not issue
certificates for shares.
The fund may periodically close to new purchases of shares or refuse any
order to buy shares if Putnam Management determines that doing so would
be in the best interests of the fund and its shareholders.
* Distribution (12b-1) plan. The fund has adopted a distribution plan to
pay for the marketing of class A shares and for services provided to
shareholders. The plan provides for payments at an annual rate (based on
average net assets) of up to 0.35%. The Trustees currently limit
payments on class A shares to 0.25% of average net assets. Because the
fees are paid out of the fund's assets on an ongoing basis, they will
increase the cost of your investment.
Eligible retirement plans. An employer-sponsored retirement plan is
eligible to purchase class A shares without an initial sales charge
through this prospectus if it invests at least $1 million in class A
shares. A deferred sales charge of up to 0.75% will apply if the plan
redeems 90% or more of its cumulative purchases within two years of the
plan's initial purchase of class A shares, and only if Putnam Mutual
Funds paid a commission on the plan's purchase. Employer-sponsored plans
may make additional investments of any amount at any time.
How do I sell fund shares?
Subject to any restrictions imposed by your employer's plan, you can
sell your shares through the plan back to the fund any day the New York
Stock Exchange is open. For more information about how to sell shares of
the fund through your employer's plan, including any charges that the
plan may impose, please consult your employer.
Your plan administrator must send a signed letter of instruction to
Putnam Investor Services. The price you will receive is the next NAV per
share calculated after the fund receives the instruction in proper form.
In order to receive that day's NAV, Putnam Investor Services must
receive the instruction before the close of regular trading on the New
York Stock Exchange.
The fund generally sends payment for your shares the business day after
your request is received. Under unusual circumstances, the fund may
suspend redemptions, or postpone payment for more than seven days, as
permitted by federal securities law.
How do I exchange fund shares?
Subject to any restrictions your plan imposes, you can exchange your
fund shares for shares of other Putnam funds offered through your
employer's plan without a sales charge. Contact your plan administrator
or Putnam Investor Services for more information.
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 otherwise to promote the best
interests of the fund, the fund reserves the right to revise or
terminate the exchange privilege, limit the amount or number of
exchanges or reject any exchange. The fund into which you would like to
exchange may also reject your exchange. These actions may apply to all
shareholders or only to those shareholders whose exchanges Putnam
Management determines are likely to have a negative effect on the fund
or other Putnam funds.
Fund distributions and taxes
The fund normally distributes any net investment income quarterly and
any net realized capital gains annually.
The terms of your employer's plan will govern how your employer's plan
may receive distributions from the fund. Generally, periodic
distributions from the fund to your employer's plan are reinvested in
additional fund shares, although your employer's plan may permit you to
receive fund distributions from net investment income in cash while
reinvesting capital gains distributions in additional shares or to
receive all fund distributions in cash. If another option is not
selected, all distributions will be reinvested in additional fund
shares.
Generally, for federal income tax purposes, fund distributions are
taxable as ordinary income, except that any distributions of long-term
capital gains will be taxed as such regardless of how long you have held
your shares. However, distributions by the fund to retirement plans that
qualify for tax-exempt treatment under federal income tax laws will not
be taxable. Special tax rules apply to investments through such plans.
You should consult your tax advisor to determine the suitability of the
fund as an investment through such a plan and the tax treatment of
distributions (including distributions of amounts attributable to an
investment in the fund) from such a plan. You should consult your tax
advisor for more information on your own tax situation, including
possible foreign, state and local taxes.
The fund's investments in foreign securities may be subject to foreign
withholding taxes. In that case, the fund's return on those investments
would be decreased.
Financial highlights
The financial highlights table is intended to help you understand the
fund's recent financial performance. Certain information reflects
financial results for a single fund share. The total returns represent
the rate that an investor would have earned or lost on an investment in
the fund, assuming reinvestment of all dividends and distributions. This
information for the year ended November 30, 1999 has been derived from
the fund's financial statements, which have been audited by KPMG LLP.
Its report and the fund's financial statements are included in the
fund's annual report to shareholders, which is available upon request.
The information for all periods prior to the year ended November 30,
1999 has been derived from the fund's financial statements which have
been audited by the fund's previous independent accountants.
<TABLE>
<CAPTION>
CLASS A
(For a share outstanding throughout the period)
- --------------------------------------------------------------------------------------------------------------------------
For the period
Jan. 5, 1995+
Year ended November 30 to Nov. 30
- --------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value beginning of period $14.82 $14.87 $13.11 $11.01 $8.53
- --------------------------------------------------------------------------------------------------------------------------
Investment operations
- --------------------------------------------------------------------------------------------------------------------------
Net investment income .17 (c) .15 (c) .19 (c) .23 .15
- --------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments .30 1.32 2.52 2.41 2.45
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations .47 1.47 2.71 2.64 2.60
- --------------------------------------------------------------------------------------------------------------------------
Less distributions:
- --------------------------------------------------------------------------------------------------------------------------
From net investment income (.17) (.14) (.20) (.21) (.12)
- --------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments (1.17) (1.38) (.75) (.33) --
- --------------------------------------------------------------------------------------------------------------------------
Total distributions (1.34) (1.52) (.95) (.54) (.12)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value end of period $13.95 $14.82 $14.87 $13.11 $11.01
- --------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- --------------------------------------------------------------------------------------------------------------------------
Total return at net asset value (%)(a) 3.55 10.97 22.29 24.95 30.62*
- --------------------------------------------------------------------------------------------------------------------------
Net assets end of period (in thousands) $1,285,330 $1,241,384 $1,051,276 $637,204 $250,328
- --------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(b) .90 .96 1.00 1.09 1.35*
- --------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.19 1.04 1.40 1.92 2.03*
- --------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 80.27 81.62 74.51 83.97 64.18*
- --------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets includes amounts paid through expense offset arrangements and brokerage
service arrangements
(c) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding
during the period.
</TABLE>
For more information
about Putnam Classic Equity Fund
The fund's statement of additional information (SAI) and annual and
semi-annual reports to shareholders include additional information about
the fund. The SAI, and the independent accountants' reports and
financial statements included in the fund's two most recent annual
reports to its shareholders, are incorporated by reference into this
prospectus, which means they are part of this prospectus for legal
purposes. The fund's annual report discusses the market conditions and
investment strategies that significantly affected the fund's performance
during its last fiscal year. You may get free copies of these materials,
request other information about the fund and other Putnam funds, or make
shareholder inquiries, by calling Putnam toll-free at 1-800-752-9894.
You may review and copy information about the fund, including its SAI,
at the Securities and Exchange Commission's public reference room in
Washington, D.C. You may call the Commission at 1-202-942-8090 for
information about the operation of the public reference room. You may
also access reports and other information about the fund on the EDGAR
Database on the Commission's Internet site at http://www.sec.gov. You
may get copies of this information, with payment of a duplication fee,
by electronic request at the following E-mail address:
[email protected], or by writing the Commission's Public Reference
Section, Washington, D.C. 20549-0102. You may need to refer to the
fund's file number.
PUTNAM INVESTMENTS
Putnam Defined Contribution Plans
One Post Office Square
Boston, Massachusetts 02109
1-800-752-9894
Address correspondence to
Putnam Investor Services
P.O. Box 989
Boston, Massachusetts 02103
www.putnaminv.com
File No. 811 - 7223 xxxxx x/xx
Prospectus
MARCH 30, 2000
AS REVISED MAY 15, 2000
Putnam Classic Equity Fund
Class Y shares
Investment Category: Growth and Income
This prospectus explains what you should know about this mutual fund
before you invest. Please read it carefully.
Putnam Investment Management, Inc. (Putnam Management), which has
managed mutual funds since 1937, manages the fund.
These securities have not been approved or disapproved by the Securities
and Exchange Commission nor has the Commission passed upon the accuracy
or adequacy of this prospectus. Any statement to the contrary is a
crime.
CONTENTS
[ ] Fund summary
[ ] Goal
[ ] Main investment strategies
[ ] Main risks
[ ] Performance information
[ ] Fees and expenses
[ ] What are the fund's main investment strategies and related risks?
[ ] Who manages the fund?
[ ] How does the fund price its shares?
[ ] How do I buy fund shares?
[ ] How do I sell fund shares?
[ ] How do I exchange fund shares?
[ ] Fund distributions and taxes
[ ] Financial highlights
Putnam Defined Contribution Plans
[SCALE LOGO OMITTED]
Fund summary 4
GOAL
The fund seeks capital growth. Current income is a secondary goal.
MAIN INVESTMENT STRATEGIES - VALUE STOCKS
We invest mainly in common stocks of U.S. companies, with a focus on
value stocks that may also offer the potential for current income. Value
stocks are those we believe are currently undervalued by the market. We
look for companies undergoing positive change. If we are correct and
other investors recognize the value of the company, the price of the
stock may rise. We invest mainly in midsized and large companies.
MAIN RISKS
The main risks that could adversely affect the value of the fund's
shares and the total return on your investment include:
* The risk that the stock price of one or more of the companies in the
fund's portfolio will fall, or will fail to rise. Many factors can
adversely affect a stock's performance, including both general financial
market conditions and factors related to a specific company or industry.
This risk is generally greater for small and midsized companies, which
tend to be more vulnerable to adverse developments.
* The risk that movements in financial markets will adversely affect the
price of the fund's investments, regardless of how well the companies in
which we invest perform. The market as a whole may not favor the types
of investments we make.
You can lose money by investing in the fund. The fund may not
achieve its goals, and is not intended as a complete investment program.
An investment in the fund is not a deposit in a bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
PERFORMANCE INFORMATION
The following information provides some indication of the fund's risks.
The chart shows year-to-year changes in the performance of the fund's
class Y shares. The table following the chart compares the fund's
performance to that of a broad measure of market performance. Of course,
the fund's past performance is not an indication of future performance.
[GRAPHIC OMITTED: CALENDAR YEAR TOTAL RETURN]
CALENDAR YEAR TOTAL RETURN
1999 -0.60%
1998 13.19%
1997 23.10%
1996 23.13%
During the periods shown in the bar chart, the highest return for a
quarter was 17.09% (quarter ending 12/31/98) and the lowest return for a
quarter was -11.95% (quarter ending 09/30/99).
Performance of class Y shares in the bar chart and table following the
chart, for periods prior to their inception on 10/1/98, is derived from
the historical performance of class A shares (not offered by this
prospectus). Performance of class Y shares prior to their inception does
not reflect the initial sales charge currently applicable to class A
shares or differences in operating expenses which, for class Y shares,
are lower than the operating expenses applicable to class A shares.
Average Annual Total Returns (for periods ending 12/31/99).
- ------------------------------------------------------------------------
Since
Past inception
1 year (1/05/95)
- ------------------------------------------------------------------------
Class Y -0.60% 17.91%
S&P 500 Index 21.04% 28.58%
- ------------------------------------------------------------------------
The fund's performance is compared to the S&P 500 Index, an unmanaged
index of common stocks frequently used as a general measure of U.S.
stock market performance.
FEES AND EXPENSES
This table summarizes the fees and expenses you may pay if you invest in
class Y shares of the fund. Expenses are based on the fund's last fiscal
year.
Annual Fund Operating Expenses
(expenses that are deducted from fund assets)
- ------------------------------------------------------------------------
Total Annual
Management Other Fund Operating
Fees Expenses Expenses
- ------------------------------------------------------------------------
.51% .14% .65%
- ------------------------------------------------------------------------
EXAMPLE
The example translates the expenses shown in the preceding table into
dollar amounts. By doing this, you can more easily compare the cost of
investing in the fund to the cost of investing in other mutual funds.
The example makes certain assumptions. It assumes that you invest
$10,000 in the fund for the time periods shown and then redeem all your
shares at the end of those periods. It also assumes a 5% return on your
investment each year and that the fund's operating expenses remain the
same. The example is hypothetical; your actual costs and returns may be
higher or lower.
- ------------------------------------------------------------------------
1 year 3 years 5 years 10 years
- ------------------------------------------------------------------------
Class Y $66 $208 $362 $810
- ------------------------------------------------------------------------
What are the fund's main investment strategies and related risks?
Any investment carries with it some level of risk that generally
reflects its potential for reward. We pursue the fund's goal by
investing mainly in value stocks. Value stocks may also offer the
potential for current income. We will consider, among other things, a
company's financial strength, competitive position in its industry,
projected future earnings, cash flows and dividends when deciding
whether to buy or sell investments. A description of the risks
associated with the fund's main investment strategies follows.
* Common stocks. Common stock represents an ownership interest in a
company. The value of a company's stock may fall as a result of factors
relating directly to that company, such as decisions made by its
management or lower demand for the company's products or services. A
stock's value may also fall because of factors affecting not just the
company, but also companies in the same industry or in a number of
different industries, such as increases in production costs. The value
of a company's stock may also be affected by changes in financial
markets that are relatively unrelated to the company or its industry,
such as changes in interest rates or currency exchange rates. In
addition, a company's stock generally pays dividends only after the
company invests in its own business and makes required payments to
holders of its bonds and other debt. For this reason, the value of a
company's stock will usually react more strongly than bonds and other
debt to actual or perceived changes in the company's financial condition
or prospects. Stocks of smaller companies may be more vulnerable to
adverse developments than those of larger companies.
Companies whose stock we believe is undervalued by the market may have
experienced adverse business developments or may be subject to special
risks that have caused their stocks to be out of favor. If our
assessment of a company's prospects is wrong, or if other investors do
not similarly recognize the value of the company, then the price of the
company's stock may fall or may not approach the value that we have
placed on it.
* Foreign investments. We may invest in securities of foreign issuers.
Foreign investments involve certain special risks. For example, their
values may decline in response to changes in currency exchange rates,
unfavorable political and legal developments, unreliable or untimely
information, and economic and financial instability. In addition, the
liquidity of these investments may be more limited than for U.S.
investments, which means we may at times be unable to sell them at
desirable prices. Foreign settlement procedures may also involve
additional risks. These risks are generally greater in the case of
developing (also known as emerging) markets with less developed legal
and financial systems.
Certain of these risks may also apply to U.S. investments that are
denominated in foreign currencies or that are traded in foreign markets,
or to securities of U.S. companies that have significant foreign
operations.
* Smaller companies. We may invest in smaller and midsized companies.
Smaller companies, which may have a market capitalization of less than
$1 billion, are more likely than larger companies to have limited
product lines, markets or financial resources, or to depend on a small,
inexperienced management group. Stocks of these companies often trade
less frequently and in limited volume, and their prices may fluctuate
more than stocks of larger companies. Stocks of smaller and midsized
companies may therefore be more vulnerable to adverse developments than
those of larger companies.
* Other investments. In addition to the main investment strategies
described above, we may make other investments, such as investments in
preferred stocks, convertible securities, debt instruments and
derivatives, which may be subject to other risks, as described in the
fund's statement of additional information (SAI).
* Alternative strategies. At times we may judge that market conditions
make pursuing the fund's usual investment strategies inconsistent with
the best interests of its shareholders. We then may temporarily use
alternative strategies that are mainly designed to limit losses.
However, we may choose not to use these strategies for a variety of
reasons, even in very volatile market conditions. These strategies may
cause the fund to miss out on investment opportunities, and may prevent
the fund from achieving its goal.
* Changes in policies. The fund's Trustees may change the fund's goal,
investment strategies and other policies without shareholder approval,
except as otherwise indicated.
Who manages the fund?
The fund's Trustees oversee the general conduct of the fund's business.
The Trustees have retained Putnam Management to be the fund's investment
manager, responsible for making investment decisions for the fund and
managing the fund's other affairs and business. The fund pays Putnam
Management a quarterly management fee for these services based on the
fund's average net assets. The fund paid Putnam Management a management
fee of 0.51% of average net assets for the fund's last fiscal year.
Putnam Management's address is One Post Office Square, Boston, MA 02109.
The following officer of Putnam Management has had primary
responsibility for the day-to-day management of the fund's portfolio
since the year shown below. Her experience as portfolio manager or
investment analyst over at least the last five years is also shown.
- ------------------------------------------------------------------------
Manager Since Experience
- ------------------------------------------------------------------------
Deborah Kuenstner 2000 March 1997 - Present Putnam Management
Managing Director Prior to March 1997 Senior Portfolio
Manager at Dupont
Pension Fund
Investment
- ------------------------------------------------------------------------
How does the fund price its shares?
The price of the fund's shares is based on its net asset value (NAV).
The NAV per share of each class equals the total value of its assets,
less its liabilities, divided by the number of its outstanding shares.
Shares are only valued as of the close of regular trading on the New
York Stock Exchange each day the exchange is open.
The fund values its investments for which market quotations are readily
available at market value. It values short-term investments that will
mature within 60 days at amortized cost, which approximates market
value. It values all other investments and assets at their fair value.
The fund translates prices for its investments quoted in foreign
currencies into U.S. dollars at current exchange rates. As a result,
changes in the value of those currencies in relation to the U.S. dollar
may affect the fund's NAV. Because foreign markets may be open at
different times than the New York Stock Exchange, the value of the
fund's shares may change on days when shareholders are not able to buy
or sell them. If events materially affecting the values of the fund's
foreign investments occur between the close of foreign markets and the
close of regular trading on the New York Stock Exchange, these
investments will be valued at their fair value.
How do I buy fund shares?
All orders to purchase shares must be made through your employer's
retirement plan. For more information about how to purchase shares of
the fund through your employer's plan or limitations on the amount that
may be purchased, please consult your employer.
Putnam Mutual Funds Corp. (Putnam Mutual Funds) generally must receive
your plan's completed buy order before the close of regular trading on
the New York Stock Exchange for shares to be bought at that day's
offering price.
To eliminate the need for safekeeping, the fund will not issue
certificates for shares.
The fund may periodically close to new purchases of shares or refuse any
order to buy shares if Putnam Management determines that doing so would
be in the best interests of the fund and its shareholders.
Eligible purchasers. A defined contribution plan (including a corporate
IRA) is eligible to purchase class Y shares if
* the plan, its sponsor and other employee benefit plans of the sponsor
invest at least $150 million in Putnam funds and other investments
managed by Putnam Management or its affiliates, or
* the plan's sponsor confirms a good faith expectation that investments
in Putnam-managed assets by the sponsor and its employee benefit plans
will attain $150 million (using the higher of purchase price or current
market value) within one year of initial purchase, and agrees that class
Y shares may be redeemed and class A shares purchased if that level is
not attained.
How do I sell fund shares?
Subject to any restrictions imposed by your employer's plan, you can
sell your shares through the plan back to the fund any day the New York
Stock Exchange is open. For more information about how to sell shares of
the fund through your employer's plan, including any charges that the
plan may impose, please consult your employer.
Your plan administrator must send a signed letter of instruction to
Putnam Investor Services. The price you will receive is the next NAV per
share calculated after the fund receives the instruction in proper form.
In order to receive that day's NAV, Putnam Investor Services must
receive the instruction before the close of regular trading on the New
York Stock Exchange.
The fund generally sends payment for your shares the business day after
your request is received. Under unusual circumstances, the fund may
suspend redemptions, or postpone payment for more than seven days, as
permitted by federal securities law.
How do I exchange fund shares?
Subject to any restrictions your plan imposes, you can exchange your
fund shares for shares of other Putnam funds offered through your
employer's plan without a sales charge. Contact your plan administrator
or Putnam Investor Services for more information.
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 otherwise to promote the best
interests of the fund, the fund reserves the right to revise or
terminate the exchange privilege, limit the amount or number of
exchanges or reject any exchange. The fund into which you would like to
exchange may also reject your exchange. These actions may apply to all
shareholders or only to those shareholders whose exchanges Putnam
Management determines are likely to have a negative effect on the fund
or other Putnam funds.
Fund distributions and taxes
The fund normally distributes any net investment income quarterly and
any net realized capital gains annually.
The terms of your employer's plan will govern how your employer's plan
may receive distributions from the fund. Generally, periodic
distributions from the fund to your employer's plan are reinvested in
additional fund shares, although your employer's plan may permit you to
receive fund distributions from net investment income in cash while
reinvesting capital gains distributions in additional shares or to
receive all fund distributions in cash. If another option is not
selected, all distributions will be reinvested in additional fund
shares.
Generally, for federal income tax purposes, fund distributions are
taxable as ordinary income, except that any distributions of long-term
capital gains will be taxed as such regardless of how long you have held
your shares. However, distributions by the fund to retirement plans that
qualify for tax-exempt treatment under federal income tax laws will not
be taxable. Special tax rules apply to investments through such plans.
You should consult your tax advisor to determine the suitability of the
fund as an investment through such a plan and the tax treatment of
distributions (including distributions of amounts attributable to an
investment in the fund) from such a plan. You should consult your tax
advisor for more information on your own tax situation, including
possible foreign, state and local taxes.
The fund's investments in foreign securities may be subject to foreign
withholding taxes. In that case, the fund's return on those investments
would be decreased.
Financial highlights
The financial highlights table is intended to help you understand the
fund's recent financial performance. Certain information reflects
financial results for a single fund share. The total returns represent
the rate that an investor would have earned or lost on an investment in
the fund, assuming reinvestment of all dividends and distributions. This
information for the year ended November 30, 1999 has been derived from
the fund's financial statements, which have been audited by KPMG LLP.
Its report and the fund's financial statements are included in the
fund's annual report to shareholders, which is available upon request.
The information for all periods prior to the year ended November 30,
1999 has been derived from the fund's financial statements which have
been audited by the fund's previous independent accountants.
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS Y
- --------------------------------------------------------------------------------------------------------------------------
For the period
Year ended Oct 1, 1998+
Nov. 30 to Nov. 30
- --------------------------------------------------------------------------------------------------------------------------
1999 1998
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value,
beginning of period $14.83 $12.69
- --------------------------------------------------------------------------------------------------------------------------
Investment operations
- --------------------------------------------------------------------------------------------------------------------------
Net investment income .21(c) .03(c)
- --------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments .30 2.11
- --------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .51 2.14
- --------------------------------------------------------------------------------------------------------------------------
Less distributions:
- --------------------------------------------------------------------------------------------------------------------------
From net
investment income (.21) --
- --------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.17) --
- --------------------------------------------------------------------------------------------------------------------------
Total distributions (1.38) --
- --------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $13.96 $14.83
- --------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- --------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 3.80 16.86*
- --------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $10,282 $5,949
- --------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .65 .12*
- --------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.45 1.82*
- --------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 80.27 81.62
- --------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets includes amounts paid through expense offset arrangements and brokerage
service arrangements.
(c) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding
during the period.
</TABLE>
For more information
about Putnam Classic Equity Fund
The fund's statement of additional information (SAI) and annual and
semi-annual reports to shareholders include additional information about
the fund. The SAI, and the independent accountants' reports and
financial statements included in the fund's two most recent annual
reports to its shareholders, are incorporated by reference into this
prospectus, which means they are part of this prospectus for legal
purposes. The fund's annual report discusses the market conditions and
investment strategies that significantly affected the fund's performance
during its last fiscal year. You may get free copies of these materials,
request other information about the fund, or make shareholder inquiries,
by calling Putnam toll-free at 1-800-752-9894.
You may review and copy information about the fund, including its SAI,
at the Securities and Exchange Commission's public reference room in
Washington, D.C. You may call the Commission at 1-202-942-8090 for
information about the operation of the public reference room. You may
also access reports and other information about the fund on the EDGAR
Database on the on the Commission's Internet site at http://www.sec.gov.
You may get copies of this information, with payment of a duplication
fee, by electronic request at the following E-mail address:
[email protected], or by writing the Commission's Public Reference
Section, Washington, D.C. 20549-6009. You may need to refer to the
fund's file number.
PUTNAM INVESTMENTS
Putnam Defined Contribution Plans
One Post Office Square
Boston, Massachusetts 02109
1-800-752-9894
Address correspondence to
Putnam Investor Services
P.O. Box 989
Boston, Massachusetts 02103
www.putnaminv.com
File No. 811 - 7223 xxxxx x/xx
