PUTNAM INVESTMENT FUNDS, 497, 1995-01-06

PUTNAM INVESTMENT FUNDS
497, 1995-01-06

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PROSPECTUS
JANUARY 6, 1995

PUTNAM BASIC VALUE FUND
PUTNAM INTERNATIONAL NEW OPPORTUNITIES FUND
INVESTMENT STRATEGY: GROWTH

PUTNAM BALANCED FUND
PUTNAM GLOBAL UTILITIES FUND
PUTNAM REAL ESTATE OPPORTUNITIES FUND
INVESTMENT STRATEGY: GROWTH AND INCOME

This Prospectus explains concisely what you should know before investing in
shares of Putnam Basic Value Fund, Putnam Balanced Fund, Putnam Global
Utilities Fund, Putnam Real Estate Opportunities Fund or Putnam
International New Opportunities Fund (collectively, the "Funds" and each a
"Fund"), each a portfolio of Putnam Investment Funds (the "Trust").
Please read it carefully and keep it for future reference. You can find more
detailed information in the January 6, 1995 Statement of Additional
Information, as amended from time to time. For a free copy of the Statement
or other information, call Putnam Investor Services at 1-800-225-1581. The
Statement has been filed with the Securities and Exchange Commission and is
incorporated into this Prospectus by reference.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY FINANCIAL INSTITUTION, ARE NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
AGENCY, AND INVOLVE RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.

BOSTON * LONDON * TOKYO
<PAGE>

ABOUT THE FUNDS

Expenses summary. . . . . . . . . . . . . . . . . . . . 3
Objectives. . . . . . . . . . . . . . . . . . . . . . . 6
How objectives are pursued. . . . . . . . . . . . . . . 6
How performance is shown. . . . . . . . . . . . . . . . 24
How the Funds are managed . . . . . . . . . . . . . . . 24
Organization and history. . . . . . . . . . . . . . . . 26

ABOUT YOUR INVESTMENT

How to buy shares . . . . . . . . . . . . . . . . . . . 28
Distribution Plan . . . . . . . . . . . . . . . . . . . 31
How to sell shares . . . . . . . . . . . . . . . 32
How to exchange shares . . . . . . . . . . . . . 33
How each Fund values its shares . . . . . . . . . . . . 34
How distributions are made; tax information . . . . . . 34

ABOUT PUTNAM INVESTMENTS, INC. . . . . . . . . . . . 36

APPENDIX

Securities ratings. . . . . . . . . . . . . . . . . . . 37

<PAGE>

ABOUT THE FUNDS

EXPENSES SUMMARY

Expenses are one of several factors to consider when investing in a Fund.
The following table summarizes your maximum transaction costs from
investing in a Fund and expenses which each Fund expects to incur in its
first fiscal year. The Example shows the estimated cumulative expenses
attributable to a hypothetical $1,000 investment over specified periods.
<TABLE>
<CAPTION>

BASIC
VALUE FUND & INTERNATIONAL
REAL ESTATE GLOBAL NEW
SHAREHOLDER TRANSACTION OPPORTUNITIES UTILITIES OPPORTUNITIES
EXPENSES FUND BALANCED FUND FUND FUND
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>

Maximum Sales Charge
Imposed on Purchases (as
a percentage of offering
price) 5.75% 5.75% 5.75% 5.75%

Deferred Sales Charge (as a
percentage of the lower
of original purchase
price or redemption
proceeds) NONE* NONE* NONE* NONE*

ANNUAL FUND OPERATING
EXPENSES (as a percentage
of average net assets)

Management Fees (after
expense limitation) 0% 0% 0% 0%

Other Expenses (after
expense limitation) 1.09% .79% .69% 1.24%

Total Fund Operating
Expenses (after expense
limitation) 1.09% .79% .69% 1.24%

The table is provided to help you understand the expenses of investing in a
Fund and your share of the operating expenses that each Fund expects to
incur during its first fiscal year. The estimated annual management fees
and "Other Expenses" shown in the table reflect an expense limitation
currently in effect. In the absence of the expense limitation, management
fees, "Other Expenses" and total fund operating expenses, respectively,
would be as follows: Putnam Basic Value Fund and Putnam Real Estate
Opportunities Fund, .70%, 1.49% and 2.19%; Putnam Balanced Fund, .65%,
1.49% and 2.14%; Putnam Global Utilities Fund, .80%, 1.70% and 2.50%; and
Putnam International New Opportunities Fund, 1.20%, 1.70% and 2.90%.
"Other Expenses" are based on estimated amounts for each Fund's first
fiscal year.

EXAMPLE

Your investment of $1,000 would incur the following expenses, assuming 5%
annual return and redemption at the end of each period:

1 YEAR 3 YEARS
<S> <C> <C>

PUTNAM BASIC VALUE FUND $68 $90

PUTNAM BALANCED FUND 65 81

PUTNAM REAL ESTATE OPPORTUNITIES FUND 68 90

PUTNAM GLOBAL UTILITIES FUND 64 78

PUTNAM INTERNATIONAL NEW OPPORTUNITIES FUND 69 95

The Example does not represent past or future expense levels. Actual
expenses may be greater or less than those shown. Federal regulations
require the Example to assume a 5% annual return, but actual annual return
will vary.
<PAGE>
* A deferred sales charge of up to 1.00% is assessed on
certain redemptions of shares that were purchased without
an initial sales charge as part of an investment of $1
million or more. See "How to buy shares."

</TABLE>

OBJECTIVES

PUTNAM BASIC VALUE FUND seeks long-term capital appreciation.

PUTNAM BALANCED FUND seeks capital growth and current income.

PUTNAM GLOBAL UTILITIES FUND seeks capital growth and current
income. The Fund concentrates its investments in securities issued by
companies in the utilities industries.

PUTNAM REAL ESTATE OPPORTUNITIES FUND seeks capital growth and
current income. The Fund concentrates its investments in securities issued
by companies in the real estate industries.

PUTNAM INTERNATIONAL NEW OPPORTUNITIES FUND seeks long-term
capital appreciation.

Each Fund is represented by a separate series of shares of beneficial
interest and pursues its investment objective through its separate
investment policies. For more information about the investment strategies
employed by the Funds, see "Common investment policies and techniques"
below. None of the Funds is intended to be a complete investment program,
and there is no assurance that any Fund will achieve its objective.

HOW OBJECTIVES ARE PURSUED

PUTNAM BASIC VALUE FUND

The Fund will invest primarily in common stocks which Putnam Investment
Management, Inc., the Trust's investment manager ("Putnam Management"),
believes are undervalued at the time of purchase and have the potential for
long-term capital appreciation. The Fund is unlike most equity
mutual funds in that its investments will be comprised of a relatively small
number of issuers (currently expected to be approximately 40 to 50).
Because Putnam Management evaluates securities for the Fund based on their
long-term potential for capital appreciation, the Fund's investments may
not appreciate or yield significant income over the shorter term, and as a
result the Fund's total return over certain periods may be less than that of
other equity mutual funds. Putnam Management's investment decisions may be
contrary to those of most other investors.

In selecting common stocks for the Fund, Putnam Management will consider,
among other things, an issuer's financial strength, competitive position
and projected future earnings. The Fund's investments may include widely-
traded common stocks of larger companies as well as common stocks of
smaller, less well known companies. Small to medium-sized companies may
present greater opportunities for capital appreciation, but may also
involve greater risk. They may have limited product lines, markets or
financial resources, or may depend on a limited management group. Their
securities may trade less frequently and in limited volume, and only in the
over-the-counter market or on a regional securities exchange. As a result,
these securities may fluctuate in value more than those of larger, more
established companies.

Common stocks and other equity securities are normally the Fund's main
investments. However, the Fund may purchase preferred stocks, debt
securities and convertible securities (both bonds and preferred stocks) if
Putnam Management believes they would help achieve the Fund's objective of
long-term capital appreciation. These securities may include securities
in the lower-rated categories. Securities in the lower-rated categories
are considered to be primarily speculative and may be in default. The Fund
may invest up to 35% of its assets in securities in the lower-rated
categories, and is not subject to any other limitation based on
securities ratings. The Fund may also invest in securities principally
traded in foreign markets, engage in foreign currency exchange
transactions and transactions in futures contracts and options, enter into
repurchase agreements, loan its portfolio securities and purchase
securities for future delivery. See "Common investment policies and
techniques" below. The Fund may also hold a portion of its assets in cash or
high-quality money market instruments.

PUTNAM BALANCED FUND

The Fund will invest in a combination of equity and fixed-income
securities. The portion of the Fund's assets invested in equity securities
and fixed-income securities will vary from time to time in light of the
Fund's investment objective, changes in interest rates, and economic and
other factors. However, under normal market conditions the Fund expects to
invest at least 25% of its total assets in fixed-income securities, which
for this purpose includes debt securities, preferred stocks and that
portion of the value of convertible securities attributable to the fixed-
income characteristics of those securities. The Fund may also hold a
portion of its assets in cash or high-quality money market instruments.

In selecting equity securities for the Fund's portfolio, Putnam Management
focuses on securities which it believes are attractively priced and have
good financial strength as well as above average earnings potential.
Although the Fund's equity investments will typically emphasize issuers
with market capitalizations in excess of $1 billion, the Fund may also
invest in small to medium-sized companies, which generally have a
proprietary product or profitable market niche and the potential to grow
very rapidly. Such companies may present greater opportunities for capital
appreciation, but may also involve greater risk. They may have limited
product lines, markets or financial resources, or may depend on a limited
management group. Their securities may trade less frequently and in
limited volume, and only in the over-the-counter market or on a regional
securities exchange. As a result, these securities may fluctuate in value
more than those of larger, more established companies.

In selecting fixed-income securities for the Fund's portfolio, Putnam
Management may take full advantage of the entire range of fixed-income
securities and may adjust the average maturity of the Fund's fixed-income
investments from time to time depending on its assessment of relative
yields on securities of different maturities and types and its expectations
on future changes in interest rates. The Fund's investments in fixed-
income securities may include both government and corporate obligations.
Consistent with the Fund's investment objective, the Fund may invest
without limit in fixed-income securities rated at the time of purchase at
least B by Standard & Poor's Corporation ("S&P") or Moody's Investors
Service, Inc. ("Moody's"), or unrated securities determined by Putnam
Management to be of comparable quality. Securities in the lower-rated
categories are considered to be primarily speculative and may be in
default. See "Common investment policies and techniques -- Lower-rated
fixed-income securities" below.

The Fund may also invest in securities principally traded in foreign
markets, engage in foreign currency exchange transactions and transactions
in futures contracts and options, enter into repurchase agreements, loan
its portfolio securities and purchase securities for future delivery. See
"Common investment policies and techniques" below.

PUTNAM GLOBAL UTILITIES FUND

The Fund seeks its objective by investing under normal market conditions at
least 65% of its total assets in equity securities of companies principally
engaged in the utilities industries. The Fund may at times invest up to 100%
of its assets in securities principally traded in securities markets
outside the United States, and will under normal market conditions invest
its assets in at least three different countries, one of which may be the
United States. The Fund presently expects that it will invest a significant
portion of its assets in less developed and developing nations, whose
securities markets are sometimes referred to as "emerging securities
markets." See "Common investment practices and techniques" below. In
unusual market circumstances where Putnam Management believes that foreign
investing may involve undue risks, 100% of the Fund's assets may be invested
in the United States.

Companies in the utilities industries include companies engaged in the
manufacture, production, generation, transmission, sale or distribution of
electric or gas energy or other types of energy and companies engaged in
telecommunications, including telephone, telegraph, satellite, microwave,
cable and other communications media. Putnam Management deems a particular
company to be "principally engaged" in the utilities industries if at the
time of investment Putnam Management determines that at least 50% of the
company's assets, revenues or profits are derived from one or more of those
industries. The Fund may also invest in securities of issuers in other
industries if Putnam Management believes they will help achieve the Fund's
objective.

See "Common investment policies and techniques" below. The Fund may
also hold a portion of its assets in cash or high-quality money market
instruments.

RISK FACTORS. Since the Fund's investments are concentrated in the
utilities industries, the value of its shares can be expected to change in
light of factors affecting those industries, and may fluctuate more widely
than the value of shares of a portfolio that invests in a broader range of
industries. Many utility companies, especially electric, gas and other
energy-related utility companies, have historically been subject to risks
of increases in fuel and other operating costs, changes in interest rates on
borrowings for capital improvement programs, changes in applicable laws
and regulations, changes in technology which may render existing plants,
equipment or products obsolete, the effects of energy conservation and
operating constraints, and increased costs and delays associated with
compliance with environmental regulations. In particular, regulatory
changes with respect to nuclear and conventionally-fueled power generating
facilities could increase costs or impair the ability of utility companies
to operate such facilities or obtain adequate return on invested capital.
Generally, prices charged by utilities are regulated in the United States
and in foreign countries with the intention of protecting the public while
ensuring that utility companies earn a return sufficient to allow them to
attract capital in order to grow and continue to provide appropriate
services. There can be no assurance that such pricing policies or rates of
return will continue in the future.

In recent years, regulatory changes in the United States have increasingly
allowed utility companies to provide services and products outside their
traditional geographic areas and lines of business, creating new areas of
competition within the utilities industries. This trend toward
deregulation and the emergence of new entrants have caused non-regulated
providers of utility services to become a significant part of the utilities
industries. Putnam Management believes that the emergence of competition
and deregulation will result in certain utility companies being able to
earn more than their traditional regulated rates of return, while others
may be forced to defend their core business from increased competition and
may be less profitable. Although Putnam Management seeks to take advantage
of favorable investment opportunities that may arise from these structural
changes, there can be no assurance that the Fund will benefit from any such
changes.
<PAGE>
Foreign utility companies may also be subject to regulation, which may
differ substantially from that in the United States. Foreign utility
companies may be more heavily regulated than U.S. utility companies and, as
in the United States, generally are required to seek government approval
for rate increases. In addition, many foreign utilities use fuels that
cause more pollution than those used in the United States, which may require
such utilities to invest in pollution control equipment or switch to more
expensive fuels to meet any future pollution restrictions. Foreign
regulatory systems vary from country to country and may evolve in ways
different from regulation in the United States.

Securities of foreign utility companies often have lower dividend yields
than securities of U.S. utility companies, although such securities may
have greater potential for capital appreciation. In addition, the markets
for such securities are often less liquid and more volatile than U.S.
markets. There is currently a relatively limited amount of such securities
available for investment by the Fund, and the Fund's ability to invest its
assets outside the United States may therefore be limited. The Fund's
investments in foreign issuers may include recently privatized
enterprises. The ability of foreign entities, such as the Fund, to
participate in privatization may be limited by local law, or the price or
terms on which the Fund may be able to participate may be less advantageous
than for local investors. Moreover, there can be no assurance that
governments that have embarked on privatization programs will continue to
divest their ownership of state enterprises, that proposed privatizations
will be successful or that governments will not re-nationalize enterprises
that have been privatized. Furthermore, in the case of certain of the
enterprises in which the Fund may invest, large blocks of the stock of those
enterprises may be held by a small group of stockholders, even after the
initial equity offerings by those enterprises. The sale of some portion or
all of those blocks could have an adverse effect on the price of the stock of
any such enterprise.

PUTNAM REAL ESTATE OPPORTUNITIES FUND

Under normal market conditions, the Fund will invest at least 65% of its
total assets in securities of companies principally engaged in the
real estate industries. Examples of companies in the real estate
industries include real estate investment trusts (REITs), real estate
developers, mortgage lenders and servicers, construction companies and
building material suppliers. Putnam Management deems a particular company
to be "principally engaged" in the real estate industries if at the time of
investment Putnam Management determines that at least 50% of the company's
assets, revenues or profits are derived from businesses related to real
estate.

The Fund expects to invest primarily in common stocks that have the
potential for capital appreciation, current income, or both. However, the
Fund may purchase preferred stocks, debt securities, convertible
securities (both bonds and preferred stocks) and warrants if Putnam
Management believes they would help achieve the Fund's objective. These
securities may include securities in the lower-rated categories.
Securities in the lower-rated categories are considered to be primarily
speculative and may be in default. The Fund may also invest in securities
principally traded in foreign markets, engage in foreign currency exchange
transactions and transactions in futures contracts and options, enter into
repurchase agreements, loan its portfolio securities and purchase
securities for future delivery. See "Common investment policies and
techniques" below. The Fund may also hold a portion of its assets in cash or
high-quality money market instruments.

RISK FACTORS. Since the Fund's investments are concentrated in the real
estate industries, the value of its shares can be expected to change in
light of factors affecting those industries, and may fluctuate more widely
than the value of shares of a portfolio that invests in a broader range of
industries. Factors affecting the performance of real estate ventures or
securities issued by companies engaged in businesses related to real estate
may include excess supply of real property in certain markets, changes in
zoning laws, completion of construction, changes in real estate value and
property taxes, sufficient level of occupancy, adequate rent to cover
operating expenses, and local and regional markets for competing assets.
In addition, like the performance of other commercial ventures or the
securities issued by companies in industries unrelated to real estate, the
performance of real estate ventures and securities issued by companies in
the real estate industries may be affected by changes in interest rates,
prudent management of insurance risks, adequacy of financing available in
capital markets, competent management, changes in applicable laws and
governmental regulations (including taxes), and social and economic
trends.
<PAGE>
It is currently expected that equity REITs, which own real estate directly,
will represent a substantial portion of the Fund's investments in REITs.
The Fund may also invest in mortgage REITs, which make construction,
development or long-term mortgage loans, and hybrid REITs , which
share characteristics of equity REITs and mortgage REITs. Equity
REITs will be affected by changes in the value of the underlying property
owned by the REITs, while mortgage REITs will be affected by the value of the
properties to which they have extended credit. REITs are dependent upon the
skill of each REIT's management, may not be diversified and are subject to
the risks of financing projects.

The Fund could under certain circumstances own real estate directly as a
result of a default on debt securities it owns. If the Fund has rental
income or income from the direct disposition of real property, the receipt
of such income may adversely affect its ability to retain its tax status as a
regulated investment company. See "Distribution and taxes" below. REITs
are also subject to substantial cash flow dependency, defaults by
borrowers, self-liquidation and the risk of failing to qualify for tax-free
pass-through of income under the Internal Revenue Code and/or to maintain
exemption from the Investment Company Act of 1940. By investing in REITs
indirectly through the Fund, a shareholder bears not only a proportionate
share of the expenses of the Fund, but also, indirectly, similar expenses of
the REITs.

PUTNAM INTERNATIONAL NEW OPPORTUNITIES FUND

The Fund seeks to invest in companies that have above-average growth
prospects due to the fundamental growth of their market sector. Under
normal market conditions, the Fund will invest at least 90% of its total
assets in common stocks and other equity securities principally traded in
securities markets outside the United States. The Fund will normally
diversify its investments among a number of different countries and, except
when investing for defensive purposes as described below, will invest in at
least three different countries other than the United States.

Putnam Management believes that different market sectors in different
countries will experience different rates of growth depending on the state
of economic development of each country. As a result, Putnam Management
seeks to identify those market sectors which will experience above-average
growth in three broad categories of economies: less developed economies,
developing economies that have experienced sustained growth over the
recent past, and mature economies. Within the identified growth sectors of
each type of economy, Putnam Management seeks to invest in particular
companies that offer above-average growth prospects. The sectors in which
the Fund will invest are likely to change over time and may include a variety
of industries. Subject to the Fund's investment restrictions, the Fund may
invest up to one-half of its assets in any one particular sector. The Fund's
emphasis on particular sectors may make the value of the Fund's shares more
susceptible to any single economic, political or regulatory development
than the shares of an investment company which is more widely diversified.
As a result, the value of the Fund's shares may fluctuate more than the value
of the shares of such an investment company. The Fund may also invest a
portion of its assets in market sectors other than those that Putnam
Management believes will experience above-average growth if Putnam
Management believes that such investments are consistent with the Fund's
investment objective of long-term capital appreciation.

The securities markets of less developed economies and of many developing
economies are sometimes referred to as "emerging securities markets."
Although the amount of the Fund's assets invested in emerging securities
markets will vary over time, Putnam Management currently expects that a
substantial portion of the Fund's assets will be invested in emerging
securities markets. These markets are generally characterized by limited
trading volume and greater volatility and, as a result, the Fund may be
subject to greater risks to the extent of its investments in such markets.
For a discussion of these risks, see "Common investment policies and
techniques" below

Companies in the Fund's portfolio may include small, rapidly growing
companies. Small to medium-sized companies may present greater
opportunities for capital appreciation, but may also involve greater risk.
They may have limited product lines, markets or financial resources, or may
depend on a limited management group. Their securities may trade less
frequently and in limited volume, and only in the over-the-counter market
or on a regional securities exchange. As a result, these securities may
fluctuate in value more than those of larger, more established companies.
Because Putnam Management evaluates securities for the Fund based on their
long-term potential for capital appreciation, the Fund's investments may
not appreciate or yield significant income over the shorter term, and as a
result, the Fund's total return over certain periods may be less than that
of other equity mutual funds.
<PAGE>
The Fund invests primarily in common stocks and other equity securities,
but may also invest in convertible bonds, convertible preferred stocks,
preferred stocks and debt securities if Putnam Management believes they
would help achieve the Fund's objective of capital appreciation. The Fund
may invest up to 35% of its assets in securities in the lower-rated
categories, and is not subject to any other limitation based on
securities ratings. Securities in the lower-rated categories are
considered to be predominantly speculative and may be in default. The Fund
may also engage in foreign currency exchange transactions and transactions
in futures contracts and options, enter into repurchase agreements, loan
its portfolio securities and purchase securities for future delivery. See
"Common investment policies and techniques" below. The Fund may also hold a
portion of its assets in cash or high-quality money market instruments.

COMMON INVESTMENT POLICIES AND TECHNIQUES

FOREIGN INVESTMENTS. Each of Putnam Basic Value Fund, Putnam Balanced Fund
and Putnam Real Estate Opportunities Fund may invest up to 20% of its assets
in securities principally traded in foreign markets. Each such Fund may
also purchase Eurodollar certificates of deposit without regard to the 20%
limit. Each of Putnam Global Utilities Fund and Putnam International New
Opportunities Fund may invest without limit in securities principally
traded in foreign markets.

Since foreign securities are normally denominated and traded in foreign
currencies, the value of a Fund's assets may be affected favorably or
unfavorably by currency exchange rates and exchange control regulations.
There may be less information publicly available about a foreign company
than about a U.S. company, and foreign companies are not generally subject
to accounting, auditing and financial reporting standards and practices
comparable to those in the United States. The securities of some foreign
companies are less liquid and at times more volatile than securities of
comparable U.S. companies. Foreign brokerage commissions and other fees
are also generally higher than in the United States. Foreign settlement
procedures and trade regulations may involve certain risks (such as delay
in payment or delivery of securities or in the recovery of a Fund's assets
held abroad) and expenses not present in the settlement of domestic
investments.
<PAGE>
In addition, there may be a possibility of nationalization or expropriation
of assets, imposition of currency exchange controls, confiscatory
taxation, political or financial instability and diplomatic developments
which could affect the value of a Fund's investments in certain foreign
countries. Legal remedies available to investors in certain foreign
countries may be more limited than those available with respect to
investments in the United States or in other foreign countries. The laws of
some foreign countries may limit a Fund's ability to invest in securities of
certain issuers located in those foreign countries. Special tax
considerations apply to foreign securities.

The risks described above, including the risks of nationalization or
expropriation of assets, are typically increased to the extent that a Fund
invests in issuers located in less developed and developing nations, whose
securities markets are sometimes referred to as "emerging securities
markets." Investments in securities located in such countries are
speculative and subject to certain special risks. Political and economic
structures in many of these countries may be in their infancy and developing
rapidly, and such countries may lack the social, political and economic
stability characteristic of more developed countries. Certain of these
countries have in the past failed to recognize private property rights and
have at times nationalized or expropriated the assets of private companies.
In addition, unanticipated political or social developments may affect the
values of the Fund's investments in these countries and the availability to
the Fund of additional investments in these countries. The small size,
limited trading volume and relative inexperience of the securities markets
in these countries may make the Fund's investments in such countries
illiquid and more volatile than investments in more developed countries,
and the Fund may be required to establish special custodial or other
arrangements before making investments in these countries. There may be
little financial or accounting information available with respect to
issuers located in these countries, and it may be difficult as a result to
assess the value or prospects of an investment in such issuers.

A more detailed explanation of foreign investments, and the risks and
special tax considerations associated with them, is included in the
Statement of Additional Information.
<PAGE>
FOREIGN CURRENCY EXCHANGE TRANSACTIONS. Putnam Management may engage in
foreign currency exchange transactions to protect against uncertainty in
the level of future exchange rates. Putnam Management may engage in foreign
currency exchange transactions in connection with the purchase and sale of
portfolio securities ("transaction hedging") and to protect the value of
specific portfolio positions ("position hedging").

Each Fund may engage in transaction hedging to protect against a change in
the foreign currency exchange rate between the date on which the Fund
contracts to purchase or sell the security and the settlement date, or to
"lock in" the U.S. dollar equivalent of a dividend or interest payment in a
foreign currency. Each Fund may purchase or sell a foreign currency on a
spot (or cash) basis at the prevailing spot rate as part of its transaction
hedging strategies. If conditions warrant, each Fund may also enter into
contracts to purchase or sell foreign currencies at a future date ("forward
contracts") and may purchase and sell foreign currency futures contracts as
part of its transaction hedging strategies. A foreign currency forward
contract is a negotiated agreement to exchange currency at a future time at
a rate or rates that may be higher or lower than the spot rate. Foreign
currency futures contracts are standardized exchange-traded contracts and
have margin requirements. Each Fund may also purchase exchange-listed and
over-the-counter call and put options on foreign currency futures
contracts and on foreign currencies.

Each Fund may engage in "position hedging" to protect against the decline in
the value relative to the U.S. dollar of the currencies in which its
portfolio securities are denominated or quoted (or an increase in the value
of the foreign currencies for securities which the Fund intends to buy, when
the Fund holds cash reserves or short-term investments). For position
hedging purposes, each Fund may purchase or sell foreign currency futures
contracts, foreign currency forward contracts, and put and call options on
foreign currency futures contracts and on foreign currencies on exchanges
or over-the-counter markets. In connection with position hedging, each
Fund may also purchase or sell foreign currencies on a spot basis.

Each Fund's currency hedging transactions may call for the delivery of one
foreign currency in exchange for another foreign currency and may at times
involve currencies other than those in which its portfolio securities are
then denominated. Putnam Management will engage in such "cross hedging"
activities when it believes that such transactions provide significant
hedging opportunities for a Fund. Cross hedging transactions by a Fund
involve the risk of imperfect correlation between changes in the values of
the currencies to which such transactions relate and changes in the value of
the currency or other asset or liability which is the subject of the hedge.

Hedging transactions involve costs and may result in losses. There is no
assurance that appropriate foreign currency exchange transactions will be
available with respect to all currencies in which a Fund's investments may
be denominated. A Fund's ability to engage in hedging transactions may be
limited by tax considerations. A Fund's hedging transactions may affect
the character or amount of its distributions.

LOWER-RATED FIXED-INCOME SECURITIES. Lower-rated fixed-income securities
are generally regarded as those rated below Baa by Moody's or BBB by S&P or
securities of comparable quality as determined by Putnam Management.
These securities are often referred to as "junk bonds." Securities
rated Baa or BBB, while considered investment-grade, are more vulnerable to
adverse economic conditions than securities in the higher rated categories
and have speculative elements. Although the values of fixed-income
securities generally fluctuate with movements in interest rates, the
values of lower-rated fixed-income securities generally fluctuate
more than those of higher-rated fixed-income securities. In addition, the
lower rating reflects a greater possibility that the financial condition of
the issuer, or adverse changes in general economic conditions, or both, may
impair the ability of the issuer to make payments of interest and repayments
of principal. The rating services' descriptions of fixed-income
securities are included in the Appendix to this Prospectus. A Fund will not
necessarily dispose of a security when its rating is reduced below its
rating at the time of purchase, although Putnam Management will monitor the
investment to determine whether continued investment in the security will
assist in meeting the Fund's investment objective.

At times, some or all of each Fund's fixed-income investments may include
securities as to which that Fund, by itself or together with other funds and
accounts managed by Putnam Management and its affiliates, holds a major
portion or all of such securities. Under adverse market or economic
conditions or in the event of adverse changes in the financial condition of
the issuer, a Fund could find it more difficult to sell such securities when
Putnam Management believes it advisable to do so or may be able to sell such
securities only at prices lower than if such securities were more widely
held. Under such circumstances, it may also be more difficult to determine
the fair value of such securities for purposes of computing a Fund's net
asset value. In order to enforce its rights in the event of a default under
such securities, the Fund may be required to take possession of and manage
assets securing the issuer's obligations on such securities, which may
increase the Fund's operating expenses and adversely affect the Fund's net
asset value.

Putnam Management seeks to minimize the risks of investing in lower-rated
securities through investment analysis and attention to current
developments in interest rates and economic conditions. The lower ratings
of certain fixed-income securities held by a Fund reflect a greater
possibility that adverse changes in the financial condition of their
issuers, or in general economic conditions, or both, or an unanticipated
rise in interest rates, may impair the ability of their issuers to make
payments of interest and principal. In addition, under such circumstances
the values of such securities may be more volatile, and the markets for such
securities may be less liquid, than those for higher-rated securities, and
the Fund may as a result find it more difficult to determine the fair value
of such securities. When a Fund invests in fixed-income securities in the
lower rating categories, the achievement of its goals is more dependent on
Putnam Management's investment analysis than would be the case if the Fund
were investing in fixed-income securities in the higher rating categories.

Each Fund may at times invest in so-called "zero-coupon" bonds and
"payment-in-kind" bonds. Zero-coupon bonds are issued at a significant
discount from their principal amount and pay interest only at maturity
rather than at intervals during the life of the security. Payment-in-kind
bonds allow the issuer, at its option, to make current interest payments on
the bonds either in cash or in additional bonds. The value of zero-coupon
bonds is subject to greater fluctuation in response to changes in market
interest rates than bonds which pay interest currently. Both zero-coupon
bonds and payment-in-kind bonds allow an issuer to avoid the need to
generate cash to meet current interest payments. Accordingly, such bonds
may involve greater credit risks than bonds paying interest currently.
Even though such bonds do not pay current interest in cash, a Fund is
nonetheless required to accrue interest income on such investments and to
distribute such amounts at lest annually to shareholders. Thus, a Fund
could be required at times to liquidate other investments in order to
satisfy its distribution requirements.
<PAGE>
Certain securities held by a Fund may permit the issuer at its option to
"call", or redeem, its securities. If an issuer were to redeem securities
held by a Fund during a time of declining interest rates, the Fund might not
be able to reinvest the proceeds in securities providing the same
investment return as the securities redeemed.

For additional information concerning the risks associated with investment
by a Fund in securities in the lower rating categories, see the Statement of
Additional Information.

PORTFOLIO TURNOVER. The length of time a Fund has held a particular
security is not generally a consideration in investment decisions. A
change in the securities held by a Fund is known as "portfolio turnover." As
a result of a Fund's investment policies, under certain market conditions a
Fund's portfolio turnover rate may be higher than that of other mutual
funds. Portfolio turnover generally involves some expense to a Fund,
including brokerage commissions or dealer mark-ups and other transaction
costs on the sale of securities and reinvestment in other securities. Such
transactions may result in realization of taxable capital gains. While it
is impossible to predict each Fund's portfolio turnover rate, based on its
experience, Putnam Management believes that such rate will not exceed 200%
for each Fund.

DEFENSIVE STRATEGIES. At times Putnam Management may judge that conditions
in the securities markets make pursuing the basic investment strategy of
one or more of the Funds inconsistent with the best interests of such Fund's
shareholders. At such times Putnam Management may temporarily use
alternative strategies, primarily designed to reduce fluctuations in the
value of such Fund's assets. In implementing these "defensive" strategies,
a Fund may invest without limit in cash or money market instruments,
preferred stocks, debt securities issued by the U.S. government or its
agencies or instrumentalities, or in any other securities Putnam
Management considers consistent with such defensive strategies. In
addition, when pursuing such defensive strategies, Putnam Global Utilities
Fund and Putnam International New Opportunities Fund may invest without
limit in securities primarily traded in U.S. markets. It is impossible to
predict when, or for how long, any of the Funds will use alternative
strategies.
<PAGE>
DIVERSIFICATION. Each Fund is a "diversified" investment company under the
Investment Company Act of 1940. This means that with respect to 75% of its
total assets each Fund may not invest more than 5% of its total assets in the
securities of any one issuer (except U.S. government securities). The
remaining 25% of each Fund's total assets is not subject to this
restriction. To the extent a Fund invests a significant portion of its
assets in the securities of a particular issuer, such Fund will be subject
to an increased risk of loss if the market value of such issuer's securities
declines.

FINANCIAL FUTURES AND RELATED OPTIONS. Each Fund may buy and sell financial
futures contracts on stock indexes and foreign currencies, and each Fund
(other than Putnam Basic Value Fund and Putnam International New
Opportunities Fund) may buy and sell financial futures contracts on U.S.
Government securities and foreign fixed-income securities. A futures
contract is a contract to buy or sell units of a particular stock index (an
"Index Future"), or a certain amount of a U.S. Government security, foreign
fixed-income security or foreign currency, at an agreed price on a
specified future date. Depending on the change in value of the index,
security or currency between the time when a Fund enters into and terminates
a futures contract, such Fund realizes a gain or loss. Each Fund may
purchase and sell futures contracts for hedging purposes and to adjust its
exposure to the relevant stock or bond markets. For example, when Putnam
Management wants to increase Putnam Balanced Fund's exposure to equity
securities, it may do so by taking long positions in futures contracts on
equity indices such as futures contracts on the Standard & Poor's 500 Stock
Index. Similarly, when Putnam Management wants to increase the Fund's
exposure to fixed-income securities, it may do so by taking long positions
in futures contracts relating to fixed-income securities such as futures
contracts on U.S. Treasury bonds or notes. Each Fund may buy and sell call
and put options on futures contracts or on stock indices in addition to or as
an alternative to purchasing or selling futures contracts or, to the extent
permitted by applicable law, to earn additional income.

Futures and options transactions involve costs and may result in losses.
Certain risks arise because of the possibility of imperfect correlations
between movements in the prices of financial futures and options and
movements in the prices of the underlying stock index, securities, or
currencies or of the securities or currencies which are the subject of the
hedge. The successful use of futures and options further depends on Putnam
Management's ability to forecast market or interest rate movements
correctly. Other risks arise from a Fund's potential inability to close out
its futures or related options positions, and there can be no assurance that
a liquid secondary market will exist for any futures contract or option at a
particular time. A Fund's ability to terminate option positions
established in the over-the-counter market may be more limited than for
exchange-traded options and may also involve the risk that securities
dealers participating in such transactions would fail to meet their
obligations to the Fund. The use of futures and options on futures for
purposes other than hedging may be regarded as speculative. Because
the markets for options and futures on foreign fixed-income securities and
foreign currencies are relatively new and still developing, each Fund's
ability to engage in such transactions may be limited. Certain provisions
of the Internal Revenue Code and certain regulatory requirements may also
limit a Fund's ability to engage in futures and options transactions.

A more detailed explanation of futures and options transactions, including
the risks associated with them, is included in the Statement of Additional
Information.

OPTIONS. Each Fund may seek to increase its current return by writing
covered call and put options on securities it owns or in which it may invest.
A Fund receives a premium from writing a call or put option, which increases
the Fund's return if the option expires unexercised or is closed out at a net
profit. When a Fund writes a call option, it gives up the opportunity to
profit from any increase in the price of a security above the exercise price
of the option; when it writes a put option, a Fund takes the risk that it will
be required to purchase a security from the option holder at a price above
the current market price of the security. A Fund may terminate an option
that it has written prior to its expiration by entering into a closing
purchase transaction in which it purchases an option having the same terms
as the option written. Each Fund may also buy and sell put and call options
for hedging purposes. Each Fund may also from time to time buy and sell
combinations of put and call options on the same underlying security to earn
additional income. The aggregate value of the securities underlying the
options may not exceed 25% of a Fund's assets. Each Fund's use of these
strategies may be limited by applicable law.

SECURITIES LOANS, REPURCHASE AGREEMENTS AND FORWARD COMMITMENTS. Each
Fund may lend portfolio securities amounting to not more than 25% of its
assets to broker-dealers and may enter into repurchase agreements on up to
25% of its assets. These transactions must be fully collateralized at all
times. Each Fund may also purchase securities for future delivery, which
may increase its overall investment exposure and involves a risk of loss if
the value of the securities declines prior to the settlement date. These
transactions involve some risk to a Fund if the other party should default
on its obligation and such Fund is delayed or prevented from recovering the
collateral or completing the transaction.

LIMITING INVESTMENT RISK. Specific investment restrictions help each Fund
limit investment risks for its shareholders. These restrictions prohibit
each Fund from investing more than: (a) with respect to 75% of its total
assets, 5% of its total assets in securities of any one issuer, other than
the U.S. government, its agencies or instrumentalities;* (b) 25% of its
total assets in any one industry, except that under normal market
conditions Putnam Real Estate Opportunities Fund will invest more than 25%
of its total assets in issuers in the real estate group of industries and
Putnam Global Utilities Fund will invest more than 25% of its total assets
in issuers in the utilities group of industries;* or (c) 15% of its net
assets in any combination of securities that are not readily marketable, in
securities restricted as to resale (excluding securities determined by the
Trust's Trustees (or the person designated by the Trust's Trustees to make
such determinations) to be readily marketable), and in repurchase
agreements maturing in more than seven days.

Restrictions marked with an asterisk (*) above are summaries of fundamental
investment policies. See the Statement of Additional Information for the
full text of these policies and the Funds' other fundamental investment
policies. Except for investment policies designated as fundamental in this
Prospectus or the Statement, the investment policies described in this
Prospectus and in the Statement are not fundamental policies. The Trustees
may change any non-fundamental investment policies without shareholder
approval. As a matter of policy, the Trustees would not materially change a
Fund's investment objective without shareholder approval.

HOW PERFORMANCE IS SHOWN

A FUND'S INVESTMENT PERFORMANCE MAY FROM TIME TO TIME BE INCLUDED IN
ADVERTISEMENTS ABOUT IT. "Yield" is calculated by dividing the annualized
net investment income per share during a recent 30-day period by the maximum
public offering price per share on the last day of the period. Yield
reflects the deduction of the maximum initial sales charge. "Total return"
for the one-, five-and ten-year periods (or for the life of a class, if
shorter) through the most recent calendar quarter represents the average
annual compounded rate of return on an investment of $1,000 in the Fund
invested at the maximum public offering price. Total return may also be
presented for other periods or based on investment at reduced sales charge
levels. Any quotation of investment performance not reflecting the maximum
initial sales charge would be reduced if such sales charge were used.

ALL DATA IS BASED ON EACH FUND'S PAST INVESTMENT RESULTS AND DOES NOT
PREDICT FUTURE PERFORMANCE. Investment performance, which will vary, is
based on many factors, including market conditions, the composition of a
Fund's portfolio, a Fund's operating expenses and which class of shares you
purchase. Investment performance also often reflects the risks associated
with each Fund's investment objective and policies. These factors should
be considered when comparing a Fund's investment results to those of other
mutual funds and other investment vehicles. Quotations of investment
performance for any period when an expense limitation was in effect will be
greater than if the limitation had not been in effect. Each Fund's
performance may be compared to various indices. See the Statement of
Additional Information.

HOW THE FUNDS ARE MANAGED

The Trustees of the Trust are responsible for generally overseeing the
conduct of each Fund's business. Subject to such policies as the Trustees
may determine, Putnam Management furnishes a continuing investment program
for each Fund and makes investment decisions on its behalf. Subject to the
control of the Trustees, Putnam Management also manages the Funds' other
affairs and business. David L. King, Senior Vice President of Putnam
Management and Vice President of the Trust, is primarily responsible for
the day-to-day operations of Putnam Basic Value Fund. Mr. King has been
employed by Putnam Management for the past five years. Brooke A. Cobb and
Kenneth J. Taubes, each a Senior Vice President of Putnam Management and a
Vice President of the Trust, are primarily responsible for the day-to-day
operations of Putnam Balanced Fund. Mr. Cobb has been employed by Putnam
Management for the past five years. Prior to July, 1991, Mr. Taubes was
Senior Vice President of the Finance Division of U.S. Trust Company.
Sheldon N. Simon, Senior Vice President of Putnam Management and Vice
President of the Trust, is primarily responsible for the day-to-day
operations of Putnam Global Utilities Fund. Mr. Simon has been employed by
Putnam Management for the past five years. Jeanne L. Mockard, Senior Vice
President of Putnam Management and Vice President of the Trust, is
primarily responsible for the day-to-day operations of Putnam Real Estate
Opportunities Fund. Ms. Mockard has been employed by Putnam Management for
the past five years. Justin M. Scott, Senior Vice President of Putnam
Management and Vice President of the Trust, is primarily responsible for
the day-to-day operations of Putnam International New Opportunities Fund.
Mr. Scott has been employed by Putnam Management for the past five years.

Under a Management Contract dated December 2, 1994, the Trust pays a
quarterly fee to Putnam Management based on the average net assets of each
Fund, as determined at the close of each business day during the quarter, at
the following annual rates, expressed as a percentage of each Fund's
average net assets: Putnam Balanced Fund - 0.65% of the first $500 million,
0.55% of the next $500 million, 0.50% of the next $500 million, 0.45% of the
next $5 billion, 0.425% of the next $5 billion, 0.405% of the next $5
billion, 0.39% of the next $5 billion, and 0.38% thereafter; Putnam Real
Estate Opportunities Fund and Putnam Basic Value Fund - 0.70% of the first
$500 million, 0.60% of the next $500 million, 0.55% of the next $500
million, 0.50% of the next $5 billion, 0.475% of the next $5 billion, 0.455%
of the next $5 billion, 0.44% of the next $5 billion, and 0.43% thereafter;
Putnam Global Utilities Fund - 0.80% of the first $500 million, 0.70% of the
next $500 million, 0.65% of the next $500 million, 0.60% of the next $5
billion, 0.575% of the next $5 billion, 0.555% of the next $5 billion, 0.54%
of the next $5 billion, and 0.53% thereafter; and Putnam International New
Opportunities Fund - 1.20% of the first $500 million, 1.10% of the next $500
million, 1.05% of the next $500 million, 1.00% of the next $5 billion,
0.975% of the next $5 billion, 0.955% of the next $5 billion, 0.94% of the
next $5 billion, and 0.93% thereafter.

In order to limit the Funds' expenses during their start-up periods, Putnam
Management has agreed to limit its compensation (and, to the extent
necessary, bear other expenses) through December 31, 1995, to the extent
that expenses of a Fund (exclusive of brokerage, interest, taxes, deferred
organizational and extraordinary expense, and payments under the Trust's
Distribution Plan) would exceed the following annual rates, expressed as a
percentage of each Fund's average net assets: Putnam Basic Value Fund and
Putnam Real Estate Opportunities Fund, 1.00%; Putnam Balanced Fund, 0.70%;
Putnam Global Utilities Fund, 0.60%; and Putnam International New
Opportunities Fund, 1.15%. For the purpose of determining any such
limitation on Putnam Management's compensation, Fund expenses shall not
reflect the application of commissions or cash management credits that may
reduce designated Fund expenses. With Trustee approval, this expense
limitation may be terminated earlier, in which event shareholders would be
notified and this Prospectus would be revised.

Each Fund pays its share of all expenses of the Trust not assumed by Putnam
Management, including Trustees' fees, auditing, legal, custodial, investor
servicing and shareholder reporting expenses, and payments under its
Distribution Plan. Expenses of the Trust directly charged or attributable
to a Fund will be paid from the assets of the Fund. General expenses of the
Trust will be allocated among the Funds on a basis that the Trustees deem
fair and equitable, which may be based on the relative assets of the Funds or
the nature of the services performed and relative applicability to a Fund.
Each Fund also reimburses Putnam Management for its share of the
compensation and related expenses of certain officers of the Trust and
their staff who provide administrative services to the Funds. The total
reimbursement is determined annually by the Trustees.

Putnam Management places all orders for purchases and sales of the Funds'
securities. In selecting broker-dealers, Putnam Management may consider
research and brokerage services furnished to it and its affiliates.
Subject to seeking the most favorable price and execution available, Putnam
Management may consider sales of shares of the Funds (and, if permitted by
law, of the other Putnam funds) as a factor in the selection of broker-
dealers.

ORGANIZATION AND HISTORY

The Trust is a Massachusetts business trust organized on October 31, 1994.
A copy of the Agreement and Declaration of Trust, which is governed by
Massachusetts law, is on file with the Secretary of State of The
Commonwealth of Massachusetts. As of December 13, 1994 Putnam Investments,
Inc. owned all of the shares of the Funds and therefore may be deemed to
"control" the Funds. Prior to January 6, 1995, the Trust was known as
Putnam Equity Funds.
<PAGE>
The Trust is an open-end, diversified, management investment company with
an unlimited number of authorized shares of beneficial interest. Shares of
the Trust may, without shareholder approval, be divided into two or more
series of shares representing separate investment portfolios. The Trust's
shares are currently divided into five series of shares representing the
Funds. Any such series of shares may be further divided without shareholder
approval into two or more classes of shares having such preferences and
special or relative rights and privileges as the Trustees determine. The
Trustees currently have authorized the issuance of four classes of
shares . Only Class A shares are currently being offered.

Each share has one vote, with fractional shares voting proportionally.
Shares of each Fund vote together as a single class, except when required by
law or as determined by the Trustees. Shares are freely transferable, are
entitled to dividends as declared by the Trustees, and, if a Fund were
liquidated, would receive the net assets of that Fund. The Funds may
suspend the sale of shares at any time and may refuse any order to purchase
shares. Although the Trust is not required to hold annual meetings of its
shareholders, shareholders holding at least 10% of the outstanding shares
entitled to vote have the right to call a meeting to elect or remove
Trustees, or to take other actions as provided in the Agreement and
Declaration of Trust.

If you own fewer shares than a minimum amount set by the Trustees (presently
20 shares), a Fund may choose to redeem your shares and pay you for them. You
will receive at least 30 days' written notice before a Fund redeems your
shares, and you may purchase additional shares at any time to avoid a
redemption. A Fund may also redeem shares if you own shares above a maximum
amount set by the Trustees. There is presently no maximum, but the Trustees
may establish one at any time, which could apply to both present and future
shareholders.

THE TRUST'S TRUSTEES: GEORGE PUTNAM,* CHAIRMAN. President of the Putnam
funds. Chairman and Director of Putnam Management and Putnam Mutual Funds
Corp. ("Putnam Mutual Funds"). Director, Marsh & McLennan Companies, Inc.;
WILLIAM F. POUNDS, VICE CHAIRMAN. Professor of Management, Alfred P. Sloan
School of Management, M.I.T.; JAMESON ADKINS BAXTER, President, Baxter
Associates, Inc.; HANS H. ESTIN, Vice Chairman, North American Management
Corp.; JOHN A. HILL, Principal and Managing Director, First Reserve
Corporation; ELIZABETH T. KENNAN, President, Mount Holyoke College;
LAWRENCE J. LASSER,* Vice President of the Putnam funds. President, Chief
Executive Officer and Director of Putnam Investments, Inc. and Putnam
Management. Director, Marsh & McLennan Companies, Inc.; ROBERT E.
PATTERSON, Executive Vice President, Cabot Partners Limited Partnership;
DONALD S. PERKINS, Director of various corporations, including AT&T, Kmart
Corporation and Time Warner Inc.; GEORGE PUTNAM, III,* President, New
Generation Research, Inc.; A.J.C. SMITH,* Chairman, Chief Executive
Officer and Director, Marsh & McLennan Companies, Inc.; and W. NICHOLAS
THORNDIKE, Director of various corporations and charitable organizations,
including Providence Journal Co. Also, Trustee of Massachusetts General
Hospital and Trustee of Eastern Utilities Associates. The Trust's Trustees
are also Trustees of the other Putnam funds. Those marked with an asterisk
(*) are "interested persons" of the Trust, Putnam Management or Putnam
Mutual Funds.

ABOUT YOUR INVESTMENT

HOW TO BUY SHARES

You can open a Fund account with as little as $500 and make additional
investments at any time with as little as $50. You can buy Fund shares three
ways - through most investment dealers, through Putnam Mutual Funds (at 1-
800-225-1581), or through a systematic investment plan. If you do not have
a dealer, Putnam Mutual Funds can refer you to one.

BUYING SHARES THROUGH PUTNAM MUTUAL FUNDS. Complete an order form and
return it with a check payable to the Fund to Putnam Mutual Funds, which will
act as your agent in purchasing shares through your designated investment
dealer.

BUYING SHARES THROUGH SYSTEMATIC INVESTING. You can make regular
investments of $25 or more per month through automatic deductions from your
bank checking account. Application forms are available from your
investment dealer or through Putnam Investor Services.

Shares are sold at the public offering price based on the net asset value
next determined after Putnam Investor Services receives your order. In
most cases, in order to receive that day's public offering price, Putnam
Investor Services must receive your order before the close of regular
trading on the New York Stock Exchange. If you buy shares through your
investment dealer, the dealer must receive your order before the close of
regular trading on the New York Stock Exchange to receive that day's public
offering price.

The public offering price of shares is the net asset value plus a sales
charge. The Fund in which you are investing receives the net asset value.
The sales charge varies depending on the size of your purchase and is
allocated between your investment dealer and Putnam Mutual Funds. The
current sales charges are:
<TABLE>
<CAPTION>

SALES CHARGE AMOUNT OF
AS A PERCENTAGE OF: SALES CHARGE
----------------------------- REALLOWED
NET TO DEALERS
AMOUNT OF TRANSACTION AMOUNT OFFERING AS A PERCENTAGE
AT OFFERING PRICE INVESTED PRICE OF OFFERING PRICE*
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 6.10% 5.75% 5.00%
$50,000 but less than 100,000 4.71 4.50 4.00
100,000 but less than 250,000 3.63 3.50 3.00
250,000 but less than 500,000 2.56 2.50 2.25
500,000 but less than 1,000,000 2.04 2.00 1.75
- ------------------------------------------------------------------------------------------

* At the discretion of Putnam Mutual Funds, however, the entire sales charge may at times be
reallowed to dealers. The Staff of the Securities and Exchange Commission has indicated that
dealers who receive more than 90% of the sales charge may be considered underwriters.
</TABLE>
There is no initial sales charge on purchases of shares of $1 million or
more. However, a contingent deferred sales charge ("CDSC") of 1.00% or
0.50%, respectively, is imposed on redemptions of such shares within the
first or second year after purchase, based on the lower of the shares' cost
and current net asset value. Any shares acquired by reinvestment of
distributions will be redeemed without a CDSC. In addition, shares
purchased by certain investors investing $1 million or more that have made
arrangements with Putnam Mutual Funds and whose dealer of record waived the
commission described in the next paragraph are not subject to the CDSC. In
determining whether a CDSC is payable, a Fund will first redeem shares not
subject to any charge. Putnam Mutual Funds receives the entire amount of
any CDSC you pay. See the Statement of Additional Information for more
information about the CDSC.

Except as stated below, Putnam Mutual Funds pays investment dealers of
record commissions on sales of Fund shares of $1 million or more based on an
investor's cumulative purchases during the one-year period beginning with
the date of the initial purchase at net asset value and each subsequent one-
year period beginning with the first net asset value purchase following the
end of the prior period. Such commissions are paid at the rate of 1.00% of
the amount under $3 million, 0.50% of the next $47 million and 0.25%
thereafter. On sales at net asset value to a participant-directed
qualified retirement plan initially investing less than $20 million in
Putnam funds and other investments managed by Putnam Management or its
affiliates (including a plan sponsored by an employer with more than 750
employees), Putnam Mutual Funds pays commissions on cumulative purchases
during the life of the account at the rate of 1.00% of the amount under $3
million and 0.50% thereafter. On sales at net asset value to all other
participant-directed qualified retirement plans, Putnam Mutual Funds pays
commissions on the initial investment and on subsequent net quarterly sales
at the rate of 0.15%.

GENERAL

YOU MAY BE ELIGIBLE TO BUY SHARES AT REDUCED SALES CHARGES. Consult your
investment dealer or Putnam Mutual Funds for details about Putnam's
Combined Purchase Privilege, Cumulative Quantity Discount, Statement of
Intention, Group Sales Plan, Employee Benefit Plans and other plans.
Descriptions are also included in the order form and in the Statement of
Additional Information.

Each Fund may sell shares at net asset value without an initial sales charge
or a CDSC to the current and retired Trustees (and their families), current
and retired employees (and their families) of Putnam Management and
affiliates, registered representatives and other employees (and their
families) of broker-dealers having sales agreements with Putnam Mutual
Funds, employees (and their families) of financial institutions having
sales agreements with Putnam Mutual Funds (or otherwise having an
arrangement with a broker-dealer or financial institution with respect to
sales of Fund shares), financial institution trust departments investing
an aggregate of $1 million or more in Putnam funds, clients of certain
administrators of tax-qualified plans, employee benefit plans of companies
with more than 750 employees, tax-qualified plans when proceeds from
repayments of loans to participants are invested (or reinvested) in Putnam
funds, "wrap accounts" for the benefit of clients of broker-dealers,
financial institutions or financial planners adhering to certain standards
established by Putnam Mutual Funds, and investors meeting certain
requirements who sold shares of certain Putnam closed-end funds pursuant to
a tender offer by the closed-end fund. In addition, a Fund may sell shares
at net asset value without an initial sales charge or a CDSC in connection
with the acquisition by a Fund of assets of an investment company or
personal holding company, and the CDSC will be waived on redemptions of
shares arising out of death or disability or in connection with certain
withdrawals from IRA or other retirement plans. See the Statement of
Additional Information.

Shareholders of other Putnam funds may be entitled to exchange their shares
for, or reinvest distributions from their funds in, shares of the Funds at
net asset value.

If you are considering redeeming or exchanging shares or transferring
shares to another person shortly after purchase, you should pay for those
shares with a certified check to avoid any delay in redemption, exchange or
transfer. Otherwise a Fund may delay payment until the purchase price of
those shares has been collected or, if you redeem by telephone, until 15
calendar days after the purchase date.

To eliminate the need for safekeeping, no Fund will issue share
certificates. Putnam Mutual Funds may, at its expense, provide additional
promotional incentives or payments to dealers that sell shares of the
Putnam funds. In some instances, these incentives or payments may be
offered only to certain dealers who have sold or may sell significant
amounts of shares.

DISTRIBUTION PLAN

The Trust has adopted a Distribution Plan pursuant to Rule 12b-1 under the
Investment Company Act of 1940, although the Trust is not currently making
any payments pursuant to the Plan. The purpose of the Plan is to permit the
Trust to compensate Putnam Mutual Funds for services provided and expenses
incurred by it in promoting the sale of shares of the Funds, reducing
redemptions, or maintaining or providing services provided to shareholders
by Putnam Mutual Funds or dealers. The Plan provides for payments by the
Funds to Putnam Mutual Funds at the annual rate of up to 0.35% of a Fund's
average net assets, subject to the authority of the Trustees to reduce the
amount of payments or to suspend the Plan for such periods as they may
determine. Subject to these limitations, the amount of such payments and
the specific purposes for which they are made shall be determined by the
Trustees. Should the Trustees decide in the future to approve payments
under the Plan, shareholders will be notified and this Prospectus will be
revised.

HOW TO SELL SHARES

You can sell your shares to a Fund any day the New York Stock Exchange is
open, either directly to a Fund or through your investment dealer. A Fund
will only redeem shares for which it has received payment.

SELLING SHARES DIRECTLY TO A FUND. Send a signed letter of instruction or
stock power form to Putnam Investor Services. The price you will receive is
the next net asset value calculated after a Fund receives your request in
proper form less any applicable CDSC. In order to receive that day's net
asset value, Putnam Investor Services must receive your request before the
close of regular trading on the New York Stock Exchange. If you sell shares
having a net asset value of $100,000 or more, the signatures of registered
owners or their legal representatives must be guaranteed by a bank, broker-
dealer or certain other financial institutions. See the Statement of
Additional Information for more information about where to obtain a
signature guarantee. Stock power forms are available from your investment
dealer, Putnam Investor Services and many commercial banks. If you want
your redemption proceeds sent to an address other than your address as it
appears on Putnam's records, a signature guarantee is required. Putnam
Investor Services usually requires additional documentation for the sale
of shares by a corporation, partnership, agent or fiduciary, or a surviving
joint owner. Contact Putnam Investor Services for details.

A FUND GENERALLY SENDS YOU PAYMENT FOR YOUR SHARES THE BUSINESS DAY AFTER
YOUR REQUEST IS RECEIVED. Under unusual circumstances, a Fund may suspend
redemptions, or postpone payment for more than seven days, as permitted by
federal securities law.

You may use Putnam's Telephone Redemption Privilege to redeem shares valued
up to $100,000 from your account unless you have notified Putnam Investor
Services of an address change within the preceding 15 days. Unless an
investor indicates otherwise on the Account Application, Putnam Investor
Services will be authorized to act upon redemption and transfer
instructions received by telephone from a shareholder, or any person
claiming to act as his or her representative, who can provide Putnam
Investor Services with his or her account registration and address as it
appears on Putnam Investor Services' records. Putnam Investor Services
will employ these and other reasonable procedures to confirm that
instructions communicated by telephone are genuine; if it fails to employ
reasonable procedures, Putnam Investor Services may be liable for any
losses due to unauthorized or fraudulent instructions. For information,
consult Putnam Investor Services. During periods of unusual market changes
and shareholder activity, you may experience delays in contacting Putnam
Investor Services by telephone in which case you may wish to submit a
written redemption request, as described above, or contact your investment
dealer, as described below. The Telephone Redemption Privilege may be
modified or terminated without notice.

SELLING SHARES THROUGH YOUR INVESTMENT DEALER. Your dealer must receive
your request before the close of regular trading on the New York Stock
Exchange to receive that day's net asset value. Your dealer will be
responsible for furnishing all necessary documentation to Putnam Investor
Services, and may charge for its services.

HOW TO EXCHANGE SHARES

You can exchange your shares for shares of certain other Putnam funds at net
asset value beginning 15 days after purchase. To exchange your shares,
simply complete an Exchange Authorization Form and send it to Putnam
Investor Services. Exchange Authorization Forms are available by calling
or writing Putnam Investor Services. For federal income tax purposes, an
exchange is treated as a sale of shares and generally results in a capital
gain or loss. A Telephone Exchange Privilege is currently available for
amounts up to $500,000. Putnam Investor Services' procedures for
telephonic transactions are described above under "How to sell shares."
Ask your investment dealer or Putnam Investor Services for prospectuses of
other Putnam funds. Shares of certain Putnam funds are not available to
residents of all states.

The exchange privilege is not intended as a vehicle for short-term trading.
Excessive exchange activity may interfere with portfolio management and
have an adverse effect on all shareholders. In order to limit excessive
exchange activity and in other circumstances where Putnam Management or the
Trustees believe doing so would be in the best interests of a Fund, a Fund
reserves the right to revise or terminate the exchange privilege, limit the
amount or number of exchanges or reject any exchange. Shareholders would be
notified of any such action to the extent required by law. Consult Putnam
Investor Services before requesting an exchange. See the Statement of
Additional Information to find out more about the exchange privilege.

HOW EACH FUND VALUES ITS SHARES

EACH FUND CALCULATES THE NET ASSET VALUE OF A SHARE BY DIVIDING THE TOTAL
VALUE OF ITS ASSETS, LESS LIABILITIES, BY THE NUMBER OF ITS SHARES
OUTSTANDING. Shares are valued as of the close of regular trading on the New
York Stock Exchange each day the exchange is open. Portfolio securities for
which market quotations are readily available are stated at market value.
Short-term investments that will mature in 60 days or less are stated at
amortized cost, which approximates market value. All other securities and
assets are valued at their fair value following procedures approved by the
Trustees.

HOW DISTRIBUTIONS ARE MADE; TAX INFORMATION

Putnam Basic Value Fund and Putnam International New Opportunities Fund
distribute any net investment income and any net realized capital gains at
least annually. Putnam Balanced Fund, Putnam Global Utilities Fund and
Putnam Real Estate Opportunities Fund distribute any net investment income
at least quarterly and any net realized capital gains at least annually.
Any net capital gains will be distributed at least annually. Capital gains
distributions are made after applying any available capital loss
carryovers.

YOU CAN CHOOSE FROM THREE DISTRIBUTION OPTIONS: (1) reinvest all
distributions from a Fund in additional shares of that Fund without a sales
charge; (2) receive distributions from net investment income in cash while
reinvesting net capital gains distributions in additional shares of that
Fund without a sales charge; or (3) receive all distributions in cash. You
can change your distribution option by notifying Putnam Investor Services
in writing. If you do not select an option when you open your account, all
distributions will be reinvested. You will receive a statement confirming
reinvestment of distributions from a Fund in additional shares of that Fund
(or in shares of other Putnam funds for Dividends Plus accounts) promptly
following the quarter in which the reinvestment occurs.

If a check representing a Fund distribution is not cashed within a specified
period, Putnam Investor Services will notify you that you have the option of
requesting another check or reinvesting the distribution in the Fund or in
another Putnam fund. If Putnam Investor Services does not receive your
election, the distribution will be reinvested in the Fund. Similarly, if
correspondence sent by a Fund or Putnam Investor Services is returned as
"undeliverable," Fund distributions will automatically be reinvested in
that Fund or in another Putnam fund.
<PAGE>
Each Fund intends to qualify as a "regulated investment company" for
federal income tax purposes and to meet all other requirements that are
necessary for it to be relieved of federal taxes on income and gains it
distributes to shareholders. Each Fund will distribute substantially all
of its ordinary income and capital gain net income on a current basis.

Each Fund's distributions will be taxable to you as ordinary income, except
that any distributions of net long-term capital gains will be taxable as
such, regardless of how long you have held the shares. Distributions will
be taxable as described above whether received in cash or in shares through
the reinvestment of distributions.

Early in each year your Fund will notify you of the amount and tax status of
distributions paid to you by the Fund for the preceding year.

A Fund's transactions in foreign currencies and hedging activities may
produce a difference between its book income and taxable income. This
difference may cause a portion of the Fund's income distributions to
constitute a return of capital for tax purposes or require the Fund to make
distributions exceeding book income to qualify as a regulated investment
company.

If at the end of each fiscal year of a Fund, more than 50% of
the value of the Fund's total assets is represented by securities of foreign
corporations, each Fund intends to make an election permitted by the
Internal Revenue Code so that shareholders who are U.S. citizens or U.S.
corporations may claim a foreign tax credit or deduction (but not both) on
their U.S. income tax returns.

For corporate shareholders, any distributions received by Putnam Real
Estate Opportunities Fund from real estate investment trusts will not
qualify for the corporate dividends-received deduction. Putnam Real
Estate Opportunities Fund's investments in REIT equity securities may
require the Fund to accrue and distribute income not yet received. In order
to generate sufficient cash to make the requisite distributions, the Fund
may be required to sell securities in its portfolio that it otherwise would
have continued to hold. The Fund's investments in REIT equity securities
may at other times result in the Fund's receipt of cash in excess of the
REIT's earnings; if the Fund distributes such amounts, such distribution
would constitute a return of capital to Fund shareholders for federal
income tax purposes.

The foregoing is a summary of certain federal income tax consequences of
investing in a Fund. You should consult your tax adviser to determine the
precise effect of an investment in a Fund on your particular tax situation
(including possible liability for state and local taxes).

ABOUT PUTNAM INVESTMENTS, INC.

PUTNAM MANAGEMENT HAS BEEN MANAGING MUTUAL FUNDS SINCE 1937. Putnam
Mutual Funds is the principal underwriter of the Funds and of other Putnam
funds. Putnam Fiduciary Trust Company is the Funds' custodian. Putnam
Investor Services, a division of Putnam Fiduciary Trust Company, is the
Funds' investor servicing and transfer agent.

Putnam Management, Putnam Mutual Funds, and Putnam Fiduciary Trust Company
are subsidiaries of Putnam Investments, Inc., which is wholly owned by
Marsh & McLennan Companies, Inc., a publicly-owned holding company whose
principal businesses are international insurance and reinsurance
brokerage, employee benefit consulting and investment management.<PAGE>

APPENDIX

SECURITIES RATINGS. The rating services' descriptions of corporate bonds
are:

MOODY'S INVESTORS SERVICE, INC.:

Aaa--Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt-edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.

Aa--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than in Aaa securities.

A--Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may
be present which suggest a susceptibility to impairment sometime in the
future.

Baa--Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present, but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.

Ba--Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during other good and bad times over the future. Uncertainty of
position characterizes bonds in this class.

B--Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance
of other terms of the contract over any long period of time may be small.

Caa--Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.

Ca--Bonds which are rated Ca represent obligations which are speculative in
a high degree. Such issues are often in default or have other marked
shortcomings.

C--Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.

STANDARD & POOR'S CORPORATION:

AAA--Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.

AA--Debt rated AA has a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degree.

A--Debt rated A has a strong capacity to pay interest and repay principal
although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher-rated
categories.

BBB--Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay interest
and repay principal for debt in this category than for bonds in higher-rated
categories.

BB-B-CCC-CC-C--Debt rated BB, B, CCC, CC, and C is regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay
interest and repay principal in accordance with the terms of the
obligation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.

D--Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if
the applicable grace period has not expired, unless Standard & Poor's
believes that such payments will be made during such grace period. The D
rating also will be used on the filing of a bankruptcy petition if debt
service payments are jeopardized.<PAGE>
PUTNAM BASIC VALUE FUND
PUTNAM BALANCED FUND
PUTNAM GLOBAL UTILITIES FUND
PUTNAM REAL ESTATE OPPORTUNITIES FUND
PUTNAM INTERNATIONAL NEW OPPORTUNITIES FUND

One Post Office Square
Boston, MA 02109

FUND INFORMATION:
INVESTMENT MANAGER

Putnam Investment Management, Inc.
One Post Office Square
Boston, MA 02109

MARKETING SERVICES

Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109

INVESTOR SERVICING AGENT

Putnam Investor Services
Mailing address:
P.O. Box 41203
Providence, RI 02940-1203

CUSTODIAN

Putnam Fiduciary Trust Company
One Post Office Square
Boston, MA 02109

LEGAL COUNSEL

Ropes & Gray
One International Place
Boston, MA 02110

INDEPENDENT ACCOUNTANTS

Coopers & Lybrand L.L.P.
One Post Office Square
Boston, MA 02109

PUTNAMINVESTMENTS

One Post Office Square
Boston, Massachusetts 02109
Toll-free 1-800-225-1581<PAGE>

PUTNAM INVESTMENT FUNDS (THE "TRUST")

PUTNAM BASIC VALUE FUND
PUTNAM BALANCED FUND
PUTNAM GLOBAL UTILITIES FUND
PUTNAM REAL ESTATE OPPORTUNITIES FUND
PUTNAM INTERNATIONAL NEW OPPORTUNITIES FUND
(EACH REFERRED TO HEREIN AS A "FUND")

FORM N-1A
PART B

STATEMENT OF ADDITIONAL INFORMATION
JANUARY 6, 1995

This Statement of Additional Information is not a Prospectus and is only
authorized for distribution when accompanied or preceded by the Prospectus
of the Trust dated January 6, 1995 , as revised from time to time.
This Statement contains information which may be useful to investors but
which is not included in the Prospectus. If the Trust has more than one form
of current Prospectus, each reference to the Prospectus in this Statement
shall include all the Trust's Prospectuses, unless otherwise noted. The
Statement should be read together with the applicable Prospectus.
Investors may obtain a free copy of the applicable Prospectus from Putnam
Investor Services, Mailing address: P.O. Box 41203, Providence, RI 02940-
1203.

Part I of this Statement contains specific information about the Funds.
Part II includes information about the Funds and the other Putnam funds.
<PAGE>
TABLE OF CONTENTS
PART I

INVESTMENT RESTRICTIONS OF THE TRUST . . . . . . . . . . . . . . I - 3

FUND CHARGES AND EXPENSES. . . . . . . . . . . . . . . . . . . . I - 6

ADDITIONAL OFFICERS OF THE TRUST . . . . . . . . . . . . . . . . I - 7

INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS . . . . . . . . I -8

PART II

MISCELLANEOUS INVESTMENT PRACTICES . . . . . . . . . . . . . . . . . . II-1

TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .II-22

MANAGEMENT OF THE FUND . . . . . . . . . . . . . . . . . . . . . . . .II-27

DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . . . . . .II-36

HOW TO BUY SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . .II-38

DISTRIBUTION PLAN. . . . . . . . . . . . . . . . . . . . . . . . . . .II-49

INVESTOR SERVICES. . . . . . . . . . . . . . . . . . . . . . . . . . .II-50

SIGNATURE GUARANTEES . . . . . . . . . . . . . . . . . . . . . . . . .II-56

SUSPENSION OF REDEMPTIONS. . . . . . . . . . . . . . . . . . . . . . .II-56

SHAREHOLDER LIABILITY. . . . . . . . . . . . . . . . . . . . . . . . .II-57

STANDARD PERFORMANCE MEASURES. . . . . . . . . . . . . . . . . . . . .II-57

COMPARISON OF PORTFOLIO PERFORMANCE. . . . . . . . . . . . . . . . . .II-58

DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .II-63

<PAGE>

STATEMENT OF ADDITIONAL INFORMATION
PART I

INVESTMENT RESTRICTIONS OF THE TRUST

AS FUNDAMENTAL INVESTMENT RESTRICTIONS, WHICH MAY NOT BE CHANGED WITH
RESPECT TO A FUND WITHOUT A VOTE OF A MAJORITY OF THE OUTSTANDING VOTING
SECURITIES OF SUCH FUND, THE TRUST MAY NOT AND WILL NOT WITH RESPECT TO A
FUND:

(1) Borrow money in excess of 10% of the value (taken at the lower of cost
or current value) of its total assets (not including the amount borrowed) at
the time the borrowing is made, and then only from banks as a temporary
measure to facilitate the meeting of redemption requests (not for leverage)
which might otherwise require the untimely disposition of portfolio
investments or for extraordinary or emergency purposes. Such borrowings
will be repaid before any additional investments are purchased.

(2) Underwrite securities issued by other persons except to the extent
that, in connection with the disposition of its portfolio investments, it
may be deemed to be an underwriter under certain federal securities laws.

(3) Purchase or sell real estate, although it may purchase securities of
issuers which deal in real estate, securities which are secured by
interests in real estate, and securities which represent interests in real
estate, and it may acquire and dispose of real estate or interests in real
estate acquired through the exercise of its rights as a holder of debt
obligations secured by real estate or interests therein.

(4) Purchase or sell commodities or commodity contracts, except that the
Fund may purchase and sell financial futures contracts and options.

(5) Make loans, except by purchase of debt obligations in which the Fund
may invest consistent with its investment policies, by entering into
repurchase agreements with respect to not more than 25% of its total assets
(taken at current value) or through the lending of its portfolio securities
with respect to not more than 25% of its total assets (taken at current
value).

(6) With respect to 75% of its total assets, invest in securities of any
issuer if, immediately after such investment, more than 5% of the total
assets of the Fund (taken at current value) would be invested in the
securities of such issuer; provided that this limitation does not apply to
obligations issued or guaranteed as to interest or principal by the U.S.
government or its political subdivisions.

(7) With respect to 75% of its total assets, acquire more than 10% of the
voting securities of any issuer.

(8) Purchase securities (other than securities of the U.S. government,
its agencies or instrumentalities) if, as a result of such purchase, more
than 25% of the Fund's total assets would be invested in any one industry,
except that Putnam Real Estate Opportunities Fund may invest more than 25%
of its total assets in securities of issuers in any industry in the real
estate group of industries and Putnam Global Utilities Fund may invest more
than 25% of its total assets in securities of issuers in any industry in the
utilities group of industries.

(9) Issue any class of securities which is senior to the Fund's shares of
beneficial interest.

IT IS CONTRARY TO EACH FUND'S PRESENT POLICY, WHICH MAY BE CHANGED WITHOUT
SHAREHOLDER APPROVAL, TO:

(1) Invest in (a) securities which at the time of such investment are not
readily marketable, (b) securities restricted as to resale (excluding
securities determined by the Trustees of the Trust (or the person
designated by the Trustees of the Trust to make such determinations) to be
readily marketable), and (c) repurchase agreements maturing in more than
seven days, if, as a result, more than 15% of the Fund's net assets (taken at
current value) would be invested in securities described in (a), (b) and (c)
above.

(2) (Not applicable to Putnam Global Utilities Fund and Putnam
International New Opportunities Fund.) Invest in warrants (other than
warrants acquired by a Fund as part of a unit or attached to securities at
the time of purchase) if, as a result, such investments (valued at the lower
of cost or market) would exceed 5% of the value of the Fund's net assets;
provided that not more than 2% of the Fund's net assets may be invested in
warrants not listed on the New York or American Stock Exchanges.
<PAGE>
(3) Buy or sell oil, gas or other mineral leases, rights or royalty
contracts, although it may purchase securities which represent interests
in, are secured by interests in, or which are issued by issuers which deal
in, such leases, rights, or contracts, and it may acquire or dispose of such
leases, rights, or contracts acquired through the exercise of its rights as
a holder of debt obligations secured thereby.

(4) Invest in securities of registered open-end investment companies,
except as they may be acquired as part of a merger or consolidation or
acquisition of assets or by purchases in the open market involving only
customary brokers' commissions.

(5) Make short sales of securities or maintain a short position for the
account of the Fund unless at all times when a short position is open it owns
an equal amount of such securities or owns securities which, without
payment of any further consideration, are convertible into or exchangeable
for securities of the same issue as, and in equal amount to, the securities
sold short.

(6) Purchase or sell real property (including limited partnership
interests), except that the Fund may (a) purchase or sell readily
marketable interests in real estate investment trusts or readily
marketable securities of companies which invest in real estate, (b)
purchase or sell securities that are secured by interests in real estate or
interests therein, or (c) acquire real estate through exercise of its
rights as a holder of obligations secured by real estate or interests
therein or sell real estate so acquired.

(7) Invest in securities of any issuer, if, to the knowledge of the Fund,
officers and Trustees of the Trust and officers and directors of Putnam
Management who beneficially own more than 0.5% of the securities of that
issuer together own more than 5% of such securities.

(8) Invest in securities of an issuer which, together with any
predecessors, controlling persons, general partners and guarantors, have a
record of less than three years' continuous business operation or relevant
business experience, if, as a result, the aggregate of such investments
would exceed 5% of the value of the Fund's net assets; provided, however,
that this restriction shall not apply to any obligations of the U.S.
government or its instrumentalities or agencies.

Although certain of the Trust's investment restrictions permit the Funds to
borrow money to a limited extent, the Funds do not currently intend to do so.
For the purpose of fundamental investment restriction 8 above, the Trust
will consider securities backed by the credit of different foreign
governments as representing separate industries.

---------------------

All percentage limitations on investments will apply at the time of the
making of an investment and shall not be considered violated unless an
excess or deficiency occurs or exists immediately after and as a result of
such investment.

The Investment Company Act of 1940 provides that a "vote of the majority of
the outstanding voting securities" of a Fund means the affirmative vote of
the lesser of (1) more than 50% of the outstanding shares of that Fund, or
(2) 67% or more of the shares of that Fund present at a meeting if more than
50% of the outstanding shares are represented at the meeting in person or by
proxy.

FUND CHARGES AND EXPENSES

MANAGEMENT FEES

EXPENSE LIMITATION. In order to limit the Funds' expenses during their
start-up periods, Putnam Management has agreed to limit its compensation
(and, to the extent necessary, bear other expenses) through December 31,
1995, to the extent that expenses of a Fund (exclusive of brokerage,
interest, taxes, deferred organizational and extraordinary expense, and
payments under the Trust's Class A Distribution Plan) would exceed the
following annual rates, expressed as a percentage of each Fund's average
net assets: Putnam Basic Value Fund and Putnam Real Estate Opportunities
Fund, 1.00%; Putnam Balanced Fund, 0.70%; Putnam Global Utilities Fund,
0.60%; and Putnam International New Opportunities Fund, 1.15%. For the
purpose of determining any such limitation on Putnam Management's
compensation, Fund expenses shall not reflect the application of
commissions or cash management credits that may reduce designated Fund
expenses. With Trustee approval, this expense limitation may be terminated
earlier, in which event shareholders would be notified and this Statement
of Additional Information would be revised.

TRUSTEE FEES

Each Trustee of the Trust receives an annual fee of $100 and an additional
fee for each Trustees' meeting attended. Trustees who are not interested
persons of Putnam Management and who serve on committees of the Trustees
receive additional fees for attendance at certain committee meetings.

OWNERSHIP OF TRUST SHARES

At December 13, 1994, Putnam Investments, Inc. owned of record and
beneficially all of the shares of each Fund. Putnam Investments, Inc. is
incorporated in Massachusetts, and its parent corporation, Marsh & McLennan
Companies, Inc., is incorporated in Delaware. The address of Putnam
Investments, Inc. is One Post Office Square, Boston, MA 02109.

ADDITIONAL OFFICERS OF THE TRUST

In addition to the persons listed as officers of the Trust in Part II of this
Statement, the following persons are also officers of the Trust. Officers
of Putnam Management hold the same offices in Putnam Management's parent
company, Putnam Investments, Inc.

PETER CARMAN, Vice President. Senior Managing Director of Putnam
Management. Vice President of certain of the Putnam funds. Prior to
August 1, 1993, Mr. Carman was Chief Investment Officer, Chairman of the
U.S. Equity Investment Policy Committee and a Director of Sanford C.
Bernstein & Company, Inc.

BROOKE A. COBB, Vice President. Senior Vice President of Putnam
Management. Vice President of certain of the Putnam funds.

DAVID L. KING, Vice President. Senior Vice President of Putnam Management.
Vice President of certain of the Putnam funds.

JEANNE L. MOCKARD, Vice President. Senior Vice President of Putnam
Management. Vice President of certain of the Putnam funds.

JOHN J. MORGAN, JR., Vice President. Managing Director of Putnam
Management. Vice President of certain of the Putnam funds.

ANTHONY W. REGAN, Vice President. Senior Managing Director of Putnam
Management. Director of Putnam Investments, Inc. Vice President of
certain of the Putnam funds.

THOMAS V. REILLY, Vice President. Managing Director of Putnam Management.
Vice President of certain of the Putnam funds.

JUSTIN M. SCOTT, Vice President. Senior Vice President of Putnam
Management. Vice President of certain of the Putnam funds.

SHELDON N. SIMON, Vice President. Senior Vice President of Putnam
Management. Vice President of certain of the Putnam funds.

KENNETH J. TAUBES, Vice President. Senior Vice President of Putnam
Management and Vice President of certain of the Putnam funds. Prior to
July, 1991, Mr. Taubes was Senior Vice President of the Finance Division of
U.S. Trust Company.

INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS

Coopers & Lybrand L.L.P. are the Trust's independent accountants,
providing audit services, tax return review and other tax consulting
services and assistance and consultation in connection with the review of
various Securities and Exchange Commission filings. The following Report
of Independent Accountants and Statement of Assets and Liabilities have
been included in this Statement of Additional Information in reliance upon
the report of the independent accountants, given on their authority as
experts in auditing and accounting.

As of the date of the financial statements, the Trust was named Putnam
Equity Funds. The financial statements reflect this former name.<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Shareholder and Board of Trustees of Putnam Equity Funds

We have audited the accompanying statements of assets and liabilities of
Putnam Basic Value Fund, Putnam Balanced Fund, Putnam Global Utilities
Fund, Putnam International New Opportunities Fund, and Putnam Real Estate
Opportunities Fund (the "Funds") of Putnam Equity Funds (the "Trust"), as
of December 13, 1994. These statements are the responsibility of the Funds'
management. Our responsibility is to express an opinion on the financial
statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of cash owned as of
December 13, 1994 by correspondence with the custodian. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable
basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Funds of the Trust
as of December 13, 1994, in conformity with generally accepted accounting
principles.

Coopers & Lybrand L.L.P.

Boston, Massachusetts
December 15, 1994
<PAGE>

STATEMENT OF ASSETS AND LIABILITIES
PUTNAM BALANCED FUND
(A SERIES OF PUTNAM EQUITY FUNDS)

December 13, 1994

Assets:

Cash . . . . . . . . . . . . . . . . . . . . . . . $20,000.00
Estimated deferred organization expenses
(Note 1) . . . . . . . . . . . . . . . . . . . . . 6,425.00
--------

Total assets. . . . . . . . . . . . . . . . . . . . . . 26,425.00

Liabilities:

Estimated organization expenses payable
(Note 1) . . . . . . . . . . . . . . . . . . . . . 6,425.00
--------
Commitments (Notes 1, 2 and 3)
Net assets applicable to 2,352.941 Class A
shares outstanding . . . . . . . . . . . . . . . . $20,000
=======

Computation of net asset value, redemption and offering
price per share:
Net asset value and redemption price per share
($20,000 divided by 2,352.941 shares). . . . . . . $8.50
======

Offering price per Class A share (100/94.25 of $8.50),
reduced on sales of $50,000 or more and in certain
other circumstances -- see "HOW TO BUY SHARES" . . $9.02
=====

See Notes to Statement of Assets and Liabilities<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
PUTNAM BASIC VALUE FUND
(A SERIES OF PUTNAM EQUITY FUNDS)

December 13, 1994

Assets:

Cash . . . . . . . . . . . . . . . . . . . . . . . $20,000.00
Estimated deferred organization expenses
(Note 1) . . . . . . . . . . . . . . . . . . . . . 6,425.00
--------
Total assets. . . . . . . . . . . . . . . . . . . . . . 26,425.00

Liabilities:

Computation of net asset value, redemption and offering
price per share:
Net asset value and redemption price per share
($20,000 divided by 2,352.941 shares). . . . . . . $8.50
======

Offering price per Class A share (100/94.25 of $8.50),
reduced on sales of $50,000 or more and in certain
other circumstances -- see "HOW TO BUY SHARES" . . $9.02
======

See Notes to Statement of Assets and Liabilities<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
PUTNAM GLOBAL UTILITIES FUND
(A SERIES OF PUTNAM EQUITY FUNDS)

December 13, 1994

Assets:

Cash . . . . . . . . . . . . . . . . . . . . . . . $20,000.00
Estimated deferred organization expenses
(Note 1) . . . . . . . . . . . . . . . . . . . . . 6,425.00
---------
Total assets. . . . . . . . . . . . . . . . . . . . . . 26,425.00

Liabilities:

Estimated organization expenses payable
(Note 1) . . . . . . . . . . . . . . . . . . . . . 6,425.00
----------
Commitments (Notes 1, 2 and 3)
Net assets applicable to 2,352.941 Class A
shares outstanding . . . . . . . . . . . . . . . . $20,000
========

Computation of net asset value, redemption and offering
price per share:
Net asset value and redemption price per share
($20,000 divided by 2,352.941 shares). . . . . . . $8.50
=======

Offering price per Class A share (100/94.25 of $8.50),
reduced on sales of $50,000 or more and in certain
other circumstances -- see "HOW TO BUY SHARES" . . $9.02
=======

See Notes to Statement of Assets and Liabilities<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
PUTNAM INTERNATIONAL NEW OPPORTUNITIES FUND
(A SERIES OF PUTNAM EQUITY FUNDS)

December 13, 1994

Assets:

Cash . . . . . . . . . . . . . . . . . . . . . . . $20,000.00
Estimated deferred organization expenses
(Note 1) . . . . . . . . . . . . . . . . . . . . . 6,425.00
----------
Total assets. . . . . . . . . . . . . . . . . . . . . . 26,425.00

Liabilities:

Computation of net asset value, redemption and offering
price per share:
Net asset value and redemption price per share
($20,000 divided by 2,352.941 shares). . . . . . . $8.50
======

Offering price per Class A share (100/94.25 of $8.50),
reduced on sales of $50,000 or more and in certain
other circumstances -- see "HOW TO BUY SHARES" . . $9.02
======

See Notes to Statement of Assets and Liabilities<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
PUTNAM REAL ESTATE OPPORTUNITIES FUND
(A SERIES OF PUTNAM EQUITY FUNDS)

December 13, 1994

Assets:

Liabilities:

Computation of net asset value, redemption and offering
price per share:
Net asset value and redemption price per share
($20,000 divided by 2,352.941 shares). . . . . . . $8.50
======

Offering price per Class A share (100/94.25 of $8.50),
reduced on sales of $50,000 or more and in certain
other circumstances -- see "HOW TO BUY SHARES" . . $9.02
======

See Notes to Statement of Assets and Liabilities<PAGE>
NOTES TO STATEMENTS OF ASSETS AND LIABILITIES

NOTE 1. ORGANIZATION

The Trust was organized as a Massachusetts business trust under an
Agreement and Declaration of Trust, dated October 31, 1994, and is registered
under the Investment Company Act of 1940, as amended, as an open-end,
diversified, management investment company, consisting of a series of
investment portfolios (the "Funds"), each of which is represented by a
separate series of shares of beneficial interest. The Trust currently
consists of five Funds: Putnam Balanced Fund, Putnam Basic Value Fund,
Putnam Global Utilities Fund, Putnam International New Opportunities Fund and
Putnam Real Estate Opportunities Fund. Each Fund offers Class A shares. The
Trust's Agreement and Declaration of Trust permits the issuance of an
unlimited number of shares. The Trust has had no operations other than those
relating to organizational matters and the initial capital contribution of
$100,000 to the Trust. Each Fund's outstanding shares are owned by Putnam
Investments, Inc.

Upon the sale of its shares to the public, the Trust will become liable for
registration fees payable to the Securities and Exchange Commission and for not
more than $125,000 of expenses in connection with its organization and the
initial public offering of its shares. Putnam Investment Management, Inc.
("Putnam Management"), a wholly-owned subsidiary of Putnam Investments, Inc.,
will pay any such expenses in excess of that amount and will pay all such
expenses in the event that the initial public offering is withdrawn. At
December 13, 1994, estimated deferred organization expenses for each Fund are
$6,425.00 based upon estimated registration, legal and accounting costs.
Each Fund will amortize such expenses borne by it over its first five years
of operation based upon projected net asset levels. Putnam Investments, Inc.
has agreed that if any of the initial shares of any Fund are redeemed during
such amortization period by any holder thereof, the redemption proceeds will
be reduced by the amount of the then unamortized organization expenses in the
same ratio as the number of shares redeemed bears to the number of initial
shares held at the time of redemption.

NOTE 2. MANAGEMENT CONTRACT

The Trust has entered into a Management Contract with Putnam Management.
As compensation for the services rendered, facilities furnished, and expenses
borne by Putnam Management, the Trust will pay Putnam Management a fee,
computed and paid quarterly based on the average net assets of each Fund for
the quarter. Such fee is based on the following annual rates: Putnam
Balanced Fund - 0.65% of the first $500 million, 0.55% of, the next $500
million, 0.50% of the next $500 million, 0.45% of the next $5 billion, 0.425%
of the next $5 billion, 0.405% of the next $5 billion, 0.39% of the next $5
billion, and 0.38% thereafter; Putnam Real Estate Opportunities Fund and
Putnam Basic Value Fund - 0.70% of the first $500 million, 0.60% of the next
$500 million, 0.55% of the next $500 million, 0.50% of the next $5 billion,
0.475% of the next $5 billion, 0.455% of the next $5 billion, 0.44% of the
next $5 billion, and 0.43% thereafter; Putnam Global Utilities Fund - 0.80%
of the first $500 million, 0.70% of the next $500 million, 0.65% of the next
$500 million, 0.60% of the next $5 billion, 0.575% of the next $5 billion,
0.555% of the next $5 billion, 0.54% of the next $5 billion, and 0.53%
thereafter; and Putnam International New Opportunities Fund - 1.20% of the
first $500 million, 1.10% of the next $500 million, 1.05% of the next $500
million, 1.00% of the next $5 billion, 0.975% of the next $5 billion, 0.955%
of the next $5 billion, 0.94% of the next $5 billion, and 0.93% thereafter.

NOTE 3. DISTRIBUTION PLAN

The Trust has entered into a Distribution Plan pursuant to Rule 12b-1 under
the Investment Company Act of 1940 relating to its Class A shares. Each Fund
will, upon the approval of such payments by the Trustees of such Fund, pay
Putnam Mutual Funds Corp., a wholly-owned subsidiary of Putnam Investments,
Inc., a quarterly distribution fee at the annual rate of up to 0.35% of the
average net assets of the Fund represented by Class A shares.
No payments are presently being made under the Distribution Plan.
<PAGE>
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