PUTNAM INVESTMENT FUNDS, 497, 1996-02-13

PUTNAM INVESTMENT FUNDS
497, 1996-02-13

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PUTNAM EMERGING GROWTH FUND
PUTNAM GENESIS FUND
PUTNAM GLOBAL GROWTH AND INCOME FUND
PUTNAM INTERNATIONAL FUND
PUTNAM JAPAN FUND
(EACH REFERRED TO HEREIN AS A "FUND"),

EACH A SERIES OF PUTNAM INVESTMENT FUNDS (THE "TRUST")

FORM N-1A
PART B

STATEMENT OF ADDITIONAL INFORMATION ("SAI")
DECEMBER 28, 1995, as revised January 31, 1996

This SAI is not a prospectus and is only authorized for
distribution when accompanied or preceded by the prospectus of
the funds dated December 28, 1995, as revised from time to time.
This SAI contains information which may be useful to investors
but which is not included in the prospectus. If a fund has more
than one form of current prospectus, each reference to the
prospectus in this SAI shall include all of the fund's
prospectuses, unless otherwise noted. The SAI 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 SAI 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. . . . . . . . . . . . . . . . . . . . . . . . I-3

CHARGES AND EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . I-5

INVESTMENT PERFORMANCE . . . . . . . . . . . . . . . . . . . . . . . . I-7

ADDITIONAL OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . .I-12

INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS . . . . . . . . . . .I-13

Part II

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

TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .II-25

MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .II-31

DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . . . . . .II-40

HOW TO BUY SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . .II-42

DISTRIBUTION PLANS . . . . . . . . . . . . . . . . . . . . . . . . . .II-54

INVESTOR SERVICES. . . . . . . . . . . . . . . . . . . . . . . . . . .II-55

SIGNATURE GUARANTEES . . . . . . . . . . . . . . . . . . . . . . . . .II-61

SUSPENSION OF REDEMPTIONS. . . . . . . . . . . . . . . . . . . . . . .II-61

SHAREHOLDER LIABILITY. . . . . . . . . . . . . . . . . . . . . . . . .II-61

STANDARD PERFORMANCE MEASURES. . . . . . . . . . . . . . . . . . . . .II-62

COMPARISON OF PORTFOLIO PERFORMANCE. . . . . . . . . . . . . . . . . .II-63

DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .II-67

<PAGE>
SAI
PART I

INVESTMENT RESTRICTIONS

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, each fund may not and
will not:

(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.

(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) 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.

(3) 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.

(4) 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.

(5) 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.

(6) 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.

Although certain of the Trust's fundamental investment
restrictions permit it to borrow money to a limited extent, it
does 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 a
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 of the fund are represented at the meeting in
person or by proxy.

CHARGES AND EXPENSES

Putnam Global Growth and Income Fund

Under a Management Contract dated December 2, 1994, as revised
July 14, 1995, Putnam Global Growth and Income Fund pays a
quarterly fee to Putnam Management based on the average net
assets of the fund, as determined at the close of each business
day during the quarter, at the annual rate of 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. Pursuant to the Management
Contract, the fund incurred the following fees:
<PAGE>
Reflecting a
reduction in the
following amount
pursuant to an
Fiscal Management expense
year fee paid limitation
- ------ ---------- -----------------

1995 $9,700 $36,617

Brokerage commissions

The following table shows brokerage commissions paid during the
fiscal period indicated.

Fiscal Brokerage
year commissions
------ ------------

Putnam Global Growth and
Income Fund 1995 $5,158

The following table shows transactions placed with brokers and
dealers during the most recent fiscal year to recognize research,
statistical and quotation services Putnam Management considered
to be particularly useful to it and its affiliates.

Dollar
value Percent of
of these total Amount of
transactions transactions commissions
------------ ------------ -----------
Putnam Global Growth
and Income Fund $1,513,351 82.82% $4,306

Administrative expense reimbursement

The Trust, on behalf of Putnam Global Growth and Income Fund,
reimbursed Putnam Management in the following amount for
administrative services during fiscal 1995, including the
following amount for compensation of certain officers of the fund
and contributions to the Putnam Investments, Inc. Profit Sharing
Retirement Plan for their benefit:
<PAGE>
Portion of total
reimbursement for
compensation
Total and
reimbursement contributions
------------- ----------------

Putnam Global Growth
and Income Fund $30 $29

Class A sales charges and contingent deferred sales charges

Putnam Mutual Funds received no sales charges with respect to
class A shares during fiscal 1995.

Investor servicing and custody fees and expenses

During the 1995 fiscal year, Putnam Global Growth and Income Fund
incurred $6,524 in fees and out-of-pocket expenses for investor
servicing and custody services provided by Putnam Fiduciary Trust
Company.

INVESTMENT PERFORMANCE

Standard performance measures
(for the period ended September 30, 1995)
Putnam Global Growth and Income Fund

Class A
Inception date: 1/3/95

Total return NAV* POP**
- --------------------------------------------

Life of class 13.41% 6.87%

*net asset value
**public offering price

ALL FUNDS

Trustee fees

Each Trustee receives a fee for his or her services. Each
Trustee also receives fees for serving as Trustee of other Putnam
funds. The Trustees periodically review their fees to assure
that such fees continue to be appropriate in light of their
responsibilities as well as in relation to fees paid to trustees
of other mutual fund complexes. The Trustees meet monthly over a
two-day period, except in August. The Compensation Committee,
which consists solely of Trustees not affiliated with Putnam
Management and is responsible for recommending Trustee
compensation, estimates that Committee and Trustee meeting time
together with the appropriate preparation requires the equivalent
of at least three business days per Trustee meeting. The
following table shows the year each Trustee was first elected a
Trustee of the Putnam funds, the estimated fees to be paid to
each Trustee by each fund other than Putnam Global Growth and
Income Fund for fiscal 1996, the fees paid to each Trustee by
Putnam Global Growth and Income Fund for fiscal 1995 and the fees
paid to each Trustee by all of the Putnam funds during calendar
year 1995.<PAGE>
[CAPTION]
<TABLE>
COMPENSATION TABLE

Aggregate compensation from*

Putnam Putnam
Putnam Global Growth Emerging Putnam Putnam All
Genesis and Income Markets International Japan Putnam
Trustees/year Fund* Fund Fund* Fund* Fund* funds**
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Jameson A. Baxter/1994 $122 $122 $122 $122 $122 $150,854
Hans H. Estin/1972 122 122 122 122 122 150,854
John A. Hill/1985*** 122 122 122 122 122 149,854
Elizabeth T. Kennan/1992 122 122 122 122 122 148,854
Lawrence J. Lasser/1992 122 122 122 122 122 150,854
Robert E. Patterson/1984 122 122 122 122 122 152,854
Donald S. Perkins/1982 122 122 122 122 122 150,854
William F. Pounds/1971 122 122 122 122 122 149,854
George Putnam/1957 122 122 122 122 122 150,854
George Putnam, III/1984 122 122 122 122 122 150,854
Eli Shapiro/1995**** 122 122 122 122 122 95,372
A.J.C. Smith/1986 122 122 122 122 122 149,854
W. Nicholas Thorndike/1992122 122 122 122 122 152,854
- ------------------------------------------------------------------------------------------------
* Reflects estimated amounts to be paid for fiscal year 1996. Includes an annual retainer and an attendance fee for
each meeting attended.
** Reflects total payments received from all Putnam funds in the most recent calendar year. As of December 31, 1995,
there were 99 funds in the Putnam family.
*** Includes amounts of compensation deferred pursuant to a Trustee Compensation Deferral Plan. The total amount of
deferred compensation payable to Mr. Hill by all Putnam funds as of October 31, 1995 was $26,395.14, including
income earned on such amounts.
**** Elected as a Trustee in April 1995.
</TABLE>
The Trustees have approved Retirement Guidelines for Trustees of
the Putnam funds. These Guidelines provide generally that a
Trustee who retires after reaching age 72 and who has at least 10
years of continuous service will be eligible to receive a
retirement benefit from each Putnam fund for which he or she
served as a Trustee. The amount and form of such benefit is
subject to determination annually by the Trustees and, unless
otherwise determined by the Trustees, will be an annual cash
benefit payable for life equal to one-half of the Trustee
retainer fees paid by each fund at the time of retirement.
Several retired Trustees are currently receiving benefits
pursuant to the Guidelines and it is anticipated that the current
Trustees will receive similar benefits upon their retirement. A
Trustee who retired in calendar 1995 and was eligible to receive
benefits under these Guidelines would have received an annual
benefit of $66,749, based upon the aggregate retainer fees paid
by the Putnam funds for such year. The Trustees reserve the
right to amend or terminate such Guidelines and the related
payments at any time, and may modify or waive the foregoing
eligibility requirements when deemed appropriate.

For additional information concerning the Trustees, see
"Management" in Part II of this SAI.

Distribution fees

The Trust has adopted distribution plans pursuant to Rule 12b-1
under the Investment Company Act of 1940, although the funds are
not currently making any payments pursuant to the plan. The
purpose of the plan is to permit the funds 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 class A 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 attributable to class A shares, subject to the
authority of the Trustees to reduce the amount of payments or to
suspend the class A 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.

Share ownership

At November 30, 1995, the officers and Trustees of the Trust as a
group owned 3.67% of the outstanding shares of Putnam Global
Growth and Income Fund and, except as noted below, to the
knowledge of the Trust no person owned of record or beneficially
5% or more of the shares of a fund.

Putnam Emerging Growth Fund

Shareholder name Percentage
and address owned
-------------------- --------
Putnam Investments Inc.* 100%

Putnam Genesis Fund

Shareholder name Percentage
and address owned
-------------------- --------
Putnam Investments Inc.* 100%

Putnam Global Growth and Income Fund

Shareholder name Percentage
and address owned
-------------------- --------
Putnam Investments Inc.* 96.10%

Putnam International Fund

Shareholder name Percentage
and address owned
-------------------- --------
Putnam Investments Inc.* 100%

Putnam Japan Fund

Shareholder name Percentage
and address owned
-------------------- --------
Putnam Investments Inc.* 100%

* c/o Putnam Investments, One Post Office Square, Boston, MA
02109

ADDITIONAL OFFICERS

In addition to the persons listed as officers of the Trust in
Part II of this SAI, each of the following persons is also a Vice
President of each fund and Vice President of certain of the
Putnam funds. Officers of Putnam Management hold the same
offices in Putnam Management's parent company, Putnam
Investments, Inc.
<PAGE>
Thomas R. Bogan, Senior Vice President of Putnam Management.
Prior to November, 1994, Mr. Bogan was Senior Analyst at Lord,
Abbett & Co.

Peter Carman, Senior Managing Director of Putnam Management.
Prior to August, 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.

David L. King, Senior Vice President of Putnam Management.

Carol C. McMullen, Managing Director of Putnam Management. Prior
to June, 1995, Ms. McMullen was Senior Vice President and Senior
Portfolio Manager of Baring Asset Management.

Jeanne L. Mockard, Senior Vice President of Putnam Management.

John J. Morgan, Jr., Managing Director of Putnam Management.

Hugh H. Mullin, Senior Vice President of Putnam Management.

Patrick O'Donnell, Managing Director of Putnam Management.
Prior to May, 1994, Mr. O'Donnell was the founder and President
of Exeter Research Inc.

Anthony W. Regan, Senior Managing Director of Putnam Management.
Director of Putnam Investments, Inc. Vice President and Trust
Officer of Putnam Fiduciary Trust Company.

Thomas V. Reilly, Managing Director of Putnam Management.

David J. Santos, Vice President of Putnam Management.

Justin M. Scott, Managing Director of Putnam Management.

Sheldon N. Simon, Senior Vice President of Putnam Management.

Kenneth J. Taubes, Senior Vice President of Putnam Management.
Prior to June, 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., One Post Office Square, Boston, MA
02109, are the independent accountants for Putnam International
Fund, Putnam Genesis Fund and Putnam Global Growth and Income
Fund (formerly Putnam Global Utilities Fund), and Price
Waterhouse LLP, 160 Federal Street, Boston, MA, 02110 are the
independent accountants for Putnam Emerging Growth Fund and
Putnam Japan Fund, each 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 Report of Independent
Accountants, financial highlights and financial statements
included in Putnam Global Growth and Income Fund's (formerly
Putnam Global Utilities Fund) Annual Report for the fiscal year
ended September 30, 1995, filed electronically on November 30,
1995 (File No. 811-7237), are incorporated by reference into this
SAI. The financial highlights included in the prospectus and
incorporated by reference into this SAI and the financial
statements incorporated by reference into the prospectus and this
SAI have been so included and incorporated in reliance upon the
report of the independent accountants, given on their authority
as experts in auditing and accounting.<PAGE>

PROSPECTUS
January 1, 1996

Putnam American Renaissance Fund
Putnam Research Fund
INVESTMENT STRATEGY: GROWTH

Putnam Balanced 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 American Renaissance Fund, Putnam
Balanced Fund, Putnam Real Estate Opportunities Fund or Putnam
Research 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 1, 1996 statement of
additional information (the "SAI"), as amended from time to time.
For a free copy of the SAI or other information, call Putnam
Investor Services at 1-800-225-1581. The SAI 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 AMOUNT INVESTED.

BOSTON * LONDON * TOKYO
<PAGE>
ABOUT THE FUNDS

Expenses summary 4
This section describes the sales charges, management fees, and
annual operating expenses that apply to a fund's shares. Use it
to help you estimate the impact of transaction costs on your
investment over time.

Financial highlights 5
Study this table to see, among other things, how a fund performed
each year for the past 10 years or since it began investment
operations if it has been in operation for less than 10 years.

Objectives 8
Read this section to make sure a fund's objective is consistent
with your own.

How the funds pursue their objectives 8
This section explains in detail how a fund seeks its investment
objective.

Common investment policies and techniques; risk factors 13
All investments entail some risk. Read this section to
make sure you understand certain risks that may be involved
when investing in a fund.

How performance is shown 20
This section describes and defines the measures used to assess a
fund's performance. All data are based on a fund's past
investment results and do not predict future performance.

How the funds are managed 20
Consult this section for information about a fund's management,
allocation of a fund's expenses, and how purchases and sales of
securities are made for a fund.

Organization and history 23
In this section, you will learn when a fund was introduced, how
it is organized, how it may offer shares, and who its Trustees
are.

ABOUT YOUR INVESTMENT

How to buy shares 24
This section describes the ways you may purchase shares and tells
you the minimum amounts required to open various types of
accounts. It explains how sales charges are determined and how
you may become eligible for reduced sales charges on shares.

Distribution plan 28
This section tells you what distribution fees are charged against
shares of a fund.

How to sell shares 28
In this section you can learn how to sell shares of a fund,
either directly to the fund or through an investment dealer.

How to exchange shares 29
Find out in this section how you may exchange shares of a fund
for shares of other Putnam funds. The section also explains how
exchanges can be made without sales charges and the conditions
under which sales charges may be required.

How a fund values its shares 30
This section explains how a fund determines the value of its
shares.

How a fund makes distributions to shareholders; tax
information 30
This section describes the various options you have in choosing
how to receive dividends from a fund. It also discusses the
federal tax status of the payments and counsels shareholders to
seek specific advice about their own situation.

ABOUT PUTNAM INVESTMENTS, INC. 32

Read this section to learn more about the companies that provide
the marketing, investment management, and shareholder account
services to Putnam funds and their shareholders.

APPENDIX 33
Securities ratings<PAGE>
About the funds

EXPENSES SUMMARY

Expenses are one of several factors to consider when investing.
The following table summarizes your maximum transaction costs
from investing in a fund and estimated expenses which each fund
expects to incur in the current fiscal year. The examples show
the cumulative expenses attributable to a hypothetical $1,000
investment over specified periods.

Shareholder transaction expenses

Maximum sales charge imposed
on purchases (as a percentage
of offering price) 5.75%

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

* A deferred sales charge of up to 1.00% is assessed on
certain redemptions of shares that were purchased without an
initial sales charge. See "How to buy shares."

Annual fund operating expenses
(as a percentage of average net assets)

Total fund
operating
Other expenses
Management fees expenses (after
(after expense (after expense expense
limitation) limitation) limitation)

American Renaissance 0.00% 1.01% 1.01%
Fund
Balanced Fund 0.20 0.50 0.70
Real Estate
Opportunities Fund 0.50 0.50 1.00
Research Fund 0.00 1.01 1.01

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 the current fiscal year. "Other
expenses" are based on estimated amounts for each fund's current
fiscal year. The estimated annual management fees and "Other
expenses" shown in the table reflect an expense limitation
currently in effect for each of the funds. In the absence of the
expense limitation, estimated management fees, "Other expenses"
and total fund operating expenses would be as follows:

Total Fund
Other operating
Management fees expenses expenses

American Renaissance 0.70% 1.41% 2.11%
Fund
Balanced Fund 0.65 0.50 1.15
Real Estate
Opportunities Fund 0.70 0.50 1.20
Research Fund 0.65 1.41 2.06

Examples

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

American Renaissance Fund $67 $88
Balanced Fund $64 $79
Real Estate Opportunities Fund $67 $88
Research Fund $67 $88

The examples do not represent past or future expense levels.
Actual expenses may be greater or less than those shown. Federal
regulations require the examples to assume a 5% annual return,
but actual annual return varies.

FINANCIAL HIGHLIGHTS

The following tables present per share financial information for
Putnam Balanced Fund and Putnam Real Estate Opportunities Fund.
Putnam American Renaissance Fund and Putnam Research Fund had no
outstanding shares during these periods. This information has
been audited and reported on by the funds' independent
accountants. The "Report of independent accountants" and
financial statements included in the annual report to
shareholders for the 1995 fiscal year for each of Putnam Balanced
Fund and Putnam Real Estate Opportunities Fund are incorporated
by reference into this prospectus. The annual reports for each
of these funds, which contain additional unaudited performance
information, are available without charge upon request.
<PAGE>
Putnam Balanced Fund
Financial highlights
(For a share outstanding throughout the period)

For the period
January 3, 1995
(commencement of operations)
to September 30,
1995

Net asset value, beginning of period $8.50
Investment operations:
Net investment income .23(a)
Net realized and unrealized
gain on investments 1.83(a)
Total from investment operations 2.06(a)
Net asset value, end of period $10.56
Total investment return at
net asset value (%)(b) 24.24(c)
Net assets, end of period (in thousands) $1,951
Ratio of expenses to average net assets (%)(d) .54(a)(c)
Ratio of net investment income 2.44(a)(c)
to average net assets (%)
Portfolio turnover (%) 95.15(c)

(a) Reflects an expense limitation during the period. As a
result of such limitation, expenses for the fund reflect a
reduction of $0.23 per share.
(b) Total investment return assumes dividend reinvestment and
does not reflect the effect of sales charges.
(c) Not annualized.
(d) The ratio of expenses to average net assets includes amounts
paid through expense offset arrangements.
<PAGE>
Putnam Real Estate Opportunities Fund
Financial highlights
(For a share outstanding throughout the period)

For the period
January 3, 1995
(commencement
of operations)
to August 31,
1995

Net asset value, beginning of period $8.50
Investment operations:
Net investment income .30(a)
Net realized and unrealized
gain on investments .69
Total from investment operations .99
Net asset value, end of period $9.49
Total investment return at
net asset value (%)(b) 11.65(c)
Net assets, end of period (in thousands) $1,829
Ratio of expenses to average net assets (%) .48(a)(c)
Ratio of net investment income
to average net assets (%) 3.52(a)(c)
Portfolio turnover (%) 5.35(c)

(a) Reflects an expense limitation in effect during the period.
As a result of such limitation, expenses for the fund
reflect a reduction of $0.21 per share.
(b) Total investment return assumes dividend reinvestment and
does not reflect the effect of sales charges.
(c) Not annualized.<PAGE>
OBJECTIVES

Putnam American Renaissance Fund seeks capital
appreciation.

Putnam Balanced Fund seeks capital growth and current
income.

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 Research Fund seeks 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; risk factors" 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 THE FUNDS PURSUE THEIR OBJECTIVES

Putnam American Renaissance Fund

The fund will invest primarily in common stocks of U.S. companies
that Putnam Investment Management, Inc., the Trust's investment
manager ("Putnam Management"), believes will benefit from major,
long-term trends in the economy, business conditions, consumer
behavior or public perceptions of the environment. Putnam
Management attempts to identify these trends in their early
stages, and then attempts to identify the economic sectors that
may benefit from them. In selecting securities from these
sectors, Putnam Management will consider a variety of factors,
including an issuer's financial strength, competitive position
and projected future earnings. In addition, the fund may also
invest a portion of its assets in securities of companies that,
although not in any of the sectors that Putnam Management
believes may benefit from such trends, are expected by Putnam
Management to experience above-average growth.

The fund is unlike most equity mutual funds in that its
investments will be comprised of a relatively small number of
issuers. Because Putnam Management evaluates securities for the
fund based on their 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. In addition, although the fund will not invest more than
25% of its assets in any one industry, the fund's emphasis on a
relatively limited number of sectors of the economy at any given
time may make the value of fund shares more susceptible to any
single economic, political or regulatory development than the
value of shares of a more widely diversified mutual fund. As a
result, the value of fund shares may fluctuate more than the
value of shares of other equity mutual funds. Achievement of the
fund's goals will be dependent not only on Putnam Management's
ability to select individual investments, but also on Putnam
Management's ability to accurately identify the long-term trends
described above and the economic sectors that will benefit from
those trends.

Putnam Management expects that under normal market conditions the
fund will invest primarily in securities of issuers with equity
market capitalizations above $1 billion. However, the fund may
also invest in small- to medium-sized companies that have equity
market capitalizations below this level. These companies will
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.

Common stocks 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 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 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; risk factors" 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 equity market
capitalizations in excess of $1 billion, the fund may also invest
in small- to medium-sized companies that have equity market
capitalizations below this level. These companies 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 of 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 ("S&P") or Moody's
Investors Service, Inc. ("Moody's"), or in 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; risk factors -- 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; risk factors" below.

<PAGE>
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; risk factors" 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, difficulties in
completing 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.

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 changes in 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.

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 an 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.

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 "How a fund makes distributions to shareholders;
tax information" below.

Putnam Research Fund

The fund invests primarily in common stocks recommended by Putnam
Management's Equity Research Department as having the greatest
potential for capital appreciation. Because the analysts in
Putnam Management's Equity Research Department emphasize
fundamental analysis, Putnam Management, when selecting
securities for the fund, will focus primarily on individual
securities rather than sector or industry weightings.
Notwithstanding this focus on individual securities, Putnam
Management currently expects that the fund's portfolio will
invest in securities representing most (and at times possibly
all) of the sectors included in the Standard & Poor's 500
Composite Stock Price Index, although the fund is not an index
fund and its portfolio is not intended to replicate the index.

Putnam Management expects that under normal market conditions the
fund will invest primarily in securities of issuers with market
capitalizations above $500 million. From time to time, however,
a portion of the fund's assets may be invested in securities of
companies with equity market capitalizations below this level.
These 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 investment policies and techniques; risk factors

Foreign investments

Each fund may invest up to 20% of its assets in securities
principally traded in foreign markets. Each fund may also
purchase Eurodollar certificates of deposit without regard to the
20% limit. Since foreign securities are normally denominated and
traded in foreign currencies, the values 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 with 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 those 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 that could affect the
value of 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
investments in securities of certain issuers located in those
foreign countries. Special tax considerations apply to foreign
securities.

The risks described above are typically increased for investments
in securities principally traded in, or issued by issuers located
in, underdeveloped and developing nations, which are sometimes
referred to as "emerging markets."

Each fund may buy or sell foreign currencies, foreign currency
futures contracts, foreign currency forward contracts and put and
call options on foreign currencies for hedging purposes in
connection with its foreign investments.

A more detailed explanation of foreign investments, and the risks
and special tax considerations associated with them, is included
in the SAI.

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" and may include securities in
default. Securities rated Baa or BBB, while considered
investment-grade, are more vulnerable to adverse economic
conditions than securities in the higher rating 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 income and
principal. 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.

<PAGE>
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 all or a major portion. 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 these securities when Putnam Management
believes it advisable to do so or may be able to sell these
securities only at prices lower than if these securities were
more widely held. Under these 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
these securities, a fund may be required to participate in
various legal proceedings or take possession of and manage assets
securing the issuer's obligations on such securities. This could
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 values of zero-coupon bonds and
payment-in-kind bonds are subject to greater fluctuation in
response to changes in market interest rates than bonds that pay
interest in cash currently. Both zero-coupon bonds and payment-
in-kind bonds allow an issuer to avoid the need to generate cash <PAGE>
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 nonetheless is required to accrue interest income on these
investments and to distribute the interest income at least
annually to shareholders. Thus, a fund could be required at
times to liquidate other investments in order to satisfy its
distribution requirements.

Certain securities held by a fund may permit the issuer at its
option to "call," or redeem, its securities. If an issuer were
to redeem securities held by a fund during a time of declining
interest rates, 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 SAI.

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 markups and other
transaction costs on the sale of securities and reinvestment in
other securities. These transactions may result in realization
of taxable capital gains. Portfolio turnover rates for the life
of Putnam Balanced Fund and Putnam Real Estate Opportunities Fund
are shown in the section, "Financial highlights." While it is
impossible to predict portfolio turnover rates for Putnam
American Renaissance Fund and Putnam Research Fund, which
commenced operations on October 2, 1995, Putnam Management, based
on its experience, believes that such rates will not exceed 200%
for each fund.

Financial futures and options. Each fund may buy and sell
financial futures contracts on stock indexes and foreign
currencies, and Putnam Balanced Fund may buy and sell financial
future 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 security or index at an agreed price
on a specified future date. Depending on the change in value of
the security or index between the time the fund enters into and
terminates an index future transaction, the fund realizes a gain
or loss. In addition to or as an alternative to purchasing or
selling index futures, the fund may buy and sell call and put
options on index futures or stock indexes. The fund may engage
in index futures and options transactions for hedging purposes
and for non-hedging purposes, such as to earn additional income.

The use of index futures and related options involves certain
special risks. Futures and options transactions involve costs
and may result in losses.

Certain risks arise because of the possibility of imperfect
correlations between movements in the prices of index futures and
options and movements in the prices of the underlying stock index
or of the portfolio securities that are the subject of the hedge.
The successful use of the strategies described above further
depends on Putnam Management's ability to forecast market
movements correctly.

Other risks arise from the potential inability to close out index
futures or options positions. There can be no assurance that a
liquid secondary market will exist for any index future or option
at a particular time. The use of futures and options
transactions for purposes other than hedging entails greater
risks. Certain provisions of the Internal Revenue Code and
certain regulatory requirements may limit the use of index
futures and options transactions.

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

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.

<PAGE>
Each fund may also buy and sell put and call options for hedging
purposes. From time to time, each fund may also 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.

Defensive strategies

At times Putnam Management may judge that conditions in the
securities markets make pursuing the basic investment strategy of
a fund 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. It is
impossible to predict when, or for how long, a fund will use
alternative strategies.

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.

<PAGE>
Derivatives

Certain of the instruments in which each fund will invest, such
as futures contracts, options and forward contracts, are
considered to be "derivatives." Derivatives are financial
instruments whose value depends upon, or is derived from, the
value of an underlying asset, such as a security or an index.
Further information about these instruments and the risks
involved in their use is included elsewhere in this prospectus
and in the SAI.

Limiting investment risk

Specific investment restrictions help each fund limit investment
risks for its shareholders. These restrictions prohibit each
fund, with respect to 75% of its total assets, from acquiring
more than 10% of the voting securities of any issuer.* They also
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;* 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 SAI 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 SAI, the investment
policies described in this prospectus and in the SAI 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 the fund. "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 a 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 the sales
charge were used.

All data are based on past investment results and do 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
the investor purchases. 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 with 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 that of various indexes. See the SAI.

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.

Each fund pays Putnam Management a quarterly fee for these
services based on the fund's average net assets.

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 and Putnam Research 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; and Putnam American
Renaissance Fund and Putnam Real Estate Opportunities 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.

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 June
30, 1996 for Putnam American Renaissance Fund and Putnam Research
Fund, and through May 31, 1996 for Putnam Balanced Fund and
Putnam Real Estate Opportunities Fund, 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 American Renaissance Fund, Putnam Real Estate
Opportunities Fund and Putnam Research Fund, 1.00%, and Putnam
Balanced Fund, 0.70%. For the purpose of determining any such
limitation on Putnam Management's compensation, fund expenses
shall not reflect the application of credits related to brokerage
service and expense offset arrangements that may reduce
designated fund expenses. With Trustee approval, these expense
limitations may be terminated earlier, in which event
shareholders would be notified and this prospectus would be
revised.

The following officers of Putnam Management have had primary
responsibility for the day-to-day management of the indicated
funds' portfolios since the year stated below:

Business experience
Year (at least 5 years)
------ -----------------
Thomas R. Bogan 1995 Employed as an investment
Senior Vice President professional by Putnam
Research Fund Management since 1994.
Prior to November, 1994,
Mr. Bogan was Senior
Analyst of Lord, Abbett & Co.

<PAGE>
Carol C. McMullen 1995 Employed as an investment
Managing Director professional by Putnam
American Renaissance Management since 1995. Prior
Fund to June, 1995, Ms. McMullen
was Senior Vice President and
Senior Portfolio Manager of
Baring Asset Management.

Jeanne L. Mockard 1995 Employed as an investment
Senior Vice President professional by Putnam
Real Estate Opportunities Management since 1990.
Fund

Patrick O'Donnell 1995 Employed as an investment
Managing Director professional by Putnam
Research Fund Management since 1994.
Prior to May, 1994, Mr.
O'Donnell was the founder and
President of Exeter Research
Inc.

David J. Santos 1995 Employed as an investment
Vice President professional by Putnam
Balanced Fund Management since 1986.

Kenneth J. Taubes 1995 Employed as an investment
Senior Vice President professional by Putnam
Balanced Fund Management since 1991. Prior
to June, 1991, Mr. Taubes
was
Senior Vice President of
the Finance Division of U.S. Trust
Company.

Each fund pays its share of all expenses not assumed by Putnam
Management, including Trustees' fees, auditing, legal, custodial,
investor servicing and shareholder reporting expenses, and
payments under its distribution plans. 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 and charged to the funds and any other portfolios
of the Trust 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 a portion 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
November 30, 1995, Putnam Investments, Inc. owned more than 25%
of the shares of each of the funds and therefore may be deemed to
"control" each of the funds. Prior to January 6, 1995, the Trust
was known as Putnam Equity Funds.

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 be divided without
shareholder approval into two or more series of shares
representing separate investment portfolios and are currently
divided into eleven series of shares. Only shares of Putnam
American Renaissance Fund, Putnam Balanced Fund, Putnam Real
Estate Opportunities Fund and Putnam Research Fund are offered by
this prospectus.

Any such series of shares may be divided without shareholder
approval into two or more classes of shares having such
preferences and special or relative rights and privileges as the
Trustees determine. The Trustees currently have authorized the
issuance of four classes of shares. Only class A shares are
currently being offered by this prospectus. Each fund may also
offer other classes of shares with different sales charges and
expenses. Because of these different sales charges and expenses,
the investment performance of the classes will vary. For more
information, including your eligibility to purchase any other
class of shares, contact your investment dealer or Putnam Mutual
Funds (at 1-800-225-1581).

Each share has one vote, with fractional shares voting
proportionally. Shares of each fund vote together as a single
class, except when otherwise 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. A fund
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.
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 Trustees of the Trust: 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, Massachusetts Institute of Technology; 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 Emeritus and Professor, 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.; Eli Shapiro, Alfred P. Sloan
Professor of Management, Emeritus, Alfred P. Sloan School of
Management, Massachusetts Institute of Technology; 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 Data General
Corporation, Bradley Real Estate, Inc. and Providence Journal Co.
Also, Trustee of Massachusetts General Hospital and Eastern
Utilities Associates. The Trustees of the Trust are also
Trustees of the other Putnam funds. Those marked with an
asterisk (*) are or may be deemed to be "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 write a check for the amount you wish to invest, payable
to the fund. Return the completed form and check 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 or savings 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 that varies depending on the size of your purchase.
The fund receives the net asset value. The sales charge is
allocated between your investment dealer and Putnam Mutual Funds
as shown in the following table, except when Putnam Mutual Funds,
in its discretion, allocates the entire amount to your investment
dealer.

Under 50,000 6.10% 5.75% 5.00%
50,000 but under 100,000 4.71 4.50 3.75
100,000 but under 250,000 3.63 3.50 2.75
250,000 but under 500,000 2.56 2.50 2.00
500,000 but under 1,000,000 2.04 2.00 1.75
- -----------------------------------------------------------------

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, will be imposed if you
redeem these 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, there are no sales charges on shares purchased by
participant-directed employee benefit plans with at least 200
eligible employees.

Shares purchased by certain investors investing $1 million or
more who have made arrangements with Putnam Mutual Funds and
whose dealer of record waived the commission as described below
are not subject to the CDSC. In determining whether a CDSC is
payable, 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 SAI 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. Each subsequent one-year measuring
period for these purposes will begin 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 with at least 200 eligible
employees), Putnam Mutual Funds pays commissions during each one-
year measuring period, determined as described above, at the rate
of 1.00% of the first $2 million, 0.80% of the next $1 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 SAI.

A participant-directed employee benefit plan participating in a
"multi-fund" program approved by Putnam Mutual Funds may include
amounts invested in the other mutual funds participating in such
program for purposes of determining whether the plan may purchase
shares at net asset value. These investments will also be
included for purposes of the discount privileges and programs
described above.

Each fund may sell shares at net asset value without an initial
sales charge or a CDSC to the Trust's current and retired
Trustees (and their families), current and retired employees (and
their families) of Putnam Management and affiliates, registered
representatives and other employees (and their families) of
broker-dealers having sales agreements with Putnam Mutual Funds,
employees (and their families) of financial institutions having
sales agreements with Putnam Mutual Funds (or otherwise having an
arrangement with a broker-dealer or financial institution with
respect to sales of fund shares), financial institution trust
departments investing an aggregate of $1 million or more in
Putnam funds, clients of certain administrators of tax-qualified
plans, tax-qualified plans when proceeds from repayments of loans
to participants are invested (or reinvested) in Putnam funds,
"wrap accounts" for the benefit of clients of broker-dealers,
financial institutions or financial planners adhering to certain
standards established by Putnam Mutual Funds, and investors
meeting certain requirements who sold shares of certain Putnam
closed-end funds pursuant to a tender offer by the closed-end
fund.

In addition, each fund may sell shares at net asset value without
an initial sales charge or a CDSC in connection with the
acquisition by that fund of assets of an investment company or
personal holding company. The CDSC will be waived on redemptions
of shares arising out of the death or post-purchase disability of
a shareholder or settlor of a living trust account, and on
redemptions in connection with certain withdrawals from IRA or
other retirement plans. Up to 12% of the value of shares subject
to a systematic withdrawal plan may also be redeemed each year
without a CDSC. The SAI contains additional information about
purchasing shares of a fund's shares at reduced sales charges.

Shareholders of other Putnam funds may be entitled to exchange
their shares for, or reinvest distributions from their funds in,
shares of a fund 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 will from time to time, at its expense,
provide additional promotional incentives or payments to dealers
that sell shares of the Putnam funds. These incentives or
payments may include payments for travel expenses, including
lodging, incurred in connection with trips taken by invited
registered representatives and their guests to locations within
and outside the United States for meetings or seminars of a
business nature. In some instances, these incentives or payments
may be offered only to certain dealers who have sold or may sell
significant amounts of shares.

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 SAI 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 this event, 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 you 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. The form is
available from 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, the
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 SAI to find out more
about the exchange privilege.

HOW A FUND VALUES ITS SHARES

A 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 valued at market value. Short-term investments
that will mature in 60 days or less are valued at amortized cost,
which approximates market value. All other securities and assets
are valued at their fair value following procedures approved by
the Trustees.

HOW A FUND MAKES DISTRIBUTIONS TO SHAREHOLDERS; TAX INFORMATION

Putnam American Renaissance Fund and Putnam Research Fund
distribute any net investment income and any net realized capital
gains at least annually. Putnam Balanced Fund and Putnam Real
Estate Opportunities Fund distribute any net investment income at
least quarterly and any net realized capital gains at least
annually. Capital gains distributions are made after applying
any available capital loss carryovers.

You can choose from three distribution options:

- Reinvest all distributions from a fund in additional shares
of that fund without a sales charge;

<PAGE>
- 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

- 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.

Each fund intends to qualify as a "regulated investment company"
for federal income tax purposes and to meet all other
requirements 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.

For corporate shareholders, any distributions received by Putnam
Real Estate Opportunities Fund from REITs 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 Trust and
of other Putnam funds. Putnam Fiduciary Trust Company is the
Trust's custodian. Putnam Investor Services, a division of
Putnam Fiduciary Trust Company, is the Trust's 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

The following rating services describe rated securities as
follows:

Moody's Investors Service, Inc.

Aaa--Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and
are generally referred to as "gilt-edged." 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 risk appear somewhat larger than
the 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

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.

BB-B-CCC-CC-C--Debt rated 'BB', 'B', 'CCC', 'CC', and 'C' is
regarded as having predominantly speculative characteristics with
respect to capacity to pay interest and repay principal. 'BB'
indicates the least degree of speculation and 'C' the highest.
While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or
major exposures to adverse conditions.

BB -- Debt rated `BB' has less near-term vulnerability to default
than other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial, or
economic conditions which could lead to inadequate capacity to
meet timely interest and principal payments. The `BB' rating
category is also used for debt subordinated to senior debt that
is assigned an actual or implied `BBB-' rating.

B -- Debt rated `B' has a greater vulnerability to default but
currently has the capacity to meet interest payments and
principal repayments. Adverse business, financial, or economic
conditions will likely impair capacity or willingness to pay
interest and repay principal. The `B' rating category is also
used for debt subordinated to senior debt that is assigned an
actual or implied `BB' or `BB-' rating.

CCC -- Debt rated `CCC' has a currently identifiable
vulnerability to default, and is dependent upon favorable
business, financial, and economic conditions to meet timely
payment of interest and repayment of principal. In the event of
adverse business, financial, or economic conditions, it is not
likely to have the capacity to pay interest and repay principal.
The `CCC' rating category is also used for debt subordinated to
senior debt that is assigned an actual or implied `B' or `B-'
rating.

CC -- The rating `CC' typically is applied to debt subordinated
to senior debt that is assigned an actual or implied `CCC'-
rating.

C -- The rating `C' typically is applied to debt subordinated to
senior debt which is assigned an actual or implied `CCC-' debt
rating. The `C' rating may be used to cover a situation where
bankruptcy petition has been filed, but debt service payments are
continued.

D -- Bonds rated D are in payment default. The D rating category
is used when interest payments or principal payments are not made
on the date due even if the applicable grace period has not
expired, unless Standard & Poor's believes that such payments
will be made during such grace period. The D rating also will be
used on the filing of a bankruptcy petition if debt service
payments are jeopardized.

<PAGE>
PUTNAM AMERICAN RENAISSANCE FUND
PUTNAM BALANCED FUND
PUTNAM REAL ESTATE OPPORTUNITIES FUND
PUTNAM RESEARCH 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

Putnam Balanced Fund
Putnam Real Estate Opportunities Fund

Coopers & Lybrand L.L.P.
One Post Office Square
Boston, MA 02109
<PAGE>
Putnam American Renaissance Fund
Putnam Research Fund

Price Waterhouse LLP
160 Federal Street
Boston, MA 02110

PUTNAMINVESTMENTS
One Post Office Square
Boston, Massachusetts 02109
Toll-free 1-800-225-1581

H:\USERS\ACIMAN\B48497Z.1
PROSPECTUS
January 1, 1996

Putnam International New Opportunities Fund
Class A, B and M shares
INVESTMENT STRATEGY: GROWTH

This prospectus explains concisely what you should know before
investing in Putnam International New Opportunities Fund (the
"fund"), 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 1, 1996
statement of additional information (the "SAI"), as amended from
time to time. For a free copy of the SAI or other information,
call Putnam Investor Services at 1-800-225-1581. The SAI has
been filed with the Securities and Exchange Commission and is
incorporated into this prospectus by reference.

SHARES OF THE FUND 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 AMOUNT INVESTED.

BOSTON * LONDON * TOKYO
<PAGE>
ABOUT THE FUND

Expenses summary 4
This section describes the sales charges, management fees, and
annual operating expenses that apply to the fund's various
classes of shares. Use it to help you estimate the impact of
transaction costs on your investment over time.

Financial highlights 5
Study this table to see, among other things, how the fund
performed each year for the past 10 years or since it began
investment operations if it has been in operation for less than
10 years.

Objective 7
Read this section to make sure the fund's objective is consistent
with your own.

How the fund pursues its objective 7
This section explains in detail how the fund seeks its investment
objective.

Risk factors. All investments entail some risk. Read 8
this section to make sure you understand certain risks that
may be involved when investing in the fund.

How performance is shown 15
This section describes and defines the measures used to assess
the fund's performance. All data are based on the fund's past
investment results and do not predict future performance.

How the fund is managed 16
Consult this section for information about the fund's management,
allocation of the fund's expenses, and how purchases and sales of
securities are made for the fund.

Organization and history 17
In this section, you will learn when the fund was introduced, how
it is organized, how it may offer shares, and who its Trustees
are.

<PAGE>
ABOUT YOUR INVESTMENT

Alternative sales arrangements 18
Read this section for descriptions of the classes of shares this
prospectus offers and for points you should consider when making
your choice.

How to buy shares 19
This section describes the ways you may purchase shares and tells
you the minimum amounts required to open various types of
accounts. It explains how sales charges are determined and how
you may become eligible for reduced sales charges on each class
of shares.

Distribution plans 24
This section tells you what distribution fees are charged against
each class of shares.

How to sell shares 26
In this section you can learn how to sell shares of the fund,
either directly to the fund or through an investment dealer.

How to exchange shares 27
Find out in this section how you may exchange shares of the fund
for shares of other Putnam funds. The section also explains how
exchanges can be made without sales charges and the conditions
under which sales charges may be required.

How the fund values its shares 28
This section explains how the fund determines the value of its
shares.

How the fund makes distributions to shareholders; tax
information 28
This section describes the various options you have in choosing
how to receive dividends from the fund. It also discusses the
federal tax status of the payments and counsels shareholders to
seek specific advise about their own situation.

ABOUT PUTNAM INVESTMENTS, INC. 30

Read this section to learn more about the companies that provide
the marketing, investment management, and shareholder account
services to Putnam funds and their shareholders.

<PAGE>
About the fund

EXPENSES SUMMARY

Expenses are one of several factors to consider when investing.
The following table summarizes your maximum transaction costs
from investing in the fund and estimated expenses for the current
fiscal year. The examples show the cumulative expenses
attributable to a hypothetical $1,000 investment over specified
periods.

Class A Class B Class M
shares shares shares
Shareholder transaction
expenses

Maximum sales charge
imposed on purchases
(as a percentage of
offering price) 5.75% NONE* 3.50%*

Deferred sales charge 5.0% in the first
(as a percentage year, declining
of the lower of to 1.0% in the
original purchase sixth year, and
price or redemption eliminated
proceeds) NONE** thereafter NONE

Annual fund operating expenses
(as a percentage of average net assets)
Total fund
Management 12b-1 Other operating
feesfees expenses expenses
---------- ----- -------- ----------

Class A 1.20% 0.25% 0.48% 1.93%
Class B 1.20% 1.00% 0.48% 2.68%
Class M 1.20% 0.75% 0.48% 2.43%

The table is provided to help you understand the expenses of
investing in the fund and your share of the operating expenses
that the fund expects to incur during its current fiscal year.
The 12b-1 fees for the fund reflect amounts currently payable
under the fund's distribution plans. "Other expenses" are based
on estimated expenses the fund expects to incur during the
current fiscal year.

Examples

Your investment of $1,000 would incur the following expenses,
assuming 5% annual return and, except as indicated, redemption at
the end of each period:
1 year 3 years

Class A $86 $115
Class B $77 $113
Class B (no redemption) $27 $83
Class M $59 $108

* The higher 12b-1 fees borne by class B and class M shares
may cause long-term shareholders to pay more than the
economic equivalent of the maximum permitted front-end
sales charge on class A shares.

** A deferred sales charge of up to 1.00% is assessed on
certain redemptions of class A shares that were purchased
without an initial sales charge. See "How to buy shares -
Class A shares."

FINANCIAL HIGHLIGHTS

The following table presents per share financial information for
class A, class B and class M shares. This information has been
audited and reported on by the fund's independent accountants.
The "Report of independent accountants" and financial statements
included in the fund's annual report to shareholders for the 1995
fiscal period are incorporated by reference into this prospectus.
The fund's annual report, which contains additional unaudited
performance information, is available without charge upon
request.<PAGE>
[CAPTION]
<TABLE>

FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)

July 21, 1995 July 21, 1995January 3, 1995
(commencement (commencement (commencement
of operations) to of operations) to of operations) to
September 30 September 30September 30
1995 1995 1995
Class M Class B Class A
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $10.25 10.25 8.50
INVESTMENT OPERATIONS
Net investment income(a) - (.01) .02
Net realized and unrealized
loss on investments .04 .04 1.77
TOTAL FROM INVESTMENT
OPERATIONS
NET ASSET VALUE,
END OF PERIOD 10.29 10.29 10.29
TOTAL INVESTMENT RETURN AT
NET ASSET VALUE (%)(b)(c) 0.39
0.29 21.06
NET ASSETS, END OF PERIOD
(in thousands) $1,259 $7,053 $15,137
Ratio of expenses to
average net assets (%) (a)(c)(d) .79 .83 1.23
Ratio of net investment income
to average net assets (%)(a)(c) (.15) (.20) .86
Portfolio turnover (%)(c) 9.24 9.24 9.24

Per share net investment income has been determined on the basis of the weighted
average number of shares outstanding during the period.
(a) Reflects an expense limitation in effect during the period. As a result of such
limitation, expenses for the fund reflect a reduction of $0.02 per share.
(b) Total investment return assumes dividend reinvestment and does not reflect the
effects of sales charges.
(c) Not annualized.
(d) The ratio of expenses to average net assets for the year ended September 30, 1995
includes amounts paid through expense offset arrangements.<PAGE>
OBJECTIVE

</TABLE>
Putnam International New Opportunities Fund seeks long-term
capital appreciation. The fund is not intended to be a complete
investment program, and there is no assurance that the fund will
achieve its objective.

HOW THE FUND PURSUES ITS OBJECTIVE

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 expects to
invest substantially all of its total assets, other than cash or
short-term investments held pending investments in common stocks,
preferred stocks, convertible preferred stocks, convertible bonds
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 at least 65% of its assets in at least three
different countries other than the United States.

Putnam Investment Management, Inc., the fund's investment manager
("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 "Risk
factors" below.

Companies in the fund's portfolio may include small, rapidly
growing companies with equity market capitalizations of less than
$1 billion. These 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.

The fund invests primarily in common stocks and other equity
securities, but may also invest up to 10% of its total assets in
non-convertible debt securities if Putnam Management believes
they would help achieve the fund's objective of long-term capital
appreciation. The fund may invest in securities in the lower-
rated categories. Securities in the lower-rated categories are
considered to be predominantly speculative and may be in default.
See "Risk factors -- Lower-rated fixed-income securities." The
fund may also hold a portion of its assets in cash or high-
quality money market instruments.

Risk factors

Foreign investments

The fund may invest without limit in securities principally
traded in foreign markets. Since foreign securities are normally
denominated and traded in foreign currencies, the values of fund
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 with 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 those 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 fund assets held abroad) and expenses not present in the
settlement of domestic investments.

In addition, there may be a possibility of nationalization or
expropriation of assets, imposition of currency exchange
controls, confiscatory taxation, political or financial
instability and diplomatic developments that could affect the
value of investments in certain foreign countries.

The risks described above, including the risks of nationalization
and expropriation of assets, are typically increased to the
extent that the 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 structure 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 and
expropriated the assets of private companies.

The currencies of certain emerging market countries have
experienced a steady devaluation relative to the U.S. dollar, and
continued devaluations may adversely affect the value of a fund's
assets denominated in such currencies. Many emerging market
companies have experienced substantial, and in some periods
extremely high, rates of inflation for many years, and continued
inflation may adversely affect the economies and securities
markets of such countries.

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.

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").

The 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. The 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, the 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. The fund may also purchase exchange-listed
and over-the-counter call and put options on foreign currency
futures contracts and on foreign currencies.

The 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, the 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, the fund may also purchase or
sell foreign currencies on a spot basis.

The currencies of certain foreign countries are not widely
traded, and as a result, foreign currency exchange transactions
may not be available with respect to such currencies.

The 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 the fund. Cross hedging transactions by the
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 the fund's investments may be denominated. The fund's
ability to engage in hedging transactions may be limited by tax
considerations. The fund's hedging transactions may affect the
character or amount of its distributions.

A more detailed explanation of foreign investments, and the risks
and special tax considerations associated with them, is included
in the SAI.

Investments in fixed-income securities

Although the fund will invest primarily in common stocks, it may
also invest in both higher-rated and lower-rated fixed-income
securities, and is not subject to any restrictions based on
credit ratings. The values of fixed-income securities generally
fluctuate in response to changes in interest rates. Thus, a
decrease in interest rates will generally result in an increase
in the value of the fund's fixed-income investments. Conversely,
during periods of rising interest rates, the value of the fund's
fixed-income investments will generally decline. The values of
lower-rated fixed-income securities, commonly known as "junk
bonds," generally fluctuate more than those of higher-rated
fixed-income securities. Securities in the lower rating
categories may, depending on the rating, have large uncertainties
or major risk exposure to adverse conditions, and may include
securities in default. The rating services' descriptions of
securities in the various rating categories, including the
speculative characteristics of securities in the lower rating
categories, are set forth in the SAI.

The lower ratings of these securities 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 the fund invests in securities in
the lower rating categories, the achievement of the fund's goals
is more dependent on Putnam Management's ability than would be
the case if the fund were investing in securities in the higher
rating categories.

For additional information concerning the risks associated with
investment by the fund in securities in the lower rating
categories, see the SAI.

Portfolio turnover

The length of time the fund has held a particular security is not
generally a consideration in investment decisions. A change in
the securities held by the fund is known as "portfolio turnover."
As a result of the fund's investment policies, under certain
market conditions the fund's portfolio turnover rate may be
higher than that of other mutual funds.

Portfolio turnover generally involves some expense to the fund,
including brokerage commissions or dealer markups and other
transaction costs on the sale of securities and reinvestment in
other securities. These transactions may result in realization
of taxable capital gains. While it is impossible to predict
portfolio turnover rates, Putnam Management believes that such
rate will not exceed 200%. The portfolio turnover rate for the
fund's first fiscal period is shown in the section "Financial
highlights."

Financial futures and related options

The fund may buy and sell financial futures contracts on stock
indexes and foreign currencies. A futures contract is a contract
to buy or sell units of a particular stock index, or a certain
amount of a foreign currency, at an agreed price on a specified
future date. Depending on the change in value of the index or
currency between the time the fund enters into and terminates a
futures contract, the fund realizes a gain or loss. In addition
to or as an alternative to purchasing or selling futures
contracts, the fund may buy and sell call and put options on
futures contracts or on stock indexes. The fund may engage in
financial futures and options transactions for hedging purposes
and for non-hedging purposes, such as to earn additional income
to adjust its exposure to relevant markets.

The use of futures and options includes certain special risks.
Futures and options transactions involve costs and may result in
losses.

Certain risks arise because of the possibility of imperfect
correlations between movements in the prices of financial futures
and options and movements in the prices of the underlying stock
index or currency 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 movements correctly.

Other risks arise from the potential inability to close out
futures or options positions. There can be no assurance that a
liquid secondary market will exist for any futures contract or
option at a particular time. The 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 entails greater risks. Because the markets for options
and futures on foreign currencies are relatively new and still
developing, the 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 the 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 SAI.

Options. The 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. The fund receives a premium from writing a
call or put option, which increases the return if the option
expires unexercised or is closed out at a net profit.

When the 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, the
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. The 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.

The fund may also buy and sell put and call options for hedging
purposes. From time to time, the fund may also 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 fund
assets. The use of these strategies may be limited by applicable
law.

A more detailed explanation of options transactions, including
the risks associated with them, is included in the SAI.

Securities loans, repurchase agreements and forward commitments

The 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. The 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 the fund if the other party
should default on its obligation and the fund is delayed or
prevented from recovering the collateral or completing the
transaction.

Defensive strategies

At times Putnam Management may judge that conditions in the
securities markets make pursuing the basic investment strategy of
the fund inconsistent with the best interests of the fund's
shareholders. At such times Putnam Management may temporarily
use alternative strategies, primarily designed to reduce
fluctuations in the value of the fund's assets. In implementing
these "defensive" strategies, the fund may invest without limit
in cash or money market instruments, preferred stocks, debt
securities issued by the U.S. government or any foreign
government or their agencies or instrumentalities, or in any
other securities Putnam Management considers consistent with such
defensive strategies. In addition, when pursuing such defensive
strategies, the fund may invest without limit in securities
primarily traded in U.S. markets. It is impossible to predict
when, or for how long, the fund will use these alternative
strategies.

Diversification

The fund is a "diversified" investment company under the
Investment Company Act of 1940. This means that with respect to
75% of its total assets the 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 the fund's total
assets is not subject to this restriction. To the extent the fund
invests a significant portion of its assets in the securities of
a particular issuer, the fund will be subject to an increased
risk of loss if the market value of such issuer's securities
declines.

Derivatives

Certain of the instruments in which the fund will invest, such as
futures contracts, options and forward contracts, are considered
to be "derivatives." Derivatives are financial instruments whose
value depends upon, or is derived from, the value of an
underlying asset, such as a security or an index. Although the
fund may use derivatives for purposes other than hedging, such as
to earn additional income, the fund does not consider its use of
derivatives for such purposes to be speculative because it
expects, whenever appropriate, to either cover its positions or
segregate assets sufficient to pay any potential liabilities
resulting from such investments. Further information about these
instruments and the risks involved in their use is included
elsewhere in this prospectus and in the SAI.

Limiting investment risk

Specific investment restrictions help the fund limit investment
risks for its shareholders. These restrictions prohibit the
fund, with respect to 75% of its total assets, from acquiring
more than 10% of the voting securities of any, issuer.* They
also prohibit the 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);*

(b) 25% of its total assets in any one industry;* or

Restrictions marked with an asterisk (*) above are summaries of
fundamental investment policies. See the SAI for the full text
of these policies and the fund's other fundamental investment
policies. Except for investment policies designated as
fundamental in this prospectus or the SAI, the investment
policies described in this prospectus and in the SAI 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 the
fund's investment objective without shareholder approval.

HOW PERFORMANCE IS SHOWN

The fund's investment performance may from time to time be
included in advertisements about the fund. "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
(in the case of class A and class M shares) or reflecting the
deduction of any applicable contingent deferred sales charge (in
the case of class B shares). Total return may also be presented
for other periods or based on investment at reduced sales charge
levels. Any quotation of investment performance not reflecting
the maximum initial sales charge or contingent deferred sales
charge would be reduced if the sales charge were used.

All data are based on past investment results and do not predict
future performance.

Investment performance, which will vary, is based on many
factors, including market conditions, the composition of the
fund's portfolio, the fund's operating expenses and which class
of shares the investor purchases. Investment performance also
often reflects the risks associated with the fund's investment
objective and policies. These factors should be considered when
comparing the fund's investment results with 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. The fund's performance may be
compared to that of various indexes. See the SAI.

HOW THE FUND IS MANAGED

The Trustees of the Trust are responsible for generally
overseeing the conduct of the Trust's business. Subject to such
policies as the Trustees may determine, Putnam Management
furnishes a continuing investment program for the fund and makes
investment decisions on its behalf. Subject to the control of
the Trustees, Putnam Management also manages the fund's other
affairs and business.

The fund pays a quarterly fee to Putnam Management based on the
average net assets of the fund, as determined at the close of
each business day during the quarter, at the annual rate,
expressed as a percentage of the fund's average net assets, of
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.

The following officer of Putnam Management has had primary
responsibility for the day-to-day management of the fund's
portfolio since the year stated below:

Business experience
Year (at least 5 years)

Justin M. Scott 1995 Employed as an investment
Managing Director professional by Putnam
Management since 1988.

The fund pays all expenses not assumed by Putnam Management,
including Trustees' fees, auditing, legal, custodial, investor
servicing and shareholder reporting expenses, and payments under
its distribution plans (which are in turn allocated to the
relevant class of shares). Expenses of the Trust directly
charged or attributable to the fund will be paid from the assets
of the fund. General expenses of the Trust will be allocated
among and charged to the assets of the fund and any other
portfolio of the Trust on a basis that the Trustees deem fair and
equitable, which may be based on the relative assets of the fund
or the nature of the services performed and relative
applicability to the fund and other portfolios of the Trust. The
fund also reimburses Putnam Management for the compensation and
related expenses of certain officers of the fund and their staff
who provide administrative services to the fund. The total
reimbursement is determined annually by the Trustees.

Putnam Management places all orders for purchases and sales of
the fund's 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 fund (and, if permitted by law, of the
other Putnam funds) as a factor in the selection of broker-
dealers.

ORGANIZATION AND HISTORY

Putnam International New Opportunities Fund is a series of Putnam
Investment Funds, 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.
Prior to January 6, 1995, the Trust was known as Putnam Equity
Funds. As of November 30, 1995, Putnam Investments, Inc. owned
more than 25% of the shares of the fund and therefore may be
deemed to "control" the fund.

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 fund's shares are currently divided
into three classes. Only the fund's class A, B and M shares are
offered by this prospectus. The fund may also offer other
classes of shares with different sales charges and expenses.
Because of these different sales charges and expenses, the
investment performance of the classes will vary. For more
information, including your eligibility to purchase any other
class of shares, contact your investment dealer or Putnam Mutual
Funds (at 1-800-225-1581).

Each share has one vote, with fractional shares voting
proportionally. Shares of the fund and of each other series of
the Trust vote together as a single class except when otherwise
required by law or as determined by the Trustees. Shares of the
fund are freely transferable, are entitled to dividends as
declared by the Trustees, and, if the fund were liquidated, would
receive the net assets of the fund. The fund 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), the fund may choose to redeem your shares.
You will receive at least 30 days' written notice before the fund
redeems your shares, and you may purchase additional shares at
any time to avoid a redemption. The 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, Massachusetts Institute of Technology; 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 Emeritus and Professor, 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.; Eli Shapiro, Alfred P.
Sloan Professor of Management, Emeritus, Alfred P. Sloan School
of Management, Massachusetts Institute of Technology; 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 Data
General Corporation, Bradley Real Estate, Inc. and Providence
Journal Co. Also, Trustee of Massachusetts General Hospital and
Eastern Utilities Associates. The Trust's Trustees are also
Trustees of the other Putnam funds. Those marked with an
asterisk (*) are or may be deemed to be "interested persons" of
the Trust, Putnam Management or Putnam Mutual Funds.

About Your Investment

ALTERNATIVE SALES ARRANGEMENTS

This prospectus offers investors three classes of shares that
bear sales charges in different forms and amounts and that bear
different levels of expenses:

Class A shares. An investor who purchases class A shares pays a
sales charge at the time of purchase. As a result, class A
shares are not subject to any charges when they are redeemed,
except for sales at net asset value that are subject to a
contingent deferred sales charge ("CDSC"). Certain purchases of
class A shares qualify for reduced sales charges. Class A shares
bear a lower 12b-1 fee than class B and class M shares. See "How
to buy shares -- Class A shares" and "Distribution plans."

Class B shares. Class B shares are sold without an initial sales
charge, but are subject to a CDSC if redeemed within a specified
period after purchase. Class B shares also bear a higher 12b-1
fee than class A and class M shares. Class B shares
automatically convert into class A shares, based on relative net
asset value, approximately eight years after purchase. For more
information about the conversion of class B shares, see the SAI.
This discussion will include information about how shares
acquired through reinvestment of distributions are treated for
conversion purposes. The discussion will also note certain
circumstances under which a conversion may not occur. Class B
shares provide an investor the benefit of putting all of the
investor's dollars to work from the time the investment is made.
Until conversion, class B shares will have a higher expense ratio
and pay lower dividends than class A and class M shares because
of the higher 12b-1 fee. See "How to buy shares -- Class B
shares" and "Distribution plans."

Class M shares. An investor who purchases class M shares pays a
sales charge at the time of purchase that is lower than the sales
charge applicable to class A shares. Certain purchases of class
M shares qualify for reduced sales charges. Class M shares bear
a 12b-1 fee that is lower than class B shares but higher than
class A shares. Class M shares are not subject to any CDSC and
do not convert into any other class of shares. See "How to buy
shares -- Class M shares" and "Distribution plans."

Which arrangement is best for you? The decision as to which
class of shares provides a more suitable investment for an
investor depends on a number of factors, including the amount and
intended length of the investment. Investors making investments
that qualify for reduced sales charges might consider class A or
class M shares. Investors who prefer not to pay an initial sales
charge might consider class B shares. Orders for class B shares
for $250,000 or more will be treated as orders for class A shares
or declined. For more information about these sales
arrangements, consult your investment dealer or Putnam Investor
Services. Shares may only be exchanged for shares of the same
class of another Putnam fund. See "How to exchange shares."

HOW TO BUY SHARES

Class A shares

Sales charge Amount of
as a percentage of: sales charge
------------------- reallowed to
Net dealers as a
Amount of transaction amount Offering percentage of
at offering price ($) invested price offering price
- -----------------------------------------------------------------
Under 50,000 6.10% 5.75% 5.00%
50,000 but under 100,000 4.71 4.50 3.75
100,000 but under 250,000 3.63 3.50 2.75
250,000 but under 500,000 2.56 2.50 2.00
500,000 but under 1,000,000 2.04 2.00 1.75

There is no initial sales charge on purchases of class A shares
of $1 million or more. However, a CDSC of 1.00% or 0.50%,
respectively, will be imposed if you redeem these 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, there are no sales charges on shares purchased by
participant-directed employee benefit plans with at least 200
eligible employees.

Shares purchased by certain investors investing $1 million or
more who have made arrangements with Putnam Mutual Funds and
whose dealer of record waived the commission as described below
are not subject to the CDSC. In determining whether a CDSC is
payable, the fund will first redeem shares not subject to any
charge. Putnam Mutual Funds receives the entire amount of any
CDSC you pay. See the SAI for more information about the CDSC.

Except as stated below, Putnam Mutual Funds pays investment
dealers of record commissions on sales of class A shares of $1
million or more based on an investor's cumulative purchases
during the one-year period beginning with the date of the initial
purchase at net asset value. Each subsequent one-year measuring
period for these purposes will begin 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.

Class B shares

Class B shares are sold without an initial sales charge, although
a CDSC will be imposed if you redeem shares within a specified
period after purchase, as shown in the table below. The
following types of shares may be redeemed without charge at any
time: (i) shares acquired by reinvestment of distributions and
(ii) shares otherwise exempt from the CDSC, as described in "How
to buy shares -- General" below. For other shares, the amount
of the charge is determined as a percentage of the lesser of the
current market value or the cost of the shares being redeemed.

Year 1 2 3 4 5 6 7+
- -----------------------------------------------------------
Charge 5% 4% 3% 3% 2% 1% 0%

In determining whether a CDSC is payable on any redemption, the
fund will first redeem shares not subject to any charge, and then
shares held longest during the CDSC period. For this purpose,
the amount of any increase in a share's value above its initial
purchase price is not regarded as a share exempt from the CDSC.
Thus, when a share that has appreciated in value is redeemed
during the CDSC period, a CDSC is assessed only on its initial
purchase price. For information on how sales charges are
calculated if you exchange your shares, see "How to exchange
shares." Putnam Mutual Funds receives the entire amount of any
CDSC you pay.

Class M shares

The public offering price of class M shares is the net asset
value plus a sales charge that varies depending on the size of
your purchase. The fund receives the net asset value. The sales
charge is allocated between your investment dealer and Putnam
Mutual Funds as shown in the following table, except when Putnam
Mutual Funds, at its discretion, allocates the entire amount to
your investment dealer.

Sales charge Amount of
as a percentage of: sales charge
------------------- reallowed to
Net dealers as a
Amount of transaction amount Offering percentage of
at offering price ($) invested price offering price
- -----------------------------------------------------------------
Under 50,000 3.63% 3.50% 3.00%
50,000 but under 100,000 2.56 2.50 2.00
100,000 but under 250,000 1.52 1.50 1.00
250,000 but under 500,000 1.01 1.00 1.00
500,000 and above 1,000,000 NONE NONE NONE

General

You may be eligible to buy class A shares and class M shares at
reduced sales charges.

A participant-directed employee benefit plan participating in a
"multi-fund" program approved by Putnam Mutual Funds may include
amounts invested in other mutual funds participating in such
program for purposes of determining whether the plan may purchase
class A shares at net asset value. These investments will also
be included for purposes of the discount privileges and programs
described above.

Sales charges will not apply to class M shares purchased with
redemption proceeds received within the prior 90 days from non-
Putnam mutual funds on which the investor paid a front-end or a
contingent deferred sales charge or to class M shares purchased
by participant-directed qualified retirement plans with at least
50 eligible employees. The fund may also sell class M shares at
net asset value to members of qualified groups.

The fund may sell class A, class B and class M shares at net
asset value without an initial sales charge or a CDSC to the
fund's current and retired Trustees (and their families), current
and retired employees (and their families) of Putnam Management
and affiliates, registered representatives and other employees
(and their families) of broker-dealers having sales agreements
with Putnam Mutual Funds, employees (and their families) of
financial institutions having sales agreements with Putnam Mutual
Funds (or otherwise having an arrangement with a broker-dealer or
financial institution with respect to sales of fund shares),
financial institution trust departments investing an aggregate of
$1 million or more in Putnam funds, clients of certain
administrators of tax-qualified plans, tax-qualified plans when
proceeds from repayments of loans to participants are invested
(or reinvested) in Putnam funds, "wrap accounts" for the benefit
of clients of broker-dealers, financial institutions or financial
planners adhering to certain standards established by Putnam
Mutual Funds, and investors meeting certain requirements who sold
shares of certain Putnam closed-end funds pursuant to a tender
offer by the closed-end fund.

In addition, the fund may sell shares at net asset value without
an initial sales charge or a CDSC in connection with the
acquisition by the fund of assets of an investment company or
personal holding company. The CDSC will be waived on redemptions
of shares arising out of the death or post-purchase disability of
a shareholder or settlor of a living trust account, and on
redemptions in connection with certain withdrawals from IRA or
other retirement plans. Up to 12% of the value of shares subject
to a systematic withdrawal plan may also be redeemed each year
without a CDSC. The SAI contains additional information about
purchasing the fund's shares at reduced sales charges.

Shareholders of other Putnam funds may be entitled to exchange
their shares for, or reinvest distributions from their funds in,
shares of the fund 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 the 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, the fund will not issue certificates for your
shares unless you request them.

DISTRIBUTION PLANS

Class A distribution plan. The class A plan provides for
payments by the fund to Putnam Mutual Funds at the annual rate of
up to 0.35% of average net assets attributable to class A shares.
The Trustees currently limit payments under the class A plan to
the annual rate of 0.25% of such assets.

Putnam Mutual Funds makes quarterly payments to qualifying
dealers (including, for this purpose, certain financial
institutions) to compensate them for services provided in
connection with sales of class A shares and the maintenance of
shareholder accounts. The payments are based on the average net
asset value of class A shares attributable to shareholders for
whom the dealers are designated as the dealer of record.

This calculation excludes until one year after purchase shares
purchased at net asset value, known as "NAV shares," by
shareholders investing $1 million or more. Also excluded until
one year after purchase are NAV shares purchased by participant-
directed qualified retirement plans with at least 200 eligible
employees. NAV shares are not subject to the one-year exclusion
provision in cases where certain shareholders who invested $1
million or more have made arrangements with Putnam Mutual Funds
and the dealer of record waived the sales commission.

Except as stated below, Putnam Mutual Funds makes the quarterly
payments at the annual rate of 0.25% of such average net asset
value for class A shares (including shares acquired through
reinvestment of distributions).

For participant-directed qualified retirement plans initially
investing less than $20 million in Putnam funds and other
investments managed by Putnam Management or its affiliates,
Putnam Mutual Funds' payments to qualifying dealers on NAV shares
are 100% of the rate stated above if average plan assets in
Putnam funds (excluding money market funds) during the quarter
are less than $20 million, 60% of the stated rate if average plan
assets are at least $20 million but under $30 million, and 40% of
the stated rate if average plan assets are $30 million or more.

For all other participant-directed qualified retirement plans
purchasing NAV shares, Putnam Mutual Funds makes quarterly
payments to qualifying dealers at the annual rate of 0.10% of the
average net asset value of such shares.

Class B and class M distribution plans. The class B and class M
plans provide for payments by the fund to Putnam Mutual Funds at
the annual rate of up to 1.00% of average net assets attributable
to class B shares and class M shares, as the case may be. The
Trustees currently limit payments under the class M plan to the
annual rate of 0.75% of such assets.

Although class B shares are sold without an initial sales charge,
Putnam Mutual Funds pays a sales commission equal to 4.00% of the
amount invested to dealers who sell class B shares. These
commissions are not paid on exchanges from other Putnam funds or
on sales to investors exempt from the CDSC.

The amount paid to dealers at the time of the sale of class M
shares is set forth above under "How to buy shares -- Class M
shares." In addition, to further compensate dealers (including
qualifying financial institutions) for services provided in
connection with sales of class B shares and class M shares and
the maintenance of shareholder accounts, Putnam Mutual Funds
makes quarterly payments to qualifying dealers.

The payments are based on the average net asset value of class B
shares and class M shares attributable to shareholders for whom
the dealers are designated as the dealer of record. Putnam
Mutual Funds makes the payments at an annual rate of 0.25% of
such average net asset value of class B shares and class M
shares, as the case may be.

Putnam Mutual Funds also pays to dealers, as additional
compensation with respect to the sale of class M shares, 0.40% of
such average net asset value of class M shares. For class M
shares, the total annual payment to dealers equals 0.65% of such
average net asset value.

General. Payments under the plans are intended to compensate
Putnam Mutual Funds for services provided and expenses incurred
by it as principal underwriter of fund shares, including the
payments to dealers mentioned above. Putnam Mutual Funds may
suspend or modify such payments to dealers.

The payments are also subject to the continuation of the relevant
distribution plan, the terms of service agreements between
dealers and Putnam Mutual Funds, and any applicable limits
imposed by the National Association of Securities Dealers, Inc.

HOW TO SELL SHARES

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

Selling shares directly to the fund. Send a signed letter of
instruction or stock power form to Putnam Investor Services,
along with any certificates that represent shares you want to
sell. The price you will receive is the next net asset value
calculated after the 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.

The fund generally sends you payment for your shares the business
day after your request is received. Under unusual circumstances,
the fund may suspend redemptions, or postpone payment for more
than seven days, as permitted by federal securities law.

During periods of unusual market changes and shareholder
activity, you may experience delays in contacting Putnam Investor
Services by telephone. In this event you may wish to submit a
written redemption request, as described above, or contact your
investment dealer, as described below. The Telephone Redemption
Privilege is not available if you were issued certificates for
shares that remain outstanding. The Telephone Redemption
Privilege may be modified or terminated without notice.

HOW TO EXCHANGE SHARES

You can exchange your shares for shares of the same class of
certain other Putnam funds at net asset value beginning 15 days
after purchase. Not all Putnam funds offer all classes of shares.
If you exchange shares subject to a CDSC, the transaction will
not be subject to the CDSC. However, when you redeem the shares
acquired through the exchange, the redemption may be subject to
the CDSC, depending upon when you originally purchased the
shares. The CDSC will be computed using the schedule of any fund
into or from which you have exchanged your shares that would
result in your paying the highest CDSC applicable to your class
of shares. For purposes of computing the CDSC, the length of
time you have owned your shares will be measured from the date of
original purchase and will not be affected by any exchange.

To exchange your shares, simply complete an Exchange
Authorization Form and send it to Putnam Investor Services. The
form is available from Putnam Investor Services. For federal
income tax purposes, an exchange is treated as a sale of shares
and generally results in a capital gain or loss. A Telephone
Exchange Privilege is currently available for amounts up to
$500,000. Putnam Investor Services' procedures for telephonic
transactions are described above under "How to sell shares." The
Telephone Exchange Privilege is not available if you were issued
certificates for shares that remain outstanding. Ask your
investment dealer or Putnam Investor Services for prospectuses of
other Putnam funds. Shares of certain Putnam funds are not
available to residents of all states.

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

HOW THE FUND VALUES ITS SHARES

The fund calculates the net asset value of a share of each class
by dividing the total value of its assets, less liabilities, by
the number of its shares outstanding. Shares are valued as of
the close of regular trading on the New York Stock Exchange each
day the exchange is open. Portfolio securities for which market
quotations are readily available are valued at market value.
Short-term investments that will mature in 60 days or less are
valued at amortized cost, which approximates market value. All
other securities and assets are valued at their fair value
following procedures approved by the Trustees.

HOW THE FUND MAKES DISTRIBUTIONS TO SHAREHOLDERS; TAX INFORMATION

The fund distributes any net investment income and any net
realized capital gains at least annually. Distributions from net
investment income, if any, are expected to be small.
Distributions from capital gains are made after applying any
available capital loss carryovers. Distributions paid on class A
shares will generally be greater than those paid on class B and
class M shares because expenses attributable to class B and class
M shares will generally be higher.

You can choose from three distribution options:

- - Reinvest all distributions in additional shares without a
sales charge;

- - Receive distributions from net investment income in cash
while reinvesting net capital gains distributions in
additional shares without a sales charge; or

- - Receive all distributions in cash.

You can change your distribution option by notifying Putnam
Investor Services in writing. If you do not select an option
when you open your account, all distributions will be reinvested.
All distributions not paid in cash will be reinvested in shares
of the class on which the distributions are paid. You will
receive a statement confirming reinvestment of distributions in
additional shares (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 the fund or Putnam Investor Services is
returned as "undeliverable," fund distributions will
automatically be reinvested in the fund or in another Putnam
fund.

The fund intends to qualify as a "regulated investment company"
for federal income tax purposes and to meet all other
requirements necessary for it to be relieved of federal taxes on
income and gains it distributes to shareholders. The fund will
distribute substantially all of its ordinary income and capital
gain net income on a current basis.

All fund 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 Putnam Investor Services will notify you of
the amount and tax status of distributions paid to you for the
preceding year.

Fund transactions in foreign currencies and hedging activities
will likely produce a difference between 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 for tax purposes.

If at the end of the fund's fiscal year more than 50% of the
value of the fund's total assets represent securities of foreign
corporations, the fund intends to make an election permitted by
the Internal Revenue Code to treat any foreign taxes it paid as
paid by shareholders. In this case, shareholders who are U.S.
citizens, U.S. corporations and, in some cases, U.S. residents
generally will be required to include in U.S. taxable income
their pro rata share of such taxes, but may then generally be
entitled to claim a foreign tax credit or deduction (but not
both) for their share of such taxes.

The foregoing is a summary of certain federal income tax
consequences of investing in the fund. You should consult your
tax adviser to determine the precise effect of an investment in
the 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 fund and
of other Putnam funds. Putnam Fiduciary Trust Company is the
fund's custodian. Putnam Investor Services, a division of Putnam
Fiduciary Trust Company, is the fund's investor servicing and
transfer agent.

The following services are available to you as a Putnam mutual
fund shareholder.

SYSTEMATIC INVESTMENT PLAN Invest as much as you wish ($25 or
more) on any business day of the month except for the 29th, 30th,
or 31st. The amount will be automatically transferred from your
checking or savings account.

SYSTEMATIC WITHDRAWAL Make regular withdrawals of $50 or more
monthly, quarterly, or semiannually from an account valued at
$10,000 or more. You may establish your withdrawal on any
business day of the month except for the 29th, 30th, or 31st.

SYSTEMATIC EXCHANGE Transfer assets automatically from one
Putnam account to another on a regular, prearranged basis. There
is no additional charge for this service.

FREE EXCHANGE PRIVILEGE Exchange money between Putnam funds in
the same class of shares without charge. The exchange privilege
allows you to adjust your investments as your objectives change.
A signature guarantee is required for exchanges of more than
$500,000.

Investors may not maintain, within the same fund, simultaneous
plans for systematic investment or exchange and systematic
withdrawal or exchange. These privileges are subject to change
or termination.

For more information about any of these services and privileges,
call your investment advisor or a Putnam customer service
representative toll-free at 1-800-225-1581.
<PAGE>
PUTNAM 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

H:\USERS\ACIMAN\B48497Z.1<PAGE>
PROSPECTUS
January 1, 1996

Putnam New Value Fund
Class A, B and M shares
INVESTMENT STRATEGY: GROWTH

This prospectus explains concisely what you should know before
investing in Putnam New Value Fund (the "fund"), 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 1, 1996 statement of additional
information (the "SAI"), as amended from time to time. For a
free copy of the SAI or other information, call Putnam Investor
Services at 1-800-225-1581. The SAI has been filed with the
Securities and Exchange Commission and is incorporated into this
prospectus by reference.

BOSTON * LONDON * TOKYO
<PAGE>
ABOUT THE FUND

Objective 7
Read this section to make sure the fund's objective is consistent
with your own.

How the fund pursues its objective 7
This section explains in detail how the fund seeks its investment
objective.

Risk factors. All investments entail some risk. 7
Read this section to make sure you understand certain risks
that may be involved when investing in the fund.

How performance is shown 13
This section describes and defines the measures used to assess
the fund's performance. All data are based on the fund's past
investment results and do not predict future performance.

How the fund is managed 13
Consult this section for information about the fund's management,
allocation of the fund's expenses, and how purchases and sales of
securities are made for the fund.

Organization and history 15
In this section, you will learn when the fund was introduced, how
it is organized, how it may offer shares, and who its Trustees
are.

<PAGE>
ABOUT YOUR INVESTMENT

Alternative sales arrangements 16
Read this section for descriptions of the classes of shares this
prospectus offers and for points you should consider when making
your choice.

How to buy shares 18
This section describes the ways you may purchase shares and tells
you the minimum amounts required to open various types of
accounts. It explains how sales charges are determined and how
you may become eligible for reduced sales charges on each class
of shares.

Distribution plans 22
This section tells you what distribution fees are charged against
each class of shares.

How to sell shares 24
In this section you can learn how to sell shares of the fund,
either directly to the fund or through an investment dealer.

How to exchange shares 25
Find out in this section how you may exchange shares of the fund
for shares of other Putnam funds. The section also explains how
exchanges can be made without sales charges and the conditions
under which sales charges may be required.

How the fund values its shares 26
This section explains how the fund determines the value of its
shares.

How the fund makes distributions to shareholders; tax
information 26
This section describes the various options you have in choosing
how to receive dividends from the fund. It also discusses the
federal tax status of the payments and counsels shareholders to
seek specific advice about their own situation.

ABOUT PUTNAM INVESTMENTS, INC. 27

Read this section to learn more about the companies that provide
the marketing, investment management, and shareholder account
services to Putnam funds and their shareholders.

<PAGE>
About the fund

EXPENSES SUMMARY

Class A Class B Class M
shares shares shares
Shareholder transaction
expenses

Maximum sales charge
imposed on purchases
(as a percentage of
offering price) 5.75% NONE* 3.50%*

Annual fund operating expenses
(as a percentage of average net assets)
Total fund
Management 12b-1 Other operating
feesfees expenses expenses
---------- ----- -------- ----------

Class A 0.70% 0.25% 0.19% 1.14%
Class B 0.70% 1.00% 0.19% 1.89%
Class M 0.70% 0.75% 0.19% 1.64%

<PAGE>
Examples

Your investment of $1,000 would incur the following expenses,
assuming 5% annual return and, except as indicated, redemption at
the end of each period:
1 year 3 years

Class A $78 $92
Class B $69 $89
Class B (no redemption) $19 $59
Class M $51 $85

** A deferred sales charge of up to 1.00% is assessed on
certain redemptions of class A shares that were purchased
without an initial sales charge. See "How to buy shares -
Class A shares."

FINANCIAL HIGHLIGHTS

The following table presents per share financial information for
class A shares. No class B shares or class M shares were
outstanding during the period. This information has been audited
and reported on by the fund's independent accountants. The
"Report of independent accountants" and financial statements
included in the fund's annual report to shareholders for the 1995
fiscal period are incorporated by reference into this prospectus.
The fund's annual report, which contains additional unaudited
performance information, is available without charge upon
request.

<PAGE>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)

January 3, 1995
(commencement
of operations)
to August 31,
1995

NET ASSET VALUE, BEGINNING OF PERIOD $8.50
INVESTMENT OPERATIONS
Net investment income .15(a)
Net realized and unrealized
gain on investments 1.88
TOTAL FROM INVESTMENT OPERATIONS 2.03(a)
Net investment income
Net realized gain on investments
TOTAL DISTRIBUTIONS
NET ASSET VALUE, END OF PERIOD $10.53
TOTAL INVESTMENT RETURN AT
NET ASSET VALUE (%)(b) 23.88(c)
NET ASSETS, END OF PERIOD (in thousands) $2,473
Ratio of expenses to average net assets (%) .51(a)(c)
Ratio of net investment income
to average net assets (%) 1.67(a)(c)
Portfolio turnover (%) 51.07(c)

(a) Reflects an expense limitation in effect during the period.
As a result of such limitation, expenses for the fund reflect a
reduction of $0.14 per share.
(b) Total investment return assumes dividend reinvestment and
does not reflect the effect of sales charges.
(c) Not annualized.<PAGE>
OBJECTIVE

Putnam New Value Fund seeks long-term capital appreciation. The
fund is not intended to be a complete investment program, and
there is no assurance that it will achieve its objective.

HOW THE FUND PURSUES ITS OBJECTIVE

The fund will invest primarily in common stocks which Putnam
Investment Management, Inc., the fund'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 for the fund 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 small companies with equity
market capitalizations below $1 billion. These 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. The fund may also hold a portion of its assets in
cash or high-quality money market instruments.

Risk factors

Foreign investments

The fund may invest up to 20% of its assets in securities
principally traded in foreign markets. The fund may also purchase
Eurodollar certificates of deposit without regard to the 20%
limit. Since foreign securities are normally denominated and
traded in foreign currencies, the values of fund 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 with 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 those 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 fund assets held abroad) and expenses not present in the
settlement of domestic investments.

The fund may buy or sell foreign currencies and call options on
foreign currencies for hedging purposes in connection with its
foreign investments.

A more detailed explanation of foreign investments, and the risks
and special tax considerations associated with them, is included
in the SAI.

Investments in fixed-income securities

Although the fund will invest primarily in common stocks, it may
also invest in both higher-rated and lower-rated fixed-income
securities, and is not subject to any restrictions based on
credit ratings. The values of fixed-income securities generally
fluctuate in response to changes in interest rates. Thus, a
decrease in interest rates will generally result in an increase
in the value of the fund's assets. Conversely, during periods of
rising interest rates, the value of the fund's assets will
generally decline. The values of lower-rated fixed-income
securities, commonly known as "junk bonds," generally fluctuate
more than those of higher-rated fixed-income securities.
Securities in the lower rating categories may, depending on the
rating, have large uncertainties or major risk exposure to
adverse conditions, and may include securities in default. The
rating services' descriptions of securities in the various rating
categories, including the speculative characteristics of
securities in the lower rating categories, are set forth in the
SAI.

For additional information concerning the risks associated with
investment by the fund in securities in the lower rating
categories, see the SAI.

Portfolio turnover

Portfolio turnover generally involves some expense to the fund,
including brokerage commissions or dealer markups and other
transaction costs on the sale of securities and reinvestment in
other securities. These transactions may result in realization
of taxable capital gains. While it is impossible to predict
portfolio turnover rates Putnam Management believes that such
will not exceed 200%. The portfolio turnover rate for the life
of the fund is shown in the section, "Financial highlights."

Stock index futures and options

The fund may buy and sell stock index futures contracts. An
"index future" is a contract to buy or sell units of a particular
stock index at an agreed price on a specified future date.
Depending on the change in value of the index between the time
the fund enters into and terminates an index future transaction,
the fund realizes a gain or loss. In addition to or as an
alternative to purchasing or selling index futures, the fund may
buy and sell call and put options on futures or stock indexes.
The fund may engage in index futures and options transactions for
hedging purposes and for non-hedging purposes, such as to earn
additional income.

The use of index futures and related options involves certain
special risks. Futures and options transactions involve costs
and may result in losses.

Certain risks arise because of the possibility of imperfect
correlations between movements in the prices of index futures and
options and movements in the prices of the underlying stock index
or of the portfolio securities that are the subject of a hedge.
The successful use of futures and options further depends on
Putnam Management's ability to forecast market movements
correctly.

Other risks arise from the potential inability to close out index
futures or options positions. There can be no assurance that a
liquid secondary market will exist for any index futures or
option at any particular time. The use of futures and options
transactions for purposes other than hedging entails greater
risks. Certain provisions of the Internal Revenue Code and
certain regulatory requirements may limit the use of index
futures and options transactions.

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

Options

The 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. The fund receives a premium from writing a call or
put option, which increases the return if the option expires
unexercised or is closed out at a net profit.

A more detailed explanation of options transactions, including
the risks associated with them, is included in the SAI.

Securities loans, repurchase agreements and forward commitments

Defensive strategies

At times Putnam Management may judge that conditions in the
securities markets make pursuing the fund's basic investment
strategy inconsistent with the best interests of it's
shareholders. At such times Putnam Management may temporarily
use alternative strategies, primarily designed to reduce
fluctuations in the value of the fund's assets. In implementing
these "defensive" strategies, the fund may invest without limit
in cash or money market instruments, preferred stocks, debt
securities issued by the U.S. government, its agencies or
instrumentalities, or in any other securities Putnam Management
considers consistent with such defensive strategies. It is
impossible to predict when, or for how long, the fund will use
alternative strategies.

Diversification

Derivatives

Limiting investment risk

(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;* or

HOW PERFORMANCE IS SHOWN

The fund's investment performance may from time to time be
included in advertisements about the fund.

"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 (in the case of class A and class M shares)
or reflecting the deduction of any applicable contingent deferred
sales charge (in the case of class B shares). Total return may
also be presented for other periods or based on investment at
reduced sales charge levels. Any quotation of investment
performance not reflecting the maximum initial sales charge or
contingent deferred sales charge would be reduced if the sales
charge were used.

All data are based on past investment results and do not predict
future performance.

HOW THE FUND IS MANAGED

<PAGE>
The fund pays a quarterly fee to Putnam Management based on the
average net assets of the fund, as determined at the close of
each business day during the quarter, at an annual rate,
expressed as a percentage of the fund's average net assets, of
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.

In order to limit the fund's expenses during its start-up period,
Putnam Management has agreed to limit its compensation (and, to
the extent necessary, bear other expenses) through May 31, 1996
to the extent that expenses of any class of shares of the fund
(exclusive of brokerage, interest, taxes, deferred organizational
and extraordinary expense, and payments under the fund's
distribution plans) would exceed the annual rate of 1.00% of the
average net assets. For the purpose of determining any such
limitation on Putnam Management's compensation, expenses of the
fund shall not reflect the application of credits related to
brokerage service and expense offset arrangements 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 SAI would be revised.

The following officer of Putnam Management has had primary
responsibility for the day-to-day management of the fund's
portfolio since the year stated below:

Business experience
Year (at least 5 years)

David L. King 1995 Employed as an investment
Senior Vice President professional by Putnam
Management since 1983.

The fund pays all expenses not assumed by Putnam Management,
including Trustees' fees, auditing, legal, custodial, investor
servicing and shareholder reporting expenses, and payments under
its distribution plans (which are in turn allocated to the
relevant class of shares). Expenses of the Trust directly
charged or attributable to the fund will be paid from the assets
of the fund. General expenses of the Trust will be allocated
among and charged to the assets of the fund and any other
portfolio of the Trust on a basis that the Trustees deem fair and
equitable, which may be based on the relative assets of the fund
and other portfolios of the Trust or the nature of the services
performed and relative applicability to the fund and other
portfolios of the Trust. The fund also reimburses Putnam
Management for the compensation and related expenses of certain
officers of the fund and their staff who provide administrative
services to the fund. The total reimbursement is determined
annually by the Trustees.

ORGANIZATION AND HISTORY

Putnam New Value Fund is a series of Putnam Investment Funds, 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. Prior to January 6, 1995, the
Trust was known as Putnam Equity Funds. As of November 30, 1995,
Putnam Investments, Inc. owned more than 25% of the shares of the
fund and therefore may be deemed to "control" the fund.

About Your Investment

ALTERNATIVE SALES ARRANGEMENTS

This prospectus offers investors three classes of shares that
bear sales charges in different forms and amounts and that bear
different levels of expenses:

Class A shares. An investor who purchases class A shares pays a
sales charge at the time of purchase. As a result, class A
shares are not subject to any charges when they are redeemed,
except for certain sales at net asset value that are subject to a
contingent deferred sales charge ("CDSC"). Certain purchases of
class A shares qualify for reduced sales charges. Class A shares
bear a lower 12b-1 fee than class B and class M shares. See "How
to buy shares -- Class A shares" and "Distribution plans."

<PAGE>
HOW TO BUY SHARES

Class A shares

The public offering price of class A shares is the net asset
value plus a sales charge that varies depending on the size of
your purchase. The fund receives the net asset value. The sales
charge is allocated between your investment dealer and Putnam
Mutual Funds as shown in the following table, except when Putnam
Mutual Funds, in its discretion, allocates the entire amount to
your investment dealer.
Sales charge Amount of
as a percentage of: sales charge
------------------- reallowed to
Net dealers as a
Amount of transaction amount Offering percentage of
at offering price ($) invested price offering price
- -----------------------------------------------------------------
Under 50,000 6.10% 5.75% 5.00%
50,000 but under 100,000 4.71 4.50 3.75
100,000 but under 250,000 3.63 3.50 2.75
250,000 but under 500,000 2.56 2.50 2.00
500,000 but under 1,000,000 2.04 2.00 1.75

In addition, there are no sales charges on shares purchased by
participant-directed employee benefit plans with at least 200
eligible employees.

Shares purchased by certain investors investing $1 million or
more who have made arrangements with Putnam Mutual Funds and
whose dealer of record waived the commission as described below
are not subject to the CDSC. In determining whether a CDSC is
payable, the fund will first redeem shares not subject to any
charge. Putnam Mutual Funds receives the entire amount of any
CDSC you pay. See the SAI for more information about the CDSC.

Class B shares

Year 1 2 3 4 5 6 7+
- -----------------------------------------------------------
Charge 5% 4% 3% 3% 2% 1% 0%

Class M shares

Sales charge Amount of
as a percentage of: sales charge
------------------- reallowed to
Net dealers as a
Amount of transaction amount Offering percentage of
at offering price ($) invested price offering price
- -----------------------------------------------------------------
Under 50,000 3.63% 3.50% 3.00%
50,000 but under 100,000 2.56 2.50 2.00
100,000 but under 250,000 1.52 1.50 1.00
250,000 but under 500,000 1.01 1.00 1.00
500,000 and above NONE NONE NONE

General

You may be eligible to buy class A shares and class M shares at
reduced sales charges.

Sales charges will not apply to class M shares purchased with
redemption proceeds received within the prior 90 days from non-
Putnam mutual funds on which the investor paid a front-end or a
contingent deferred sales charge or to class M shares purchased
by participant-directed qualified retirement plans with at least
50 eligible employees. The fund may sell class M shares at net
asset value to members of qualified groups.

The fund may sell class A, class B and class M shares at net
asset value without an initial sales charge or a CDSC to the
Trust's current and retired Trustees (and their families),
current and retired employees (and their families) of Putnam
Management and affiliates, registered representatives and other
employees (and their families) of broker-dealers having sales
agreements with Putnam Mutual Funds, employees (and their
families) of financial institutions having sales agreements with
Putnam Mutual Funds (or otherwise having an arrangement with a
broker-dealer or financial institution with respect to sales of
fund shares), financial institution trust departments investing
an aggregate of $1 million or more in Putnam funds, clients of
certain administrators of tax-qualified plans, tax-qualified
plans when proceeds from repayments of loans to participants are
invested (or reinvested) in Putnam funds, "wrap accounts" for the
benefit of clients of broker-dealers, financial institutions or
financial planners adhering to certain standards established by
Putnam Mutual Funds, and investors meeting certain requirements
who sold shares of certain Putnam closed-end funds pursuant to a
tender offer by the closed-end fund.

Shareholders of other Putnam funds may be entitled to exchange
their shares for, or reinvest distributions from their funds in,
shares of the fund 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 the 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, the fund will not issue certificates for your shares
unless you request them.

DISTRIBUTION PLANS

HOW TO SELL SHARES

HOW TO EXCHANGE SHARES

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 the fund, the
fund reserves the right to revise or terminate the exchange
privilege, limit the amount or number of exchanges or reject any
exchange. Shareholders would be notified of any such action to
the extent required by law. Consult Putnam Investor Services
before requesting an exchange. See the SAI to find out more
about the exchange privilege.

HOW THE FUND VALUES ITS SHARES

HOW THE FUND MAKES DISTRIBUTIONS TO SHAREHOLDERS; TAX INFORMATION
The fund distributes any net investment income and any net
realized capital gains at least annually. Distributions from
net investment income, if any, are expected to be small.
Distributions from capital gains are made after applying any
available capital loss carryovers. Distributions paid on class A
shares will generally be greater than those paid on class B and
class M shares because expenses attributable to class B and class
M shares will generally be higher.

You can choose from three distribution options:

- - Reinvest all distributions in additional shares without a
sales charge;

- - Receive distributions from net investment income in cash
while reinvesting net capital gains distributions in
additional shares without a sales charge; or

- - Receive all distributions in cash.

You can change your distribution option by notifying Putnam
Investor Services in writing. If you do not select an option
when you open your account, all distributions will be reinvested.
All distributions not paid in cash will be reinvested in shares
of the class on which the distributions are paid. You will
receive a statement confirming reinvestment of distributions in
additional shares (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 the fund or Putnam Investor Services is
returned as "undeliverable," fund distributions will
automatically be reinvested in the fund or in another Putnam
fund.

Early in each year Putnam Investor Services will notify you of
the amount and tax status of distributions paid to you for the
preceding year.

About Putnam Investments, Inc.

Bond An IOU issued by a government or corporation that
usually pays interest.
- -----------------------------------------------------------------
Capital A profit or loss on the sale of securities (stocks
gain/loss or bonds).
- -----------------------------------------------------------------
Class A, B, Types of shares, each class offering investors a
M shares different choice about how to pay sales charges
and distribution fees. A fund's prospectus
explains the availability and attributes of each
type.
- -----------------------------------------------------------------
Common A unit of ownership of a corporation.
stock
- -----------------------------------------------------------------
Distribution A payment from a mutual fund to shareholders. It
may include interest from bonds and dividends from
stocks (dividend distributions). It may also
include profits from the sale of securities from
the fund's portfolio (capital gains
distributions).
- -----------------------------------------------------------------
Net asset The basic value of one share of a mutual fund
value (NAV) without regard to sales charges. Some bond funds
aim for a steady NAV, representing stability; most
stock funds work to raise NAV, representing growth
in the value of an investment.
- -----------------------------------------------------------------
Public The purchase price of one class A share or class M
offering share of a mutual fund, including the applicable
price (POP) up-front sales charge.
- -----------------------------------------------------------------
Total return A measure of performance showing change in the
value of an investment over a given period,
assuming all earnings are invested back into the
fund.
- -----------------------------------------------------------------
Yield The percentage rate at which a fund's portfolio
earns income from its investments.
<PAGE>
Make the most of your Putnam privileges

The following services are available to you as a Putnam mutual
fund shareholder.

SYSTEMATIC EXCHANGE Transfer assets automatically from one
Putnam account to another on a regular, prearranged basis. There
is no additional charge for this service.

For more information about any of these services and privileges,
call your investment advisor or a Putnam customer service
representative toll-free at 1-800-225-1581.

<PAGE>
DIVIDENDS PLUS

Diversify your portfolio by investing dividends and other
distributions from one Putnam fund automatically into another at
net asset value.

STATEMENT OF INTENTION

To reduce a front-end sales charge, you agree to invest a minimum
dollar amount over 13 months. Depending on your fund, the
minimum is $25,000, $50,000, or $100,000. Whenever you make an
investment under this arrangement, you or your investment advisor
should notify Putnam that a Statement of Intention is in effect.

For more information about any of these services and privileges,
call your investment advisor or a Putnam customer service
representative toll-free at 1-800-225-1581.<PAGE>
Putnam Family of Funds

PUTNAM GROWTH FUNDS

Putnam Asia Pacific Growth Fund
Putnam Diversified Equity Trust
Putnam Europe Growth Fund
Putnam Global Growth Fund
Putnam Health Sciences Trust
Putnam International New Opportunities Fund
Putnam Investors Fund
Putnam Natural Resources Fund
Putnam New Opportunities Fund
Putnam OTC Emerging Growth Fund
Putnam Overseas Growth Fund
Putnam Vista Fund
Putnam Voyager Fund
Putnam Voyager Fund II*

PUTNAM GROWTH AND INCOME FUNDS

Putnam Balanced Retirement Fund
Putnam Convertible Income-Growth Trust
Putnam Equity Income Fund
The George Putnam Fund of Boston
The Putnam Fund for Growth and Income
Putnam Growth and Income Fund II
Putnam Utilities Growth and Income Fund

PUTNAM INCOME FUNDS

Putnam Adjustable Rate U.S. Government Fund
Putnam American Government Income Fund
Putnam Diversified Income Trust
Putnam Federal Income Trust
Putnam Global Governmental Income Trust
Putnam High Yield Advantage Fund
Putnam High Yield Trust
Putnam Income Fund
Putnam Intermediate U.S. Government Fund
Putnam Preferred Income Fund
Putnam U.S. Government Income Trust
<PAGE>
PUTNAM TAX-FREE INCOME FUNDS

Putnam Intermediate Tax Exempt Fund
Putnam Municipal Income Fund
Putnam Tax Exempt Income Fund
Putnam Tax-Free High Yield Fund
Putnam Tax-Free Insured Fund
Putnam State tax-free income funds+
Arizona, California, Florida, Massachusetts, Michigan, Minnesota,
New Jersey, New York, Ohio, and Pennsylvania

LIFESTAGE(SM) FUNDS
Putnam Asset Allocation Funds -- three investment portfolios that
spread your money across a variety of stocks, bonds, and money
market investments seeking to help maximize your return and
reduce your risk.
The three portfolios:
Balanced Portfolio
Conservative Portfolio
Growth Portfolio

PUTNAM MONEY MARKET FUNDS
Putnam Money Market Fund
Putnam California Tax Exempt Money Market Fund
Putnam New York Tax Exempt Money Market Fund
Putnam Tax Exempt Money Market Fund

*Formerly Putnam Growth Fund
+Not available in all states.

Please call your financial advisor or Putnam to obtain a
prospectus for any Putnam fund. It contains more complete
information, including charges and expenses. Read it carefully
before you invest or send money.

<PAGE>
PUTNAM NEW VALUE 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 EMERGING MARKETS FUND
PUTNAM GENESIS FUND
PUTNAM GLOBAL GROWTH AND INCOME FUND
PUTNAM INTERNATIONAL FUND
PUTNAM JAPAN FUND
(EACH REFERRED TO HEREIN AS A "FUND"),

EACH A SERIES OF PUTNAM INVESTMENT FUNDS (THE "TRUST")

FORM N-1A
PART B

STATEMENT OF ADDITIONAL INFORMATION ("SAI")
DECEMBER 28, 1995

Part I of this SAI 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. . . . . . . . . . . . . . . . . . . . . . . . I-3

CHARGES AND EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . I-5

INVESTMENT PERFORMANCE . . . . . . . . . . . . . . . . . . . . . . . . I-7

ADDITIONAL OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . .I-12

INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS . . . . . . . . . . .I-13

Part II

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

TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .II-25

MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .II-30

DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . . . . . .II-40

HOW TO BUY SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . .II-41

DISTRIBUTION PLANS . . . . . . . . . . . . . . . . . . . . . . . . . .II-54

INVESTOR SERVICES. . . . . . . . . . . . . . . . . . . . . . . . . . .II-55

SIGNATURE GUARANTEES . . . . . . . . . . . . . . . . . . . . . . . . .II-60

SUSPENSION OF REDEMPTIONS. . . . . . . . . . . . . . . . . . . . . . .II-61

SHAREHOLDER LIABILITY. . . . . . . . . . . . . . . . . . . . . . . . .II-61

STANDARD PERFORMANCE MEASURES. . . . . . . . . . . . . . . . . . . . .II-61

COMPARISON OF PORTFOLIO PERFORMANCE. . . . . . . . . . . . . . . . . .II-63

DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .II-67

<PAGE>
SAI
PART I

INVESTMENT RESTRICTIONS

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, each fund may not and
will not:

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

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

(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:

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

CHARGES AND EXPENSES

Putnam Global Growth and Income Fund

1995 $9,700 $36,617

Brokerage commissions

The following table shows brokerage commissions paid during the
fiscal period indicated.

Fiscal Brokerage
year commissions
------ ------------

Putnam Global Growth and
Income Fund 1995 $5,158

Dollar
value Percent of
of these total Amount of
transactions transactions commissions
------------ ------------ -----------
Putnam Global Growth
and Income Fund $1,513,351 82.82% $4,306

Administrative expense reimbursement

Putnam Global Growth
and Income Fund $30 $29

Class A sales charges and contingent deferred sales charges

Putnam Mutual Funds received no sales charges with respect to
class A shares during fiscal 1995.

Investor servicing and custody fees and expenses

INVESTMENT PERFORMANCE

Standard performance measures
(for the period ended September 30, 1995)
Putnam Global Growth and Income Fund

Class A
Inception date: 1/3/95

Total return NAV* POP**
- --------------------------------------------

Life of class 13.41% 6.87%

*net asset value
**public offering price

ALL FUNDS

Trustee fees

Aggregate compensation from*

For additional information concerning the Trustees, see
"Management" in Part II of this SAI.

Distribution fees

Share ownership

Putnam Emerging Growth Fund

Shareholder name Percentage
and address owned
-------------------- --------
Putnam Investments Inc.* 100%

Putnam Genesis Fund

Shareholder name Percentage
and address owned
-------------------- --------
Putnam Investments Inc.* 100%

Putnam Global Growth and Income Fund

Shareholder name Percentage
and address owned
-------------------- --------
Putnam Investments Inc.* 96.10%

Putnam International Fund

Shareholder name Percentage
and address owned
-------------------- --------
Putnam Investments Inc.* 100%

Putnam Japan Fund

Shareholder name Percentage
and address owned
-------------------- --------
Putnam Investments Inc.* 100%

* c/o Putnam Investments, One Post Office Square, Boston, MA
02109

ADDITIONAL OFFICERS

David L. King, Senior Vice President of Putnam Management.

Carol C. McMullen, Managing Director of Putnam Management. Prior
to June, 1995, Ms. McMullen was Senior Vice President and Senior
Portfolio Manager of Baring Asset Management.

Jeanne L. Mockard, Senior Vice President of Putnam Management.

John J. Morgan, Jr., Managing Director of Putnam Management.

Hugh H. Mullin, Senior Vice President of Putnam Management.

Patrick O'Donnell, Managing Director of Putnam Management.
Prior to May, 1994, Mr. O'Donnell was the founder and President
of Exeter Research Inc.

Anthony W. Regan, Senior Managing Director of Putnam Management.
Director of Putnam Investments, Inc. Vice President and Trust
Officer of Putnam Fiduciary Trust Company.

Thomas V. Reilly, Managing Director of Putnam Management.

David J. Santos, Vice President of Putnam Management.

Justin M. Scott, Managing Director of Putnam Management.

Sheldon N. Simon, Senior Vice President of Putnam Management.

Kenneth J. Taubes, Senior Vice President of Putnam Management.
Prior to June, 1991, Mr. Taubes was Senior Vice President of the
Finance Division of U.S. Trust Company.

INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS

FORM N-1A
PART B

STATEMENT OF ADDITIONAL INFORMATION ("SAI")
January 1, 1996

This SAI is not a prospectus and is only authorized for
distribution when accompanied or preceded by the prospectus of
the fund dated January 1, 1996, as revised from time to time.
This SAI contains information which may be useful to investors
but which is not included in the prospectus. If the fund has
more than one form of current prospectus, each reference to the
prospectus in this SAI shall include all the fund's prospectuses,
unless otherwise noted. The SAI 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 SAI contains specific information about the fund.
Part II includes information about the fund and the other Putnam
funds.
<PAGE>
TABLE OF CONTENTS
PART I

SECURITY RATINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . .I-3

INVESTMENT RESTRICTIONS. . . . . . . . . . . . . . . . . . . . . . . . .I-6

CHARGES AND EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . .I-9

INVESTMENT PERFORMANCE . . . . . . . . . . . . . . . . . . I-13

ADDITIONAL OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . . I-14

INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS . . . . . . . . . . . I-15

Part II

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

TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .II-25

MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .II-30

DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . . . . . .II-40

HOW TO BUY SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . .II-41

DISTRIBUTION PLAN. . . . . . . . . . . . . . . . . . . . . . . . . . .II-54

INVESTOR SERVICES. . . . . . . . . . . . . . . . . . . . . . . . . . .II-55

SIGNATURE GUARANTEES . . . . . . . . . . . . . . . . . . . . . . . . .II-60

SUSPENSION OF REDEMPTIONS. . . . . . . . . . . . . . . . . . . . . . .II-61

SHAREHOLDER LIABILITY. . . . . . . . . . . . . . . . . . . . . . . . .II-61

STANDARD PERFORMANCE MEASURES. . . . . . . . . . . . . . . . . . . . .II-61

COMPARISON OF PORTFOLIO PERFORMANCE. . . . . . . . . . . . . . . . . .II-63

DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .II-67

<PAGE>
SAI
PART I

SECURITY RATINGS

The following rating services describe rated securities as
follows:

Moody's Investors Service, Inc.

Bonds

Aaa -- Bond which are rate Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and
are generally referred to as "gilt-edged." 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 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
greater amplitude or there may be other elements present which
make the long-term risk appear somewhat larger than the Aaa
securities.

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

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

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

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

Bonds

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 higher rated issues only
in small degree.

A -- Debt rated 'A' has a strong capacity to pay interest and
repay principal although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than 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 in higher rated categories.
BB-B-CCC-CC-C -- Debt rated 'BB', 'B', 'CCC', 'CC', and 'C' is
regarded as having predominantly speculative characteristics with
respect to capacity to pay interest and repay principal. 'BB'
indicates the least degree of speculation and 'C' the highest.
While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or
major exposures to adverse conditions.

BB -- Debt rated 'BB' has less near-term vulnerability to default
than other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial, or
economic conditions which could lead to inadequate capacity to
meet timely interest and principal payments. The 'BB' rating
category is also used for debt subordinated to senior debt that
is assigned an actual or implied 'BBB-' rating.

B -- Debt rated 'B' has a greater vulnerability to default but
currently has the capacity to meet interest payments and
principal repayments. Adverse business, financial, or economic
conditions will likely impair capacity or willingness to pay
interest and repay principal. The 'B' rating category is also
used for debt subordinated to senior debt that is assigned an
actual or implied 'BB' or 'BB-' rating.

CCC -- Debt rated 'CCC' has a currently identifiable
vulnerability to default, and is dependent upon favorable
business, financial, and economic conditions to meet timely
payment of interest and repayment of principal. In the event of
adverse business, financial, or economic conditions, it is not
likely to have the capacity to pay interest and repay principal.
The 'CCC' rating category is also used for debt subordinated to
senior debt that is assigned an actual or implied 'B' or 'B-'
rating.

CC -- The rating 'CC' typically is applied to debt subordinated
to senior debt that is assigned an actual or implied 'CCC'-
rating.

C -- The rating 'C' typically is applied to debt subordinated to
senior debt which is assigned an actual or implied 'CCC-' debt
rating. The 'C' rating may be used to cover a situation where
bankruptcy petition has been filed, but debt service payments are
continued.

D -- Bonds rated 'D' are in payment default. The 'D' rating
category is used when interest payments or principal payments are
not made on the date due even if the applicable grace period has
not expired, unless Standard & Poor's believes that such payments
will be made during such grace period. The 'D' rating also will
be used on the filing of a bankruptcy petition if debt service
payments are jeopardized.

INVESTMENT RESTRICTIONS

As fundamental investment restrictions, which may not be changed
without a vote of a majority of the outstanding voting
securities, the fund may not and will not:

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

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

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

It is contrary to the fund's present policy, which may be changed
without shareholder approval, to:

(7) 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 fund's investment restrictions permit it
to borrow money to a limited extent, it does not currently intend
to do so.

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

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

CHARGES AND EXPENSES

Management fees

For the past fiscal year, pursuant to its Management Contract,
the fund incurred the following fees:
Reflecting a
reduction in the
following amount
Management pursuant to an
Fiscal year fee paid expense limitation
- ----------- ---------- -----------------

1995 $26,644 $66,625

The expense limitation expired on December 31, 1995.

Brokerage commissions

The following table shows brokerage commissions paid during the
fiscal period indicated.

Brokerage
Fiscal year commissions
----------- -----------

1995 $89,850

Dollar
value Percent of
of these total Amount of
Fiscal year transactions transactions commissions
- ----------- ------------ ------------ -----------

1995 $19,865,274 99.14% $89,646

<PAGE>
Administrative expense reimbursement

The fund reimbursed Putnam Management in the following amount for
administrative services during fiscal 1995, including the
following amount for compensation of certain officers of the fund
and contributions to the Putnam Investments, Inc. Profit Sharing
Retirement Plan for their benefit:

Portion of total
reimbursement for
Total compensation and
Fiscal year reimbursement contributions
- ---------- ------------- ----------------

1995 $30 $29

Trustee fees

Each Trustee receives a fee for his or her services. Each
Trustee also receives fees for serving as Trustee of other Putnam
funds. The Trustees periodically review their fees to assure
that such fees continue to be appropriate in light of their
responsibilities as well as in relation to fees paid to trustees
of other mutual fund complexes. The Trustees meet monthly over a
two-day period, except in August. The Compensation Committee,
which consists solely of Trustees not affiliated with Putnam
Management and is responsible for recommending Trustee
compensation, estimates that Committee and Trustee meeting time
together with the appropriate preparation requires the equivalent
of at least three business days per Trustee meeting. The
following table shows the year each Trustee was first elected a
Trustee of the Putnam funds, the estimated fees to be paid to
each Trustee by the fund for fiscal 1996 and the fees paid to
each Trustee by all of the Putnam funds during the calendar year
1995.

<PAGE>
[CAPTION]
<TABLE>
COMPENSATION TABLE

Estimated Total
aggregate compensation
compensation from all
Trustees from the fund* Putnam funds**
- -----------------------------------------------------------------
<S> <C> <C>
Jameson A. Baxter/1994 $122 $150,854
Hans H. Estin/1972 122 150,854
John A. Hill/1985*** 122 149,854
Elizabeth T. Kennan/1992 122 148,854
Lawrence J. Lasser/1992 122 150,854
Robert E. Patterson/1984 122 152,854
Donald S. Perkins/1982 122 150,854
William F. Pounds/1971 122 149,854
George Putnam/1957 122 150,854
George Putnam, III/1984 122 150,854
Eli Shapiro/1995**** 122 95,372
A.J.C. Smith/1986 122 149,854
W. Nicholas Thorndike/1992 122 152,854
- -----------------------------------------------------------------
* Reflects amounts paid for fiscal year 1995. Includes an
annual retainer and attendance fee for each meeting
attended.
** Reflects total payments received from all Putnam funds in
the most recent calendar year. As of December 31, 1995,
there were 99 funds in the Putnam family.
*** Includes amounts of compensation deferred pursuant to a
Trustee Compensation Deferral Plan. The total amount of
deferred compensation payable to Mr. Hill by all Putnam
funds as of September 30, 1995 was $26,395, including
income earned on such amounts.
**** Elected as a Trustee in April 1995.
</TABLE>

The Trustees have approved Retirement Guidelines for Trustees of
the Putnam funds. These Guidelines provide generally that a
Trustee who retires after reaching age 72 and who has at least 10
years of continuous service will be eligible to receive a
retirement benefit from each Putnam fund for which he or she
served as a Trustee. The amount and form of such benefit is
subject to determination annually by the Trustees and, unless
otherwise determined by the Trustees, will be an annual cash
benefit payable for life equal to one-half of the Trustee
retainer fees paid by each fund at the time of retirement.
Several retired Trustees are currently receiving benefits
pursuant to the Guidelines and it is anticipated that the current
Trustees will receive similar benefits upon their retirement. A
Trustee who retired in calendar 1995 and was eligible to receive
benefits under these Guidelines would have received an annual
benefit of $66,749, based upon the aggregate retainer fees paid
by the Putnam funds for such year. The Trustees reserve the
right to amend or terminate such Guidelines and the related
payments at any time, and may modify or waive the foregoing
eligibility requirements when deemed appropriate.

For additional information concerning the Trustees, see
"Management" in Part II of this SAI.

Share ownership

At November 30, 1995, the officers and Trustees of the Trust as a
group owned less than 1% of the outstanding shares of the fund,
and, except as noted below, to the knowledge of the Trust no
person owned of record or beneficially 5% or more of the shares
of the fund.

Putnam International New Opportunities Fund

Shareholder name Percentage
Class and address owned
----- -------------------- --------
A Merrill Lynch* 10.10%
B Merrill Lynch* 29.30%
M Merrill Lynch* 46.60%

* c/o Merrill Lynch, 4800 Deer Lake East, Mutual Fund
Operations, 3rd floor, Jacksonville, FL 32246-6483

Distribution fees

During fiscal 1995, the fund paid the following 12b-1 fees to
Putnam Mutual Funds:

Class A Class B Class M
$2,619 $2,039 $238

Class A sales charges and contingent deferred sales charges

Putnam Mutual Funds received no contingent deferred sales charges
upon redemptions of class A shares in fiscal 1995 but received
sales charges with respect to class A shares in the following
amount, all of which was allocated by Putnam Mutual Funds to <PAGE>
dealer concessions, during the period indicated:

Total
front-end
Fiscal year sales charges
----------- -------------
1995 $390,935

Class B contingent deferred sales charge

Putnam Mutual Funds received no contingent deferred sales charges
upon redemptions of class B shares in fiscal 1995:

Class M sales charges

Putnam Mutual Funds received no contingent deferred sales charges
upon redemptions of class M shares in fiscal 1995 but received
sales charges with respect to class M shares in the following
amount, none of which was retained by Putnam Mutual Funds after
dealer concessions, during the 1995 fiscal year:

Total
Fiscal year sales charge
- ----------- -------------
1995 $38,725

Investor servicing and custody fees and expenses

During the 1995 fiscal year, the fund incurred $35,129 in fees
and out-of-pocket expenses for investor servicing and custody
services provided by Putnam Fiduciary Trust Company.

INVESTMENT PERFORMANCE

Standard performance measures
(for periods ended September 30, 1995)

Class A Class B Class M

Inception date January 6, 1995 July 21, 1995 July 21, 1995

Total
return NAV* POP** NAV CDSC NAV POP
- -----------------------------------------------------------------
Life of
class*** +21.06% +14.08% +0.29% -4.71% +0.39% -3.11%

* net asset value
** public offering price
*** Performance data shown for each class represent cumulative,
rather than average annual, total return.

Data represent past performance and are not indicative of future
results. Total return at POP for class A and class M shares
reflects the deduction of the maximum sales charge of 5.75% and
3.50%. Total return at CDSC for class B shares reflects the
deduction of the applicable contingent deferred sales charge
(CDSC). The maximum class B CDSC is 5.0%. See "Standard
performance measures" in Part II of this SAI for information on
how performance is calculated. Past performance is no guarantee
of future results.

ADDITIONAL OFFICERS

In addition to the persons listed as officers of the Trust in
Part II of this SAI, each of the following persons is also a Vice
President of the Trust and Vice President of certain of the
Putnam Funds. Officers of Putnam Management hold the same
offices in Putnam Management's parent company, Putnam
Investments, Inc.

Thomas R. Bogan, Senior Vice President of Putnam Management.
Prior to November, 1994, Mr. Bogan was Senior Analyst at Lord,
Abbett & Co.

David L. King, Senior Vice President of Putnam Management.

Carol C. McMullen, Managing Director of Putnam Management. Prior
to June, 1995, Ms. McMullen was Senior Vice President and Senior
Portfolio Manager of Baring Asset Management.

Jeanne L. Mockard, Senior Vice President of Putnam Management.

John J. Morgan, Jr., Managing Director of Putnam Management.

Patrick O'Donnell, Managing Director of Putnam Management.
Prior to May 1994, Mr. O'Donnell was the founder and President of
Exeter Research Inc.

Anthony W. Regan, Senior Managing Director of Putnam Management.

Thomas V. Reilly, Managing Director of Putnam Management.

David J. Santos, Vice President of Putnam Management.

Justin M. Scott, Managing Director of Putnam Management.

Sheldon N. Simon, Senior Vice President of Putnam Management.

Kenneth J. Taubes, Senior Vice President of Putnam Management.
Prior to June, 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., One Post Office Square, Boston, MA
02109, are the fund'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 Report
of Independent Accountants, financial highlights and audited
financial statements included in the fund's Annual Report for the
period January 3, 1995 (commencement of operations) to September
30, 1995, filed electronically on November 28, 1995 (File No.
811-7237), are incorporated by reference into this SAI. The
financial highlights included in the prospectus and incorporated
by reference into this SAI and the financial statements
incorporated by reference into the prospectus and this SAI have
been so included and incorporated in reliance upon the report of
the independent accountants, given on their authority as experts
in auditing and accounting.

H:\USERS\ACIMAN\B48497Z.1<PAGE>
PUTNAM NEW VALUE FUND
(a series of Putnam Investment Funds (the "Trust"))

FORM N-1A
PART B

STATEMENT OF ADDITIONAL INFORMATION ("SAI")
January 1, 1996

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

SECURITY RATINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . .I-3

INVESTMENT RESTRICTIONS. . . . . . . . . . . . . . . . . . . . . . . . .I-6

CHARGES AND EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . .I-9

INVESTMENT PERFORMANCE . . . . . . . . . . . . . . . . . . I-13

ADDITIONAL OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . . I-13

INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS . . . . . . . . . . . I-14