PROSPECTUS
January 1, 1996
as revised May 30 , 1996
Putnam New Value Fund
Class A, B and M shares
INVESTMENT OBJECTIVE: CAPITAL APPRECIATION
INVESTMENT STRATEGY: GROWTH AND INCOME
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.
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 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. 8
Read this section to make sure you understand certain risks
that may be involved when investing in the fund.
How performance is shown 12
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 14
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 17
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 21
This section tells you what distribution fees are charged against
each class of shares.
How to sell shares 23
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 24
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 25
This section explains how the fund determines the value of its
shares.
How the fund makes distributions to shareholders; tax
information 25
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
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 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%
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.
<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
The examples do not represent past or future expense levels.
Actual expenses may be greater or less than those shown. Federal
regulations require the examples to assume a 5% annual return,
but actual annual return varies.
* The higher 12b-1 fees borne by class B 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 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)
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 .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 during the period. As a result
of such limitation, expenses for the fund reflect a reduction of
approximately $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 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,
current and projected dividend rates, competitive position
and current and projected future earnings. Putnam
Management currently expects that a portion of the fund's
investment will include common stocks that offer the potential
for above-average current income.
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.
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."
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.
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
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.
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 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
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. 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, its agencies or instrumentalities;*
(b) 25% of its total assets in any one industry;* 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 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.
"Yield" for each class of shares 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 of the
class on the last day of that period.
Yield is based on the price of the shares, including the maximum
initial sales charge in the case of class A and class M shares,
but does not reflect any contingent deferred sales charge in the
case of class B shares.
"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 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 of the fund) 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 fund's 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.
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 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.
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.
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 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."
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."
<PAGE>
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 $25 or more per month through automatic deductions
from your bank checking or savings account. Application forms
are available from your investment dealer or through Putnam
Investor Services.
Shares are sold at the public offering price based on the net
asset value next determined after Putnam Investor Services
receives your order. In most cases, in order to receive that
day's public offering price, Putnam Investor Services must
receive your order before the close of regular trading on the New
York Stock Exchange. If you buy shares through your investment
dealer, the dealer must receive your order before the close of
regular trading on the New York Stock Exchange to receive that
day's public offering price.
Class A shares
The public offering price of class A shares is the net asset
value plus a sales charge that varies depending on the size of
your purchase. The fund receives the net asset value. The sales
charge is allocated between your investment dealer and Putnam
Mutual Funds as shown in the following table, except when Putnam
Mutual Funds, in its discretion, allocates the entire amount to
your investment dealer.
Sales charge Amount of
as a percentage of: sales charge
------------------- reallowed to
Net dealers as a
Amount of transaction amount Offering percentage of
at offering price ($) 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
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.
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%.
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 NONE NONE NONE
General
You may be eligible to buy class A shares and class M 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 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 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.
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.
Putnam Mutual Funds will from time to time, at its expense,
provide additional promotional incentives or payments to dealers
that sell shares of the Putnam funds. These incentives or
payments may include payments for travel expenses, including
lodging, incurred in connection with trips taken by invited
registered representatives and their guests to locations within
and outside the United States for meetings or seminars of a
business nature. In some instances, these incentives or payments
may be offered only to certain dealers who have sold or may sell
significant amounts of shares. Certain dealers may not sell all
classes of shares.
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.
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.
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.
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 is not available if you were issued certificates for
shares that remain outstanding. 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 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.
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.
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>
Make the most of your Putnam privileges
As a Putnam mutual fund shareholder; you have access to a number
of services that can help you build a more effective and flexible
financail program. Here are some of the ways you can use these
privileges to make the most of your Putnam mutual fund
investment.
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.
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.
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 Family of Funds
PUTNAM GROWTH FUNDS
Putnam Asia Pacific Growth Fund
Putnam Capital Appreciation 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 Income Fund
Putnam Preferred Income Fund
Putnam U.S. Government Income Trust
<PAGE>
PUTNAM TAX-FREE INCOME FUNDS
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
+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 NEW VALUE FUND
(a series of Putnam Investment Funds (the "Trust"))
FORM N-1A
PART B
STATEMENT OF ADDITIONAL INFORMATION ("SAI")
January 1, 1996, as revised May 30, 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-13
INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS . . . . . . . . . . . I-14
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 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 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 -- Debt 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
of the fund, the 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.
(8) Purchase securities (other than securities of the U.S.
government, its agencies or instrumentalities) if, as a result of
such purchase, more than 25% of the fund's total assets would be
invested in any one industry.
(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:
(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) Invest in warrants (other than warrants acquired by a fund
as part of a unit or attached to securities at the time of
purchase) if, as a result, such investments (valued at the lower
of cost or market) would exceed 5% of the value of the fund's net
assets; provided that not more than 2% of the fund's net assets
may be invested in warrants not listed on the New York or
American Stock Exchanges.
(3) Buy or sell oil, gas or other mineral leases, rights or
royalty contracts, although it may purchase securities which
represent interests in, are secured by interests in, or which are
issued by issuers which deal in, such leases, rights, or
contracts, and it may acquire or dispose of such leases, rights,
or contracts acquired through the exercise of its rights as a
holder of debt obligations secured thereby.
(4) Invest in securities of registered open-end investment
companies, except as they may be acquired as part of a merger or
consolidation or acquisition of assets or by purchases in the
open market involving only customary brokers' commissions.
(5) Make short sales of securities or maintain a short position
for the account of the fund unless at all times when a short
position is open it owns an equal amount of such securities or
owns securities which, without payment of any further
consideration, are convertible into or exchangeable for
securities of the same issue as, and in equal amount to, the
securities sold short.
(6) Purchase or sell real property (including limited
partnership interests), except that the fund may (a) purchase or
sell readily marketable interests in real estate investment
trusts or readily marketable securities of companies which invest
in real estate, (b) purchase or sell securities that are secured
by interests in real estate or interests therein, or (c) acquire
real estate through exercise of its rights as a holder of
obligations secured by real estate or interests therein or sell
real estate so acquired.
(7) Invest in securities of any issuer, if, to the knowledge of
the fund, officers and Trustees of the Trust and officers and
directors of Putnam Management who beneficially own more than
0.5% of the securities of that issuer together own more than 5%
of such securities.
(8) Invest in securities of an issuer which, together with any
predecessors, controlling persons, general partners and
guarantors, have a record of less than three years' continuous
business operation or relevant business experience, if, as a
result, the aggregate of such investments would exceed 5% of the
value of the fund's net assets; provided, however, that this
restriction shall not apply to any obligations of the U.S.
government or its instrumentalities or agencies.
Although certain of the fund's investment restrictions permit it
to borrow money to a limited extent, it does not currently intend
to do so.
---------------------
All percentage limitations on investments will apply at the time
of the making of an investment and shall not be considered
violated unless an excess or deficiency occurs or exists
immediately after and as a result of such investment.
The Investment Company Act of 1940 provides that a "vote of the
majority of the outstanding voting securities" of 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 amounts
Fiscal Management pursuant to an
year fee paid expense limitation
------ ---------- -----------------
1995 $9,671 $32,910
Expense Limitation. 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 attributable to such class.
For the purpose of determining any such limitation on Putnam
Management's compensation, expenses of the fund shall not reflect
the application of commissions or cash management credits that
may reduce designated fund expenses. With Trustee approval, this
expense limitation may be terminated earlier, in which event
shareholders would be notified and this SAI would be revised.
<PAGE>
Brokerage commissions
The following table shows brokerage commissions paid during the
fiscal period indicated.
Fiscal Brokerage
year commissions
------ -----------
1995 $8,320
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
------------ ------------ -----------
$2,615,752 66.60% $5,530
Administrative expense reimbursement
The Trust, on behalf of 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 Trust and contributions to the Putnam
Investments, Inc. Profit Sharing Retirement Plan for their
benefit:
Portion of total
reimbursement for
Total compensation and
reimbursement contributions
------------- ----------------
$27 $26
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.
COMPENSATION TABLE
Total
Aggregate compensation
compensation from all
Trustees from the fund* Putnam funds**
- -----------------------------------------------------------------
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 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 August 31, 1995 was 17,217, including income
earned on such amounts.
**** Elected as a Trustee in April 1995.
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 (not available), 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 7.37% of the outstanding shares of New Value 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.
New Value Fund
Shareholder name Percentage
Class and address owned
----- -------------------- --------
A Putnam Investments* 76.20%
A The Putnam Companies Inc.** 8.80%
* c/o Putnam Investments, One Post Office Square, Boston, MA
02109
** c/o The Putnam Companies Inc., One Post Office Square,
Boston, MA 02109
Distribution fees
During fiscal 1995, the fund did not pay any 12b-1 fees to Putnam
Mutual Funds.
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. No class B or class M shares
were outstanding during fiscal 1995.
Investor servicing and custody fees and expenses
During the 1995 fiscal period, the fund incurred $5,796 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 August 31, 1995)
Class A***
Inception
date: January 3, 1995
Total
return NAV* POP**
- -----------------------------------------------------------------
Life of fund 23.88% 16.74%
Class A
Yield POP
30-day N/A
Yield N/A%
* net asset value
** public offering price
*** Performance data shown for class A shares for the period
January 3, 1995 to August 31, 1995 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 shares reflects the
deduction of the maximum sales charge of 5.75%. There were no
class B and M shares outstanding during this period. 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.
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.
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
fiscal year ended August 31, 1995, filed electronically on
November 1, 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.
