PUTNAM RESEARCH FUND
PUTNAM REAL ESTATE OPPORTUNITIES FUND
each a series of Putnam Investment Funds (the "Trust")
Prospectus Supplement dated February 24, 1997
to Prospectus dated December 31, 1996
The shareholders of Putnam Research Fund have approved a new
management contract on February 6, 1997, which will take effect
on April 1, 1997. The contract provides for a base management
fee and a performance adjustment based on the investment
performance of the fund compared to changes in the value of the
Standard & Poor's 500 Composite Stock Price Index (the "S&P
500"), an index of common stocks frequently used as a general
measure of U.S. stock market performance.
Under the new management contract, Putnam Research Fund pays
a quarterly base fee (subject to adjustment as provided below) to
Putnam Investment Management, Inc. ("Putnam Management") based on
the average net assets of Putnam Research Fund, as determined at
the close of each business day during the quarter, at the
following annual rates, expressed as a percentage of Putnam
Research Fund's average net assets: 0.65% of the first $500
million, 0.55% of the $500 million, 0.50% of the next $500
million, 0.45% of the next $5 billion, 0.425% of the next $5
billion, 0.405% of the next $5 billion, 0.39% of the next $5
billion, and 0.38% thereafter.
The applicable base fee will be increased or decreased for
each calendar quarter by an incentive payment or penalty at the
annual rate of 0.01% of the fund's average net assets for each 1%
increment by which the fund outperforms or underperforms the S&P
500 in excess of 3%, subject to a maximum increase or decrease of
0.07% of average net assets. In determining the extent to which
the fund outperofrms orunderperforms S&P 500, fractional amounts
will be rounded to the nearest whole percent.
Performance will be calculated for these purposes at the
beginning of each fiscal quarter, for the thirty-six month period
immediately preceding such quarter (or the life of Putnam
Research Fund, if shorter). For example, if Putnam Research Fund
were to achieve a cumulative total return of 30% for a given
three-year period and the S&P 500 were to return 25% for that
same period, i.e., Putnam Research Fund were to outperform the
S&P 500 by 5%, the fee payable to Putnam Management for the
following quarter would be increased by the annual rate of 0.02%
of average net assets. Conversely, if, for the given three-year
period, the fund's total return were 1% and the S&P 500 increased
in value by 6%, the fee payable to Putnam Management for the
following quarter would be decreased by the annual rate of 0.02%
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of average net assets. If the management contract had been in
effect on January 31, 1997, the fund's cumulative total return of
43.28% relative to that of the S&P 500, 39.12, would have
resulted in a 1% increase at an annual rate to the base fee. The
examples are intended solely to illustrate the effect of the
performance adjustment. Putnam Research Fund's actual return
will vary, and may be greater or less than that of the S&P 500.
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On January 3, 1997, the Trustees approved the liquidation of
Putnam Real Estate Opportunities Fund, which liquidation occurred
on February 5, 1997.
