PROSPECTUS
December 31, 1996 , as revised August 1,
1997
Putnam Growth Opportunities Fund
Class A, B and M shares
INVESTMENT STRATEGY: GROWTH
This prospectus explains concisely what you should know before
investing in Putnam Growth Opportunities Fund, (the "fund"), a
series of Putnam Investment funds (the "Trust").
Please read it carefully and keep it for future reference. You
can find more detailed information in the August 1, 1997
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 (the
"Commission") and is incorporated into this prospectus by
reference. The Commission maintains a Web site
(http://www.sec.gov) that contains the SAI, material incorporated
by reference into this prospectus and the SAI, and other
information regarding registrants that file electronically with
the Commission.
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
.
This section describes the sales charges, management fees, and
annual operating expenses that apply to the various classes of
the fund's shares. Use it to help you estimate the impact of
transaction costs on your investment over time.
Financial highlights
.
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.
Objectives
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Read this section to make sure the fund's objective is
consistent with your own.
How the fund pursues its objective
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
This section explains in detail how the fund seeks its
investment objective.
How performance is shown
.
This section describes and defines the measures used to assess
fund performance. All data are based on past investment results
and do not predict future performance.
How the fund is managed . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consult this section for information about the fund's
management, allocation of its expenses, and how purchases and
sales of securities are made.
Organization and history . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. 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
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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
.
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.
Distribution plans
.
This section tells you what distribution fees are charged against
each class of shares.
How to sell shares
.
In this section you can learn how to sell fund shares, either
directly to the fund or through an investment dealer.
How to exchange shares
.
Find out in this section how you may exchange fund shares 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
.
This section explains how the fund determines the value of
its shares.
How the fund makes distributions to shareholders; tax
information
.
This section describes the various options you have in choosing
how to receive fund dividends. It also discusses the tax status
of the payments and counsels you to seek specific advice about
your own situation.
ABOUT PUTNAM INVESTMENTS, INC.
.
Read this section to learn more about the companies that provide
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 expenses based on
the most recent 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
fees+ fees expenses+
expenses+
---------- ----- -------- ---------
Class A NONE 0.25% 1.00% 1.25%
Class B NONE 1.00% 1.00% 2.00%
Class M NONE 0.75% 1.00% 1.75%
+after expense limitation
The table is provided to help you understand the expenses of
investing and your share of fund operating expenses expected
to be incurred during the fund's first full fiscal year . The
expenses shown in the table do not reflect the application of
credits that reduce fund expenses. The annual fund operating
expenses shown in the table for class A shares have been
annualized. Actual "Other expenses" and total fund operating
expenses for class A shares were 0.89% for the ten-month
period ended July 31, 1996.
For class B and M shares, management fees and other expenses are
based on the operating expenses for the fund's class A
shares . In the absence of the expense limitation, management
fees, "Other expenses" and total fund operating expenses would
have been 0.70%, 1.80% and 2.75%, respectively, for class A
shares, shown in the table, 1.80% and 3.50%, respectively, for
class B shares and 0.70%, 1.80% and 3.25%, respectively, for
class M shares. The 12b-1 fees for class A, class B and class M
shares shown in the table reflect the amounts to which the
Trustees currently limit payments under the fund's distribution
plans.
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 3 5 10
year years years years
Class A $70 $95 $122 $200
Class B $70 $93 $128 $213 ***
Class B (no redemption) $20 $63 $108 $213 ***
Class M $52 $88 $127 $234
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."
*** Reflects conversion of class B shares to class A shares
(which pay lower ongoing expenses) approximately eight years
after purchase. See "Alternative sales arrangements."
FINANCIAL HIGHLIGHTS
The following tables present per share financial information for
class A shares. No class B or class M shares were outstanding
during the reporting periods. This information has been
audited and reported on by the independent accountants.
The "Report of independent accountants" and financial statements
included in the fund's annual report to shareholders for
the 1996 fiscal year are incorporated by reference into this
prospectus. The fund's annual report, which contains
additional unaudited performance information, is available
without charge upon request.
Financial highlights
(For a share outstanding throughout the period)
For the
period
October 2,
1995
(commencement
of operations)
to July 31, 1996
Net asset value, beginning of period $8.50
Investment operations
Net investment income .03(a)
Net realized and unrealized gain on investments 1.67
Total from investment operations 1.70(a)
Less distributions:
From net investment income (.04)
From net realized gain on investments (.01)
Total distributions (.05)
Net asset value, end of period $10.15
Total investment return at net asset value (%)(b) 20.08*
Net assets, end of period (in thousands) $2,647
Ratio of expenses to average net assets (%)(c) .89(a)*
Ratio of net investment income
to average net assets (%) .30(a)*
Portfolio turnover (%) 151.15*
Average commission rate paid (d) .0414
* Not annualized.
(a) Reflects an expense limitation in effect during the period.
As a result of such limitation, expenses for the fund
reflect a reduction of approximately $0.11 per share.
(b) Total investment return assumes dividend reinvestment and
does not reflect the effect of sales charges.
(c) Includes amounts paid through expense offset arrangements.
(d) Average commission rate paid on security trades.
OBJECTIVE
Putnam Growth Opportunities Fund seeks capital appreciation.
The fund is not intended to be a complete
investment program, and there is no assurance that it will
achieve its objective.
<PAGE>
HOW THE FUND PURSUES ITS OBJECTIVE
Basic investment strategy
The fund will invest primarily in common stocks of U.S. companies
that Putnam Investment Management, Inc., the fund's
investment manager ("Putnam Management"), believes will benefit
from major, long-term trends in the economy, business conditions,
consumer behavior or public perceptions of the environment.
Putnam Management attempts to identify these trends in their
early stages, and then attempts to identify the economic sectors
that may benefit from them. In selecting securities from these
sectors, Putnam Management will consider a variety of factors,
including an issuer's financial strength, competitive position
and projected future earnings. In addition, the fund may also
invest a portion of its assets in securities of companies that,
although not in any of the sectors that Putnam Management
believes may benefit from such trends, are expected by Putnam
Management to experience above-average growth.
Common stocks are normally the fund's main investments.
However, the fund may purchase preferred stocks, debt securities
and convertible securities (both bonds and preferred stocks) if
Putnam Management believes they would help achieve the fund's
objective of capital appreciation. The fund may also hold a
portion of its assets in cash or high-quality money market
instruments.
The fund is unlike most equity mutual funds in that its
investments will be comprised of a relatively small number of
issuers. Because Putnam Management evaluates securities for the
fund based on their potential for capital appreciation, the
fund's investments may not appreciate or yield significant income
over the shorter term, and as a result the fund's total return
over certain periods may be less than that of other equity mutual
funds. In addition, although the fund will not invest more than
25% of its assets in any one industry, the fund's emphasis on a
relatively limited number of sectors of the economy at any given
time may make the value of fund shares more susceptible to any
single economic, political or regulatory development than the
value of shares of a more widely diversified mutual fund. As a
result, the value of fund shares may fluctuate more than the
value of shares of other equity mutual funds. Achievement of the
fund's goals will be dependent not only on Putnam Management's
ability to select individual investments, but also on Putnam
Management's ability to accurately identify the long-term trends
described above and the economic sectors that will benefit from
those trends.
Putnam Management expects that under normal market conditions the
fund will invest primarily in securities of issuers with equity
market capitalizations above $1 billion. However, the fund may
also invest in small- to medium-sized companies that have equity
market capitalizations below this level. These companies will
generally have a proprietary product or profitable market niche
and the potential to grow very rapidly. Such companies may
present greater opportunities for capital appreciation, but may
also involve greater risk. They may have limited product lines,
markets or financial resources, or may depend on a limited
management group. Their securities may trade less frequently and
in limited volume, and only in the over-the-counter market or on
a regional securities exchange. As a result, these securities
may fluctuate in value more than those of larger, more
established companies.
Alternative investment strategies
At times Putnam Management may judge that conditions in the
securities markets make pursuing the basic investment strategy of
the fund inconsistent with the best interests it's shareholders.
At such times Putnam Management may temporarily use alternative
strategies primarily designed to reduce fluctuations in the value
of fund assets.
In implementing these defensive strategies, the fund may invest
without limit in cash or money market instruments, preferred
stocks, debt securities issued by the U.S. government or 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 these
alternative strategies will be used.
Foreign investments
The fund may invest in securities of foreign issuers that are not
actively traded in U.S. markets. These foreign investments
involve certain special risks described below.
Foreign securities are normally denominated and traded in foreign
currencies. As a result, the value of the fund's foreign
investments and the value of its shares may be affected favorably
or unfavorably by changes in currency exchange rates relative to
the U.S. dollar. The fund may engage in a variety of foreign
currency exchange transactions in connection with its foreign
investments, including transactions involving futures contracts,
forward contracts and options.
Investments in foreign securities may subject the fund to other
risks as well. For example, there may be less information
publicly available about a foreign issuer than about a U.S.
issuer, and foreign issuers are not generally subject to
accounting, auditing and financial reporting standards and
practices comparable to those in the United States. The
securities of some foreign issuers are less liquid and at times
more volatile than securities of comparable U.S. issuers.
Foreign brokerage commissions and other fees are also generally
higher than in the United States. Foreign settlement procedures
and trade regulations may involve certain risks (such as delay in
payment or delivery of securities or in the recovery of the
fund's assets held abroad) and expenses not present in the
settlement of investments in U.S. markets.
In addition, the fund's investments in foreign securities may be
subject to the risk of nationalization or expropriation of
assets, imposition of currency exchange controls or restrictions
on the repatriation of foreign currency, confiscatory
taxation, political or financial instability and diplomatic
developments which could affect the value of the
fund's investments in certain foreign countries.
Dividends or interest on, or proceeds from the sale of,
foreign securities may be subject to foreign withholding taxes,
and special U.S. tax considerations may apply.
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
the fund's ability to invest in securities of certain
issuers organized under the laws of those foreign
countries.
The risks described above are typically increased in
connection with investments in less developed and developing
nations, which are sometimes referred to as "emerging markets."
For example, political and economic structures in these
countries may be in their infancy and developing rapidly, causing
instability. High rates of inflation or currency devaluations
may adversely affect the economies and securities markets of such
countries. Investments in emerging markets may be considered
speculative.
The fund expects that its investments in foreign securities
generally will not exceed 20% of its total asset, although the
fund's investments in foreign securities may exceed this amount
from time to time. Certain of the foregoing risks may also apply
to some extent to securities of U.S. issuers that are denominated
in foreign currencies or that are traded in foreign markets, or
securities of U.S. issuers having significant foreign operations.
The fund may engage in a variety of foreign currency
exchange transactions in connection with its foreign investments,
including transactions involving futures contracts, forward
contracts and options. For further discussion on the risks
associated with purchasing and selling futures contracts and
options, see "Futures and options." The SAI also contains
information concerning these transactions. The decision
as to whether and to what extent
the fund will engage in
foreign currency exchange transactions will depend on a number of
factors, including prevailing market conditions, the composition
of the fund's portfolio and the availability of suitable
transactions. Accordingly, there can be no assurance
that
t
he fund will engage in foreign currency exchange
transactions at any given time or from time to time.
For more information about foreign securities and the risks
associated with investment in such securities, see SAI.
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 index futures or stock
indexes. The fund may engage in index futures and options
transactions for hedging purposes and for nonhedging purposes,
such as to adjust its exposure to relevant markets or as a
substitute for direct investment.
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 from the possibility of imperfect
correlations among movements in the prices of financial futures
and options purchased or sold by the fund, of the underlying
stock index or securities and, in the case of hedging
transactions, of the securities that are the subject of the
hedge. The successful use of the strategies described above
further depends on Putnam Management's ability to forecast market
movements correctly.
Other risks arise from the potential inability to close out index
futures or options positions. There can be no assurance that a
liquid secondary market will exist for any index future or option
at any particular time. The fund's ability to terminate option
positions established in the over-the-counter market may be more
limited than for exchange-traded options and may also involve the
risk that securities dealers participating in such transactions
would fail to meet their obligations to the fund. Certain
provisions of the Internal Revenue Code and certain regulatory
requirements may limit the use of index futures and options
transactions.
<PAGE>
A more detailed explanation of index futures and options
transactions, including the risks associated with them, is
included in the SAI.
Investments in fixed-income securities
Although the fund will invest primarily in common stocks, it may
also invest in both higher-rated and lower -rated
fixed-income securities , and is not subject to any
restrictions based on credit ratings. The values of fixed-income
securities generally fluctuate in response to changes in interest
rates. Thus, a decrease in interest rates will generally result
in an increase in the value of the fund's fixed-income
investments. Conversely, during periods of rising interest
rates, the value of the fund's fixed-income investments will
generally decline. The values of lower -rated fixed-income
securities , commonly known as "junk bonds," generally
fluctuate more than those of higher-rated fixed-income
securities. Securities in the lower rating categories may,
depending on the rating, have large uncertainties or major
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 securities in the lower
rating categories 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 it's
goals is more dependent on Putnam Management's ability
than would be the case if it were investing in
securities in the higher rating categories.
For additional information concerning the risks associated
with investing 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 its portfolio turnover rate may be higher than that of
other mutual funds.
Portfolio turnover generally involves some expense, including
brokerage commissions or dealer markups and other transaction
costs on the sale of securities and reinvestment in other
securities. These transactions may result in realization of
taxable capital gains. Portfolio turnover rates are shown in the
section "Financial highlights."
Other investment practices
The fund may also engage in the following investment
practices, each of which involves certain special risks.
The SAI contains more detailed information about these
practices, including limitations designed to reduce these
risks.
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, it 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,
including combinations of put and call options on the same
underlying security. 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.
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 if the
other party should default on its obligation and the fund
is delayed or prevented from recovering the collateral or
completing the transaction.
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 its 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, it 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 may 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 to limit investment risks
for the fund's 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 one
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 policy 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
Fund advertisements may, from time to time, include performance
information. "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.
"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 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, portfolio
composition , fund 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. Fund performance may be
compared to that of various indexes. See the SAI.
HOW THE FUND IS MANAGED
The Trustees are responsible for generally overseeing the conduct
of fund 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 Putnam Management a quarterly fee for these
services based on average net assets. See "Expenses summary"
and the SAI.
<PAGE>
The following officers of Putnam Management have had primary
responsibility for the day-to-day management of the fund's
portfolio since the years stated below:
Business experience
Year (at least 5 years)
------ -----------------
Carol C. McMullen 1995 Employed as an investment
Managing Director professional by Putnam
Management since 1995. Prior
to June, 1995, Ms. McMullen
was Senior Vice President and
Senior Portfolio Manager of
Baring Asset Management.
Jeffrey R. Lindsey 1996 Employed as an investment
Senior Vice President professional by Putnam
Management since 1994.
Prior to April, 1994, Mr.
Lindsey was Vice President
at Strategic Portfolio
Management Inc.
The fund pays its share of all expenses not assumed by
Putnam Management, including Trustees' fees, auditing, legal,
custodial, investor servicing and shareholder reporting expenses,
and payments under its distribution plans. The fund is a
series of Putnam Investment Funds (the "Trust"). 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
each portfolio of the Trust and each 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 each other portfolio or the nature of the
services performed and relative applicability to the fund
or each other portfolio. The fund also reimburses
Putnam Management for the compensation and related expenses of
certain fund officers and their staff who provide administrative
services. The total reimbursement is determined annually by the
Trustees.
Putnam Management places all orders for purchases and sales of
fund 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 fund
shares (and, if permitted by law, of the other Putnam funds) as a
factor in the selection of broker-dealers.
<PAGE>
ORGANIZATION AND HISTORY
The Trust is a Massachusetts business trust organized on October
31, 1994. A copy of the Agreement and Declaration of Trust,
which is governed by Massachusetts law, is on file with the
Secretary of State of The Commonwealth of Massachusetts. Prior
to January 6, 1995, the Trust was known as Putnam Equity Funds.
As of November 30, 1996, 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. The Trustees may, without shareholder
approval, create two or more series of shares representing
separate investment portfolios. Any such series of
shares may be divided without shareholder approval into two or
more classes of shares having such preferences and special or
relative rights and privileges as the Trustees determine. The
fund is a series of the Trust. Only class A , class B and
class M shares being offered by the 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 all classes will vote together
as a single class, except when otherwise required by law or as
determined by the Trustees. Shares are freely transferable, are
entitled to dividends as declared by the Trustees, and, if
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 the minimum 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, Chairman
and Managing Director, First Reserve Corporation; Ronald J.
Jackson, Former Chairman, President and Chief Executive Officer
of Fisher-Price, Inc., Director of Safety 1st, Inc., Trustee of
Salem Hospital and the Peabody Essex Museum; 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 and Director of
Acquisitions, Cabot Partners Limited Partnership; Donald S.
Perkins,* Director of various corporations, including Cummins
Engine Company, Lucent Technologies, Inc., Springs Industries,
Inc. and Time Warner Inc.; George Putnam, III,* President, New
Generation Research, Inc. ; A.J.C. Smith,* Chairman and
Chief Executive Officer, Marsh & McLennan Companies, Inc.; and W.
Nicholas Thorndike, Director of various corporations and
charitable organizations, including Data General Corporation,
Bradley Real Estate, Inc. and Providence Journal Co. Also,
Trustee of Massachusetts General Hospital and Eastern Utilities
Associates. The Trustees are also Trustees of the other Putnam
funds. Those marked with an asterisk (*) are or may be deemed to
be "interested persons" of the fund, Putnam Management or
Putnam Mutual Funds.
About Your Investment
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 includes information about how shares acquired
through reinvestment of distributions are treated for conversion
purposes. The discussion also notes certain circumstances under
which a conversion may not occur. Class B shares provide an
investor the benefit of putting all of the investor's dollars to
work from the time the investment is made. Until conversion,
class B shares will have a higher expense ratio and pay lower
dividends than class A and class M shares because of the higher
12b-1 fee. See "How to buy shares -- Class B shares" and
"Distribution plans."
Class M shares. An investor who purchases class M shares pays a
sales charge at the time of purchase that is lower than the sales
charge applicable to class A shares. Certain purchases of class
M shares qualify for reduced sales charges. Class M shares bear
a 12b-1 fee that is lower than class B shares but higher than
class A shares. Class M shares are not subject to any CDSC and
do not convert into any other class of shares. See "How to buy
shares -- Class M shares" and "Distribution plans."
Which arrangement is best for you? The decision as to which
class of shares provides a more suitable investment for an
investor depends on a number of factors, including the amount and
intended length of the investment. Investors making investments
that qualify for reduced sales charges might consider class A or
class M shares. Investors who prefer not to pay an initial sales
charge might consider class B shares. Orders for class B shares
for $250,000 or more will be treated as orders for class A shares
or declined. For more information about these sales
arrangements, consult your investment dealer or Putnam Investor
Services. Shares may only be exchanged for shares of the same
class of another Putnam fund. See "How to exchange shares."
HOW TO BUY SHARES
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
- ---------------------------------------------------------------
No initial sales charge applies to purchases of
class A shares of $1 million or more , or to
purchases by employer-sponsored retirement plans that
have at least 200 eligible employees. However, a
CDSC
of 1.00% or 0.50%, respectively, is imposed within the
first or second year after purchase on redemptions of these
shares, unless the dealer of record waived its
commission with Putnam Mutual Funds' approval, or unless the
purchaser is a class A qualified benefit plan (a retirement plan
for which Putnam Fiduciary Trust Company or its affiliates
provide
recordkeeping or other services in connection with purchases of
class A shares).
Class A qualified benefit plans may also purchase class A shares
with no initial sales charge. However, except as stated below, a
CDSC of 0.75% of the total amount redeemed (1.00% in the case of
plans for which Putnam Mutual Funds and its affiliates do
not act as trustee or recordkeeper) is imposed on redemptions of
these shares if, within two years of a plan's initial purchase of
class A shares, it redeems 90% or more of its cumulative
purchases. Thereafter, such a plan is no longer liable for any
CDSC. The two-year CDSC applicable to class A qualified benefit
plans for which Putnam Mutual Funds or its affiliates serve as
trustee or recordkeeper ("full service plans") is 0.50% of the
total amount redeemed for full service plans that initially
invest
at least $5 million but less than $10 million in Putnam funds and
other investments managed by Putnam Management or its affiliates
("Putnam Assets"), and is 0.25% of the total amount redeemed for
full service plans that initially invest at least $10 million but
less than $20 million in Putnam Assets. Class A qualified
benefit
plans that initially invest at least $20 million in Putnam
Assets,
or whose dealer of record has, with Putnam Mutual Funds'
approval,
waived its commission or agreed to refund its commission to
Putnam
Mutual Funds in the event a CDSC would otherwise be applicable,
are not subject to any CDSC.
In determining whether a CDSC is payable, the fund will first
redeem shares not subject to any charge . Any CDSC will
be
calculated based on the lower of the shares' cost and current
net asset value and any shares acquired by reinvestment of
distributions will be redeemed without a CDSC. Putnam Mutual
Funds receives the entire amount of any CDSC you pay. See the
SAI
for more information about the CDSC.
A class A qualified 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 elsewhere in this prospectus and in the SAI.
As described in the SAI, Putnam Mutual Funds pays the dealer
of
record a commission of up to 1% on sales to class A qualified
benefit plans. Putnam Mutual Funds pays investment dealers of
record commissions on sales of class A shares of $1 million or
more and sales of class A shares to employer- sponsored
retirement
plans that have at least 200 eligible employees and that are
class
A qualified benefit plans based on an investor's cumulative
purchases during the one-year period beginning with the date of
the initial purchase at net asset value. Each subsequent
one-year
measuring period for these purposes will begin with the first net
asset value purchase following the end of the prior period. Such
commissions are paid at the rate of 1.00% of the amount under $3
million, 0.50% of the next $47 million and 0.25% thereafter.
Class B shares
Class B shares are sold without an initial sales charge, although
a CDSC will be imposed if you redeem shares within a specified
period after purchase, as shown in the table below.
Year 1 2 3 4 5 6 7+
- -------------------------------------------------------------
Charge 5% 4% 3% 3% 2% 1% 0%
Putnam Mutual Funds pays a sales commission equal to 4.00% of
the
amount invested to dealers who sell class B shares. These
commissions are not paid on exchanges from other Putnam funds or
on sales to investors exempt from the CDSC.
<PAGE>
Class M shares
The public offering price of class M shares is the net asset
value
plus a sales charge that varies depending on the size of your
purchase. The fund receives the net asset value. The sales
charge is allocated between your investment dealer and Putnam
Mutual Funds as shown in the following table, except when Putnam
Mutual Funds, at its discretion, allocates the entire amount to
your investment dealer.
Sales charge Amount of
as a percentage of: sales charge
------------------- reallowed to
Net dealers as a
Amount of transaction amount Offering percentage of
at offering price ($) 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
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. Class M qualified benefit plans
(retirement plans for which Putnam Fiduciary Trust Company
provides recordkeeping or other services in connection with the
purchase of class M shares) and members of qualified groups may
also purchase class M shares without a sales charge.
General
You may be eligible to buy fund shares at reduced sales charges
or to sell fund shares without a CDSC .
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, qualified
benefit plans and other plans. Descriptions are also
included in the order form and in the SAI.
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 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 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,
fund shares at net asset value.
If you are considering redeeming 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, payment may be
delayed 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,
certificates will not be issued for your shares unless you
request them.
In determining whether a CDSC is payable on any redemption,
shares not subject to any charge will be redeemed first, followed
by shares held longest during the CDSC period. Any CDSC will be
based on the lower of the share's cost and net asset value. 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 you redeem a share that has appreciated in
value during the CDSC period, a CDSC is assessed on its initial
purchase price. Any shares acquired by reinvestment of
distributions will be redeemed without a CDSC. 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. See the SAI for more information about the CDSC.
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 PLAN
The fund has adopted distribution plans 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 below. The plans provide for
payments by the fund to Putnam Mutual Funds at
annual rates (expressed as a percentage of average net assets)
of up to 0.35% on class A shares, and 1.00% on class B and class
M
shares. The Trustees currently limit payments on class A and M
shares to 0.25% and 0.75% of average net assets, respectively.
Putnam Mutual Funds compensates qualifying dealers (including,
for
this purpose, certain financial institutions) for sales of shares
and the maintenance of shareholder accounts.
Putnam Mutual Funds makes quarterly payment to dealers at the
annual rate of up to 0.25% of the average net asset value of
class A shares for which such dealers are designated as the
dealer
of record. The payments to dealers for shares held by class A
qualified benefit plans are made at reduced rates, as described
in
the SAI. No payments are made during the first year after
purchase on shares purchased at net asset value by shareholder
investing $1 million or more or by employer-sponsored retirement
plans that have at least 200 eligible employees or that ar class
A
qualified benefit plans, unless the shareholder has made
arrangements with Putnam Mutual Funds and the dealer of record
has
waived the sales commission.
Putnam Mutual Funds makes quarterly payments to dealers at the
annual rates of 0.25% and 0.65% of the average net asset value of
class B and class M shares, respectively.
Putnam Mutual funds may suspend or modify its 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 by the
National
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 your 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.
Your 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 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. 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 your fund, the fund
reserves the right to revise or terminate the exchange privilege,
limit the amount or number of exchanges or reject any exchange.
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.
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).
<PAGE>
About Putnam Investments, Inc.
Putnam Management has been managing mutual funds since 1937.
Putnam Mutual Funds is the principal underwriter of the funds and
of other Putnam funds. Putnam Fiduciary Trust Company is the
custodian of the fund . Putnam Investor Services, a
division of Putnam Fiduciary Trust Company, is the investor
servicing and transfer agent for the fund .
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
The following services are available to you as a Putnam mutual
fund shareholder.
SYSTEMATIC INVESTMENT PLAN Invest as much as you wish ($25 or
more) on any business day of the month except for the 29th, 30th,
or 31st. The amount you choose will be automatically transferred
each month from your checking or savings account.
SYSTEMATIC WITHDRAWAL Make regular withdrawals of $50 or more
monthly, quarterly, or semiannually from your Putnam mutual fund
account valued at $10,000 or more. Your automatic withdrawal may
be made 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 and shares of all Putnam funds may not be available to
all investors.
Investors may not maintain, within the same fund, simultaneous
plans for systematic investment or exchange (into the fund) and
systematic withdrawal or exchange (out of the fund). 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 Emerging Markets Fund
Putnam Europe Growth Fund
Putnam Global Growth Fund
Putnam Global Natural Resources Fund
Putnam Growth Opportunities Fund
Putnam Health Sciences Trust
Putnam International Growth Fund
Putnam International New Opportunities Fund
Putnam International Voyager Fund
Putnam Investors Fund
Putnam New Opportunities Fund++
Putnam OTC & Emerging 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 International Growth and Income Fund
Putnam New Value Fund
Putnam Utilities Growth and Income Fund
PUTNAM INCOME FUNDS
Putnam American Government Income Fund
Putnam Diversified Income Trust
Putnam Diversified Income Trust II
Putnam Federal Income Trust
Putnam Global Governmental Income Trust
Putnam High Yield Advantage Fund
Putnam High Yield Total Return 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
*As of 6/30/97.
+Formerly Putnam OTC Emerging Growth Fund.
++New investments restricted; se your financial advisor for
details.
+++Not available in all states.
**Investments in money market funds are neither insured nor
guaranteed by the U.S. government. These funds are managed to
maintain a steady net asset value of $1.00 per share, although
there is no assurance this net asset value will be maintained in
the future.
Please call your financial advisor or Putnam Mutual Funds 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 GROWTH OPPORTUNITIES FUND
One Post Office Square
Boston, MA 02109
FUND INFORMATION:
INVESTMENT MANAGER
Putnam Investment Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
INVESTOR SERVICING AGENT
Putnam Investor Services
Mailing address:
P.O. Box 41203
Providence, RI 02940-1203
CUSTODIAN
Putnam Fiduciary Trust Company
One Post Office Square
Boston, MA 02109
LEGAL COUNSEL
Ropes & Gray
One International Place
Boston, MA 02110
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110
PUTNAMINVESTMENTS
One Post Office Square
Boston, Massachusetts 02109
Toll-free 1-800-225-1581
PUTNAM GROWTH OPPORTUNITIES FUND (THE "FUND"),
A SERIES OF PUTNAM INVESTMENT FUNDS (THE "TRUST")
FORM N-1A
PART B
STATEMENT OF ADDITIONAL INFORMATION ("SAI")
DECEMBER 31, 1996 , AS REVISED AUGUST 1,
1997
This SAI is not a prospectus and is only authorized for
distribution when accompanied or preceded by the prospectus of
the fund dated December 31, 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 of
the fund's prospectuses, unless otherwise noted. The SAI should
be read together with the applicable prospectus. Investors may
obtain a free copy of the applicable prospectus from Putnam
Investor Services, Mailing address: P.O. Box 41203, Providence,
RI 02940-1203.
Part I of this SAI contains specific information about the
fund . Part II includes information about the fund
and the other Putnam funds.
<PAGE>
Table Of Contents
Part I
SECURITIES RATINGS. . . . . . . . . . . . . . . . . . . . . .
. I-3
INVESTMENT RESTRICTIONS. . . . . . . . . . . . . . . . . . . .
.I- 7
CHARGES AND EXPENSES . . . . . . . . . . . . . . . . . . . . .
.I- 9
INVESTMENT PERFORMANCE . . . . . . . . . . . . . . . . . . . .
I- 14
ADDITIONAL OFFICERS. . . . . . . . . . . . . . . . . . . . . . .
. . .I-14
INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS . . . . . . . .
. . .I-16
Part II
MISCELLANEOUS INVESTMENT PRACTICES. . . . . . . . . . . . . .
. . . II-1
TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . .II-29
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . .
II-
34
DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . . .
. . .II-44
HOW TO BUY SHARES. . . . . . . . . . . . . . . . . . . . . . .
II- 45
DISTRIBUTION PLANS . . . . . . . . . . . . . . . . . . . . . .
II- 57
INVESTOR SERVICES. . . . . . . . . . . . . . . . . . . . . . .
II- 58
SIGNATURE GUARANTEES . . . . . . . . . . . . . . . . . . . . .
II- 64
SUSPENSION OF REDEMPTIONS. . . . . . . . . . . . . . . . . . .
II- 64
SHAREHOLDER LIABILITY. . . . . . . . . . . . . . . . . . . . .
II- 64
STANDARD PERFORMANCE MEASURES. . . . . . . . . . . . . . . . .
II- 65
COMPARISON OF PORTFOLIO PERFORMANCE. . . . . . . . . . . . . . .
. II- 66
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . .
. . .II-71
<PAGE>
SAI
PART I
SECURITIES RATINGS
The following rating services describe rated securities as
follows:
Moody's Investors Service, Inc.
Bonds
Aaa -- Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and
are generally referred to as "gilt edged." Interest payments are
protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such
issues.
Aa -- Bonds which are rated Aa are judged to be of high quality
by all standards. Together with the Aaa group they comprise what
are generally known as high grade bonds. They are rated lower
than the best bonds because margins of protection may not be as
large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements
present which make the long-term risk appear somewhat larger than
the Aaa securities.
A -- Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium-grade
obligations. Factors giving security to principal and interest
are considered adequate, but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa -- Bonds which are rated Baa are considered as medium grade
obligations, (i.e., they are neither highly protected nor poorly
secured). Interest payments and principal security appear
adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as
well.
Ba -- Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well-assured.
Often the protection of interest and principal payments may be
very moderate, and thereby not well safeguarded during 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 differs 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, on balance, as predominantly speculative with respect
to capacity to pay interest and repay principal in accordance
with the terms of the obligation. `BB' indicates the lowest
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 a
bankruptcy petition has been filed, but debt service payments are
continued.
D -- Bonds rated D are in payment default. The D rating category
is used when interest payments or principal payments are not made
on the date due even if the applicable grace period has not
expired, unless S&P 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.
Duff & Phelps Corporation
Long-Term Debt
AAA -- Highest credit quality. The risk factors are negligible,
being only slightly more than for risk-free U.S. Treasury debt.
AA+, AA, AA- -- High credit quality. Protection factors are
strong. Risk is modest but may vary slightly from time to time
because of economic conditions.
A+, A, A- -- Protection factors are average but adequate.
However, risk factors are more variable and greater in periods of
economic stress.
BBB+, BBB, BBB- -- Below-average protection factors but still
considered sufficient for prudent investment. Considerable
variability in risk during economic cycles.
BB+, BB, BB- -- Below investment grade but deemed likely to meet
obligations when due. Present or prospective financial
protection factors fluctuate according to industry conditions or
company fortunes. Overall quality may move up or down frequently
within this category.
B+, B, B- -- Below investment grade and possessing risk that
obligations will not be met when due. Financial protection
factors will fluctuate widely according to economic cycles,
industry conditions and/or company fortunes. Potential exists
for frequent changes in the rating within this category or into a
higher or lower rating grade.
CCC -- Well below investment-grade securities. Considerable
uncertainty exists as to timely payment of principal, interest or
preferred dividends. Protection factors are narrow and risk can
be substantial with unfavorable economic/industry conditions,
and/or with unfavorable company developments.
DD -- Defaulted debt obligations. Issuer failed to meet
scheduled principal and/or interest payments.
Fitch Investors Service, Inc.
AAA -- Bonds considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability
to pay interest and repay principal, which is unlikely to be
affected by reasonably foreseeable events.
AA -- Bonds considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay
principal is very strong, although not quite as strong as bonds
rated AAA.
A -- Bonds considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay
principal is considered to be strong, but may be more vulnerable
to adverse changes in economic conditions and circumstances than
bonds with higher ratings.
BBB -- Bonds considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay
interest and repay principal is considered to be adequate.
Adverse changes in economic conditions and circumstances,
however, are more likely to have adverse impact on these bonds,
and therefore impair timely payment. The likelihood that the
ratings of these bonds will fall below investment grade is higher
than for bonds with higher ratings.
BB -- Bonds considered to be speculative. The obligor's ability
to pay interest and repay principal may be affected over time by
adverse economic changes. However, business and financial
alternatives can be identified which could assist the obligor in
satisfying its debt service requirements.
B -- Bonds are considered highly speculative. Bonds in this class
are lightly protected as to the obligor's ability to pay interest
over the life of the issue and repay principal when due.
CCC -- Bonds have certain characteristics which, with passing of
time, could lead to the possibility of default on either
principal or interest payments.
CC -- Bonds are minimally protected. Default in payment of
interest and/or principal seems probable.
C -- Bonds are in actual or imminent default in payment of
interest or principal.
DDD -- Bonds are in default and in arrears in interest and/or
principal payments. Such bonds are extremely speculative and
should be valued only on the basis of their value in liquidation
or reorganization of the obligor.
INVESTMENT RESTRICTIONS
As fundamental investment restrictions, which may not be changed
without a vote of a majority of the outstanding voting
securities , the fund may not and will not:
(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.
<PAGE>
(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.
Although certain of the fund's fundamental investment
restrictions permit it to borrow money to a limited extent, the
fund does not currently intend to do so and did not do so last
year.
The Investment Company Act of 1940 provides that a "vote of a
majority of the outstanding voting securities" of the fund
means the affirmative vote of the lesser of (1) more than 50% of
the outstanding fund shares, or (2) 67% or more of the shares of
the fund present at a meeting if more than 50% of the
outstanding fund shares are represented at the meeting in person
or by proxy.
<PAGE>
It is contrary to the fund's present policy, which may be
changed without shareholder approval, to:
Invest in (a) securities which 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.
All percentage limitations on investments (other than pursuant to
the non-fundamental restriction above) 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.
-------------------------
CHARGES AND EXPENSES
Management fees
Under a Management Contract dated December 12, 1994, as
revised July 14, 1995 and as further revised December 1, 1995,
the fund pays a quarterly fee to Putnam Management
based on the average net assets of the fund, as
determined at the close of each business day during the quarter,
at the annual rate 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. For the fiscal period
October 2, 1995 to July 31, 1996, pursuant to the Management
Contract, the fund incurred the following fees:
Reflecting a
reduction in the
following amounts
Fiscal Management pursuant to an
period fee paid expense limitation
1996 $14,050 $29,062
Expense limitation. In order to limit the fund's
expenses, Putnam Management has agreed to limit its compensation
(and, to the extent necessary, bear other expenses of the
fund) through September 30, 1997 to the extent that expenses
of the fund (exclusive of brokerage, interest, taxes,
deferred organizational and extraordinary expense, and payments
under the fund's distribution plans) would exceed an
annual rate of 1.00% . For the purpose of determining any
such limitation on Putnam Management's compensation, expenses of
the fund do 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. Putnam Management
currently expects that the expense limitation will be continued
through the end of the fund's current fiscal year.
Brokerage commissions
The following table shows brokerage commissions paid during the
fiscal period indicated:
Fiscal Brokerage
period commissions
1996 $6,139
The following table shows transactions placed with brokers and
dealers during the most recent fiscal period to recognize
research, statistical and quotation services received by Putnam
Management and its affiliates:
Dollar
value Percent of
of these total Amount of
transactions transactions commissions
$3,337,756 42.31% $3,394
Administrative expense reimbursement
The fund reimbursed Putnam Management in the following
amounts for administrative services during fiscal 1996, including
the following amounts for compensation of certain fund officers
and contributions to the Putnam Investments, Inc. Profit Sharing
Retirement Plan for their benefit.
Portion of total
reimbursement for
Total compensation and
reimbursement contributions
$43 $38
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 fees paid to each Trustee by
the fund for fiscal 1996 and the fees paid to each Trustee
by all of the Putnam funds during calendar 1995:<PAGE>
COMPENSATION TABLE
<TABLE>
<CAPTION>
Pension or
Estimated Total
Aggregate retirement annual
benefits compensation
compensation benefits accrued
from all from all
from the as part of
Putnam funds Putnam
Trustees/Year fund(1) fund expenses(2) upon
retirement(3) funds(4)
- -----------------------------------------------------------------
- --------------------------
<S> <C> <C>
<C> <C>
Jameson A. Baxter/1994 $124 $0
$71,676 $150,854 (5)
Hans H. Estin/1972 123 0
70,043 150,854
John A. Hill/1985 122 0
70,043 149,854 (5)
Ronald J. Jackson/1996(6) 21 0
70,043 N/A
Elizabeth T. Kennan/1992 123 0
69,709 148,854
Lawrence J. Lasser/1992 121 0
70,043 150,854
Robert E. Patterson/1984 133 0
71,043 152,854
Donald S. Perkins/1982 122 0
69,376 150,854
William F. Pounds/1971 (7) 124
0 70,543149,854
George Putnam/1957 123 0
70,043 150,854
George Putnam, III/1984 123 0
70,043 150,854
A.J.C. Smith/1986 121
0 68,252149,854
W. Nicholas Thorndike/1992 132 0
71,043 152,854
- -----------------------------------------------------------------
- ------------------------------------------------------
(1) Includes an annual retainer and an attendance fee for
each meeting attended.
(2) The Trustees approved a Retirement Plan for Trustees of
the Putnam funds on October 1, 1996. Prior to that date,
voluntary retirement benefits were paid to certain
retired Trustees.
(3) Assumes that each Trustee retires at the normal
retirement date . Estimated benefits for each Trustee are
based on Trustee fee rates in effect during calendar
1995.
(4) As of December 31, 1995, there were 99 funds in the
Putnam family.
(5) Includes compensation deferred pursuant to a Trustee
Compensation Deferral Plan. Information on deferred
compensation includes income earned on such amounts.
(6) Elected as a Trustee in May 1996.
(7) Includes additional compensation for service as Vice
Chairman of the Putnam funds.
(8) Elected as a Trustee in April 1995.
</TABLE>
Under a Retirement Plan for Trustees of the Putnam funds (the
"Plan"), each Trustee who retires with at least five years of
service as a Trustee of the funds is entitled to receive an
annual retirement benefit equal to one-half of the average annual
compensation paid to such Trustee for the last three years of
service prior to retirement. This retirement benefit is payable
during a Trustee's lifetime, beginning the year following
retirement, for a number of years equal to such Trustee's years
of service. A death benefit is also available under the Plan
which assures that the Trustee and his or her beneficiaries will
receive benefit payments for the lesser of an aggregate period of
(i) ten years or (ii) such Trustee's total years of service.
The Plan Administrator (a committee comprised of Trustees that
are not "interested persons" of the fund, as defined in the
Investment Company Act of 1940) may terminate or amend the Plan
at any time, but no termination or amendment will result in a
reduction in the amount of benefits (i) currently being paid to a
Trustee at the time of such termination or amendment, or (ii) to
which a current Trustee would have been entitled had he
or she retired immediately prior to such termination or
amendment.
For additional information concerning the Trustees, see
"Management" in Part II of this SAI.
Share ownership
At November 30, 1996, the officers and Trustees of the Trust as a
group owned 5.67% of the class A shares of the fund, and,
except as noted below, to the knowledge of the Trust, no person
owned of record or beneficially 5.00% or more of the shares of
the fund. No class B or M shares were outstanding at the end
of the period.
Shareholder name Percentage
and address owned
-------------------- --------
Putnam Investments, Inc. 88.50%
One Post Office Square
Boston, MA 02109
Distribution fees
During fiscal 1996, the fund did not pay any 12b-1 fees to Putnam
Mutual Funds. No class B or M shares were outstanding during the
period.
Class A sales charges and contingent deferred sales charges
Putnam Mutual Funds received no sales charges with respect to
class A shares for any of the funds during fiscal 1996. No
class B or M shares were outstanding during the period.
<PAGE>
Investor servicing and custody fees and expenses
During the 1996 fiscal period, the fund incurred
$11,038 in fees and out-of-pocket expenses for investor
servicing and custody services provided by Putnam Fiduciary Trust
Company.
INVESTMENT PERFORMANCE
Standard performance measures
(for the period ended July 31, 1996)
Class A
Inception date: October 2, 1995
Annualized total
return
Life of class 13.16%+
+ Reflects an expense limitation in effect, in the absence of
the expense limitation, total return would have been lower. The
per share amount of the expense limitation is set forth in the
footnotes to the table in the section entitled "Financial
highlights."
Data represent past performance and are not indicative of future
results. Total return for class A shares reflects the
deduction of the maximum sales charge of 5.75% an expense
limitation currently in effect. 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. No class B or M shares were outstanding
during the period.
ADDITIONAL OFFICERS
In addition to the persons listed as fund officers in Part II of
this SAI, each of the following persons is also a Vice President
of the fund and certain of the other Putnam funds, the
total number of which is noted parenthetically. Officers of
Putnam Management hold the same offices in Putnam Management's
parent company, Putnam Investments, Inc.
Thomas R. Bogan (age 55) (1 fund). Managing Director of Putnam
Management. Prior to November, 1994, Mr. Bogan was Senior
Analyst at Lord, Abbett & Co.
Brett C. Browchuk (age 34) (48 funds). Managing Director
of Putnam Management. Prior to April, 1994, Mr. Browchuk was
Managing Director at Fidelity Investments.
William J. Curtin (age 37) (58 funds).
Managing Director of Putnam Management. Prior to August,
1996, Mr. Curtin was Managing Director of Lehman Brothers.
Deborah S. Farrell (age 40) (1 fund). Senior Vice President of
Putnam Management. Employed as an investment professional by
Putnam Management since May, 1997. Prior to May, 1997, Ms.
Farrell was a Portfolio Manager at Emerging Markets Investors
Corporation, and prior to May, 1994, Ms. Farrell was Division
Manager, Asian Capital Markets at International Finance
Corporation.
Ian C. Ferguson (age 39) (22 funds). Senior Managing Director.
Prior to April, 1996, Mr. Ferguson was CEO at Hong Kong Shanghai
Banking Corporation.
David L. King (age 40) (6 funds). Senior Vice President
of Putnam Management.
Deborah F. Kuenstner (age 38) (1 fund). Senior Vice President
of Putnam Management. Prior to March, 1997, Ms. Kuenstner was
the Senior Portfolio Manager at Dupont Pension Fund
Investment.
J. Peter Grant (age 55) (3 funds). Senior Vice President
of Putnam Management. Senior Vice President of Putnam Fiduciary
Trust Company.
Thomas R. Haslett (35) (3 funds). Managing Director of Putnam
Management. Prior to December, 1996, Mr. Haslett was Managing
Director of Montgomery Asset Management Ltd.
Omid Kamshad (age 34) (5 funds). Senior Vice President of Putnam
Management. Prior to January, 1996, Mr. Kamshad was Director of
Investments at Lombard Odier International, and prior to April,
1995, he was Director at Baring Asset Management Company.
Ami T. Kuan (age 34) (4 funds). Vice President of Putnam
Management. Prior to April, 1993, Ms. Kuan attended the MIT
Sloan School of Management.
Jeffrey R. Lindsey (age 35) (2 funds). Senior Vice President of
Putnam Management. Prior to April, 1994, Mr. Lindsey was Vice
President at Strategic Portfolio Management, Inc.
Carol C. McMullen (age 41) (7 funds). Managing Director of
Putnam Management. Prior to June, 1995, Ms. McMullen was Senior
Vice President of Baring Asset Management.
John J. Morgan, Jr. (age 56) (10 funds). Managing Director of
Putnam Management.
Kelly A. Morgan (age 34) (5 funds). Senior Vice President of
Putnam Management. Prior to December, 1996, Ms. Morgan was
Senior Vice President of Alliance Capital Management L.P.
Hugh H. Mullin (age 34) (4 funds). Senior Vice President of
Putnam Management.
<PAGE>
Patrick O'Donnell (age 50) (1 fund). Managing Director of Putnam
Management. Prior to May, 1994, Mr. O'Donnell was the founder
and President of Exeter Research Inc.
Carmel Peters (age 46) (1 fund). Senior Vice President of
Putnam Management. Prior to May, 1997, Ms. Peters was a Managing
Director and CIO of Wheelock Natwest Investment Management, Hong
Kong, and prior to February, 1996, Ms. Peters was a Director and
CIO of Rothschild Asset Management Asia Pacific, Hong Kong.
Anthony W. Regan (age 57) (11 funds). Senior Managing Director
of Putnam Management.
David J. Santos (age 38) (3 funds). Vice President of Putnam
Management.
Justin M. Scott (age 39) (10 funds). Managing Director of Putnam
Management.
George W. Stairs (age 47) (2 funds). Vice
President of Putnam Management. Prior to July, 1994, Mr.
Stairs was an Associate at ValueQuest Ltd.
Robert Swift (age 37) (7 funds). Senior Vice President of
Putnam Management. Prior to August, 1995, Mr. Swift was Director
and Senior Portfolio Manager at IAI International/Hill
Samuel Investment Advisors.
Kenneth J. Taubes (age 38) (7 funds). Senior Vice President of
Putnam Management. Senior Vice President of Putnam Fiduciary
Trust Company.
David K. Thomas (age 55) (5 funds). Senior Vice President of
Putnam Management.
INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS
Price Waterhouse, LLP, 165 Federal St. , 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
financial statements included in the fund's Annual Report
for the fiscal period ended July 31, 1996 , filed
electronically on October 2, 1996 (File No. 811-7237), are
incorporated by reference into this SAI. The financial
highlights included in the prospectus and incorporated by
reference into this SAI and the financial statements incorporated
by reference into the prospectus and this SAI have been so
included and incorporated in reliance upon the report of the
independent accountants, given on their authority as experts in
auditing and accounting.
<PAGE>
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