PUTNAM NEW VALUE FUND
One Post Office Square, Boston, MA 02109
Class A shares
INVESTMENT STRATEGY: GROWTH AND INCOME
PROSPECTUS- December 31, 1996, as revised May 30, 1997
This prospectus explains concisely what you should know before
investing in class A shares of Putnam New Value Fund (the
"fund"), a portfolio of Putnam Investment Funds (the "Trust"),
which are offered without a sales charge through eligible
employer-sponsored retirement plans. Please read it carefully
and keep it for future reference. You can find more detailed
information about the fund in the December 31, 1996 statement of
additional information (the "SAI"), as amended from time to time.
For a free copy of the SAI or for other information, including a
prospectus regarding class A shares for other investors, call
Putnam Investor Services at 1-800-752-9894. 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.
PUTNAMINVESTMENTS
Putnam Defined
Contribution Plans
<PAGE>
ABOUT THE FUND
Expenses summary..........................................
Financial highlights......................................
Objective..............................................
How the fund pursues its objective.....................
Risk factors.........................................
How performance is shown..................................
How the fund is managed...................................
Organization and history..................................
ABOUT YOUR INVESTMENT
How to buy shares.........................................
Distribution plan.........................................
How to sell shares........................................
How to exchange shares....................................
How the fund values its shares............................
How the fund makes distributions to shareholders;
tax information......................................
ABOUT PUTNAM INVESTMENTS, INC.............................
<PAGE>
About the Fund
EXPENSES SUMMARY
Expenses are one of several factors to consider when investing.
The following table summarizes expenses attributable to class A
shares based on the fund's most recent fiscal year. The example
shows the cumulative expenses attributable to a hypothetical
$1,000 investment in class A shares over specified periods.
Annual fund operating expenses
(as a percentage of average net assets)
Management fees
0.70%
12b-1 fees
0.25%
Other expenses
0.68%
Total fund operating expenses
1.63%
The table is provided to help you understand the expenses of
investing in the fund and your share of the operating expenses
that the fund incurs. The expenses shown in the table do not
reflect the application of credits that reduce fund expenses.
The management fees and "Other expenses" shown in the table
reflect the termination of an expense limitation currently in
effect. Actual management fees and total fund operating expenses
were 0.31% and 1.24%, respectively.
Example
Your investment of $1,000 would incur the following expenses,
assuming 5% annual return and redemption at the end of each
period:
1 3 5 10
year years years years
$17 $51 $89 $193
The example does not represent past or future expense levels, and
actual expenses may be greater or less than those shown. Federal
regulations require the example to assume a 5% annual return, but
actual annual return varies. The example does not reflect any
charges or expenses related to your employer's plan.
FINANCIAL HIGHLIGHTS
The following table presents per share financial information for
class A shares. This information has been derived from the
fund's financial statements, which have 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.
<TABLE><CAPTION>
Financial highlights
(For a share outstanding throughout the period)
For the
Period
Year ended January 3,
1995
August 31
(commencement of
1996
operations) to
August 31,
1995
<S> <C>
<C>
Net asset value, beginning of period $10.53
$8.50
Investment operations
Net investment income (c) .18
.15
Net realized gain on investments 1.82
1.88
Total from investment operations 2.00
2.03
Less distributions from:
Net investment income (.26)
- ---
Net realized gain on investments (.70)
- ---
Total distributions (.96)
- ---
Net asset value, end of period $11.57
$10.53
Total investment return at
net asset value (%)(a) 20.29
23.88(d)
Net assets, end of period (in thousands) $97,718
$2,473
Ratio of expenses to
average net assets (%)(b)(c) 1.24
.51(d)
Ratio of net investment income
to average net assets (%)(c) 2.45
1.67(d)
Portfolio turnover(%) 33.57
51.07(d)
Average commission rate paid(e) $.0322
(a) Total investment return assumes dividend reinvestment and
does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets for the
year ended August 31, 1996 includes amounts paid through
expense offset arrangements. Prior period ratios exclude
these amounts.
(c) Reflects an expense limitation in effect during the period.
As a result of such limitation, expenses of the fund reflect
a reduction of approximately $0.14 per share for the period
ended August 31, 1995. Expenses for the period ended
August 31, 1996 reflect a reduction of $0.01 per share.
(d) Not annualized.
(e) Average commission rate paid is required for fiscal periods
beginning
on or after September 1, 1995.
</TABLE>
OBJECTIVE
Putnam New Value Fund seeks long-term capital appreciation. The
fund is not intended to
be a complete investment program, and there is no assurance that
it will achieve its
objective.
HOW THE FUND PURSUES ITS OBJECTIVE
Basic investment strategy
The fund will invest primarily in common stocks which Putnam
Investment Management, Inc.,
the fund's investment manager ("Putnam Management"), believes are
undervalued at the time
of purchase and have the potential for long-term capital
appreciation. The fund is unlike
most equity mutual funds in that its investments will be
comprised of a relatively small
number of issuers (currently expected to be approximately 40 to
50). Because Putnam
Management evaluates securities for the fund based on their
long-term potential for
capital appreciation, the fund's investments may not appreciate
over the shorter term, and
as a result the fund's total return over certain periods may be
less than that of other
equity mutual funds. Putnam Management's investment decisions
for the fund may be
contrary to those of most other investors.
In selecting common stocks for the fund, Putnam Management will
consider, among other
things, an issuer's financial strength, current and projected
divided rates, competitive
position and current and projected future earnings. Putnam
Management currently expects
that a portion of the fund's investments will include common
stocks that offer the
potential for above-average current income.
The fund's investments may include widely-traded common stocks of
larger companies as well
as common stocks of small companies with equity market
capitalizations below $1 billion.
These companies may present greater opportunities for capital
appreciation, but may also
involve greater risk. They may have limited product lines,
markets or financial
resources, or may depend on a limited management group. Their
securities may trade less
frequently and in limited volume, and only in the
over-the-counter market or on a regional
securities exchange. As a result, these securities may fluctuate
in value more than those
of larger, more established companies.
<PAGE>
Common stocks and other equity securities are normally the fund's
main investments.
However, the fund may purchase preferred stocks, debt securities
and convertible
securities (both bonds and preferred stocks) if Putnam Management
believes they would help
achieve the fund's objective of long-term capital appreciation.
The fund may also hold a
portion of its assets in cash or high-quality money market
instruments.
Risk factors
Foreign investments
The fund may invest 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.
<PAGE>
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 assets, 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.
For more information about foreign securities and the risks
associated with investment in
such securities, see the SAI.
Investments in fixed-income securities
The fund may 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 lower ratings of these securities reflect a greater
possibility that adverse changes
in the financial condition of their issuers, or in general
economic conditions, or both,
or an unanticipated rise in interest rates, may impair the
ability of their issuers to
make payments of interest and principal. In addition, under such
circumstances the values
of such securities may be more volatile, and the markets for such
securities may be less
liquid, than those for higher-rated securities, and the fund may
as a result find it more
difficult to determine the fair value of such securities. When
the fund invests in
securities in the lower rating categories, the achievement of the
fund's goals is more
dependent on Putnam Management's ability than would be the case
if the fund were investing
in securities in the higher rating categories.
For additional information concerning the risks associated with
investment by the fund in
securities in the lower rating categories, see the SAI.
Portfolio turnover
The length of time the fund has held a particular security is not
generally a
consideration in investment decisions. A change in the
securities held by the fund is
known as "portfolio turnover." As a result of the fund's
investment policies, under
certain market conditions 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."
Futures and options
The fund may buy and sell stock index futures contracts. An
"index future" is a contract
to buy or sell units of a particular stock index at an agreed
price on a specified future
date. Depending on the change in value of the index between the
time the fund enters into
and terminates an index future transaction, the fund realizes a
gain or loss. In addition
to or as an alternative to purchasing or selling index futures,
the fund may buy and sell
call and put options on futures or stock indexes. The fund may
engage in index futures
and options transactions for hedging purposes and for non-hedging
purposes, such as to
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.
A more detailed explanation of index futures and options
transactions, including the risks
associated with them, is included in the SAI.
Options. The fund may seek to increase its current return by
writing covered call and put
options on securities it owns or in which it may invest. The
fund receives a premium from
writing a call or put option, which increases the return if the
option expires unexercised
or is closed out at a net profit.
When the fund writes a call option, it gives up the opportunity
to profit from any
increase in the price of a security above the exercise price of
the option; when it writes
a put option, 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.
A more detailed explanation of options transactions, including
the risks associated with
them, is included in the SAI.
Securities loans, repurchase agreements and forward commitments.
The fund may lend portfolio securities amounting to not more than
25% of its assets to
broker-dealers and may enter into repurchase agreements on up to
25% of its assets. These
transactions must be fully collateralized at all times. The fund
may also purchase
securities for future delivery, which may increase its overall
investment exposure and
involves a risk of loss if the value of the securities declines
prior to the settlement
date. These transactions involve some risk if the other party
should default on its
obligation and the fund is delayed or prevented from recovering
the collateral or
completing the transaction.
Defensive strategies
At times Putnam Management may judge that conditions in the
securities markets make
pursuing the fund's basic investment strategy inconsistent with
the best interests of its
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 any foreign government or their agencies or instrumentalities,
or securities primarily
traded in the U.S. markets, 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 would be
used.
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
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. "Total
return" for the one-, five- and ten-year periods (or for the life
of the class A shares,
if shorter) through the most recent calendar quarter represents
the average annual
compounded rate of return on an investment of $1,000 in the fund
invested at the maximum
public offering price. Total return may also be presented for
other periods or based on
investment at reduced sales charge levels. Any quotation of
investment performance not
reflecting the maximum initial sales charge would be reduced if
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. The fund's
performance may be compared to that of various indexes. See the
SAI. Because shares sold
through eligible employer-sponsored retirement plans are sold
without a sales charge,
quotations of investment performance reflecting the deduction of
a sales charge will be
lower than the actual investment performance of shares purchased
through such plans.
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.
The following officer of Putnam Management has had primary
responsibility for the day-to-
day management of the fund's portfolio since the year stated
below:
Business experience
Year (at least 5 years)
----- -------------------------
David L. King 1995 Employed as an investment
Senior Vice President professional by Putnam
Management since 1983.
The fund pays 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 (which are
in turn allocated to the
relevant class of shares). Expenses of the Trust directly
charged or attributable to the
fund will be paid from the assets of the fund. General expenses
of the Trust will be
allocated among and charged to the assets of the fund and 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 each fund or other
portfolios. 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, shares of the other Putnam funds) as a factor
in the selection of
broker-dealers.
ORGANIZATION AND HISTORY
Putnam New Value Fund is a series of Putnam Investment Funds, a
Massachusetts business
trust organized on October 31, 1994. A copy of the Agreement and
Declaration of Trust,
which is governed by Massachusetts law, is on file with the
Secretary of State of The
Commonwealth of Massachusetts. Prior to January 6, 1995, the
Trust was known as Putnam
Equity Funds.
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.
Only the fund's class A shares are offered by this prospectus.
The fund also offers 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 of the fund are freely
transferable, are entitled to
dividends as declared by the Trustees, and, if the fund were
liquidated, would receive the
net assets of the fund. The fund may suspend the sale of shares
at any time and may
refuse any order to purchase shares. Although the Trust is not
required to hold annual
meetings of its shareholders, shareholders holding at least 10%
of the outstanding shares
entitled to vote have the right to call a meeting to elect or
remove Trustees, or to take
other actions as provided in the Agreement and Declaration of
Trust.
If you own fewer shares than 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
HOW TO BUY SHARES
All orders to purchase shares must be made through your
employer's retirement plan. For
more information about how to purchase shares of the fund through
your employer's plan or
limitations on the amount that may be purchased, please consult
your employer. Shares
are sold to eligible employer-sponsored retirement plans at the
net asset value per share
next determined after receipt of an order by Putnam Mutual Funds.
Orders must be received
by Putnam Mutual Funds before the close of regular trading on the
New York Stock Exchange
in order to receive that day's net asset value. A class A
qualified benefit plan (an
employer-sponsored retirement plan for which Putnam Fiduciary
Trust company provides
recordkeeping or other services) is eligible to purchase fund
shares at net asset value
beginning two years after the plan's initial purchase of class A
shares. A class A
qualified benefit plan that initially invested at least $20
million in Putnam funds and
other investments managed by Putnam Management or its affiliates
and that received a
proposal from Putnam Mutual Funds on or before April 15, 1997 may
purchase fund shares at
net asset value without regard to this two-year period. An
employer-sponsored retirement
plan, other than a class A qualified benefit plan, is eligible to
purchase fund shares at
net asset value if its investment in class A shares is at least
$1 million, or it has at
least 200 eligible employees, and the dealer of record waives its
commission with the
consent of Putnam Mutual Funds. Employer-sponsored retirement
plans 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. Eligible plans
may make additional
investments of any amount at any time. To eliminate the need for
safekeeping, the fund
will not issue certificates for your shares.
On sales at net asset value to a class A qualified retirement
plan, Putnam Mutual Funds
pays commissions to the dealer of record on net monthly purchases
at rates of up to 1.00%.
See the SAI for information about the rates at which sales
commissions are paid. 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 a distribution plan 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 plan provides for
payments by the fund to
Putnam Mutual Funds at the annual rate (expressed as a percentage
of average net assets)
of up to 0.35% on class A shares. The Trustees currently limit
payments under the plan to
the annual rate of 0;25%.
Putnam Mutual Funds compensates qualifying dealers (including,
for this purpose, certain
financial institutions) for sales of shares and the maintenance
of shareholder accounts at
the annual rate of up to 0.25% of the average net asset value of
class A shares. The
payments to dealers for shares held by class A qualified benefit
plans are made at reduced
rates, as described in the SAI.
Putnam Mutual Funds may suspend or modify its payments to
dealers. The payments are also
subject to the continuation of
the distribution plan, the terms of service agreements between
dealers and Putnam Mutual
Funds, and any applicable limits imposed by the National
Association of Securities
Dealers, Inc.
HOW TO SELL SHARES
Subject to any restrictions imposed by your employer's plan, you
can sell your shares
through the plan to the fund any day the New York Stock Exchange
is open. For more
information about how to sell shares of the fund through your
employer's plan, including
any charges that may be imposed by the plan, please consult with
your employer.
Your plan administrator must send a signed letter of instruction
to Putnam Investor
Services. The price you will receive is the next net asset value
calculated after the
fund receives the request in proper form. All requests must be
received by the fund prior
to the close of regular trading on the New York Stock Exchange in
order to receive that
day's net asset value. If your plan sells 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.
The fund generally provides payment for redeemed shares the
business day after the 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. The fund will
only redeem shares for which it has received payment.
HOW TO EXCHANGE SHARES
Subject to any restrictions contained in your plan, you can
exchange your shares for
shares of other Putnam funds available through your plan at net
asset value. Contact your
plan administrator or Putnam Investor Services for more
information on how to exchange
your shares or how to obtain prospectuses of other Putnam funds
in which you may invest.
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.
Shareholders would be notified of any such action to the extent
required by law. Consult
Putnam Investor Services before requesting an exchange. See the
SAI to find out more
about the exchange privilege.
HOW THE FUND VALUES ITS SHARES
The fund calculates the net asset value of a share of each class
by dividing the total
value of its assets, less liabilities, by the number of its
shares outstanding. Shares
are valued as of the close of regular trading on the New York
Stock Exchange each day the
Exchange is open.
Portfolio securities for which market quotations are readily
available are valued at
market value. Short-term investments that will mature in 60 days
or less are valued at
amortized cost, which approximates market value. All other
securities and assets are
valued at their fair value following procedures approved by the
Trustees.
HOW THE FUND MAKES DISTRIBUTIONS TO SHAREHOLDERS; TAX INFORMATION
The fund distributes any net investment income and any net
realized capital gains at least
annually. Distributions from net investment income, if any, are
expected to be small.
Distributions from capital gains are made after applying any
available capital loss
carryovers.
The terms of your plan will govern how your plan may receive
distributions from the fund.
Generally, periodic distributions from the fund to your plan are
reinvested in additional
fund shares, although your plan may permit you to receive fund
distributions from net
investment income in cash while reinvesting capital gains
distributions in additional
shares or to receive all fund distributions in cash. If another
option is not selected,
all distributions will be reinvested in additional fund shares.
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.
Generally, fund distributions are taxable as ordinary income,
except that any
distributions of net long-term capital gains will be taxed as
such regardless of how long
you have held your shares. However, distributions by the fund to
employer-sponsored
retirement plans that qualify for tax-exempt treatment under
federal income tax laws will
not be taxable. Special tax rules apply to investments through
such plans. You should
consult your tax adviser to determine the suitability of the fund
as an investment through
such a plan and the tax treatment of distributions (including
distributions of amounts
attributable to an investment in the fund) from such a plan.
The foregoing is a summary of certain federal income tax
consequences of investing in the
fund. You should consult your tax adviser to determine the
precise effect of an
investment in the fund on your particular tax situation
(including possible liability for
state and local taxes).
ABOUT PUTNAM INVESTMENTS, INC.
Putnam Management has been managing mutual funds since 1937.
Putnam Mutual Funds is the
principal underwriter of the fund and of other Putnam funds.
Putnam Defined Contribution
Plans is a division of Putnam Mutual Funds. Putnam Fiduciary
Trust Company is the fund's
custodian. Putnam Investor Services, a division of Putnam
Fiduciary Trust Company, is the
fund's investor servicing and transfer agent.
Putnam Management, Putnam Mutual Funds and Putnam Fiduciary Trust
Company are located at
One Post Office Square, Boston, Massachusetts 02109 and 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.
