PUTNAM GROWTH OPPORTUNITIES FUND
ONE POST OFFICE SQUARE, BOSTON, MA 02109
CLASS A SHARES
INVESTMENT STRATEGY: GROWTH
PROSPECTUS - NOVEMBER 30, 1998, AS REVISED JUNE 30, 1999
This prospectus explains concisely what you should know before
investing in class A shares of Putnam Growth Opportunities
Fund (the "fund"), a series 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 November 30,
1998 statement of additional information (the "SAI"), as amended
from time to time. For a free copy of the SAI or for
other information, 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
ABOUT THE FUND
Expenses summary ........................................2
Financial highlights ....................................3
Objective ...............................................4
How the fund pursues its objective ......................4
How performance is shown ................................10
How the fund is managed . .........................10
Organization and history . ........................11
ABOUT YOUR INVESTMENT
How to buy shares .......................................13
Distribution plan.......................................14
How to sell shares ......................................14
How to exchange shares ..................................15
How the fund values its shares . ..................15
How the fund makes distributions to shareholders;
tax information . .................15
ABOUT PUTNAM INVESTMENTS, INC. ..........................16
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 0.34%
Total fund operating expenses 1.29%
The table is provided to help you understand the expenses of
investing in the fund and your share of fund operating
expenses. Expenses shown reflect the termination of an expense
limitation formerly in effect. Actual management fees, other
expenses and total fund operating expenses were 0.66%, 0.34% and
1.25%, respectively . The expenses shown in the table do not
reflect the application of credits that reduce fund expenses.
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
$13 $41 $71 $156
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 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 1998 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)
Class A
FOR THE PERIOD
YEAR ENDED OCTOBER 2, 1995+
JULY 31 TO JULY 31
1998 1997 1996
NET ASSET VALUE,
BEGINNING OF PERIOD $13.38 $10.15 $8.50
Investment operations
Net investment
income (loss)(a) (.07)(d) .03 .03
Net realized and unrealized
gain on investments 3.71 4.43 1.67
TOTAL FROM
INVESTMENT OPERATIONS 3.64 4.46 1.70
LESS DISTRIBUTIONS:
From net
investment income -- (.04) (.04)
From net realized gain
on investments (.03) (1.19) (.01)
TOTAL DISTRIBUTIONS (.03) (1.23) (.05)
NET ASSET VALUE,
END OF PERIOD $16.99 $13.38 $10.15
TOTAL INVESTMENT RETURN
AT NET ASSET VALUE(%)(b) 27.23 47.34 20.08*
NET ASSETS, END OF
PERIOD (in thousands) $287,291 $5,385 $2,647
Ratio of expenses to
average net assets(%)(a)(c) 1.25 1.05 .89*
Ratio of net investment
income (loss) to
average net assets (%)(a) (.43) .20 .30*
Portfolio turnover (%) 70.90 145.10 151.15*
+ Commencement of operations.
* Not annualized.
(a) Reflects an expense limitation in effect during the period. As a result
of such limitation, expenses of class A shares of the fund reflect a
reduction of $0.01 per share for the period ended July 31, 1998 and $0.11
per share for each of the periods ended July 31, 1997 and July 31, 1996.
(b) Total investment return assumes dividend reinvestment and does not reflect
the effect of sales charges and reflects an expense limitation in effect
for the period. Without the limitation, the total return would have been
lower.
(c) Includes amounts paid through expense offset arrangements.
(d) Per share net investment loss has been determined on the basis of the
weighted average number of shares outstanding during the period.
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.
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.
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 that are 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 in
any other securities that Putnam Management considers consistent
with such defensive strategies.
It is impossible to predict when, or for how long these
alternative strategies would be used.
FOREIGN INVESTMENTS
The fund may invest without limit in securities of foreign
issuers traded in U.S. public markets. While the fund may also
invest in securities of foreign issuers that are not traded in
U.S. public markets, it does not expect that such securities will
normally represent more than 20% of its average net assets,
although such investments may occasionally exceed this amount.
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.
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 the
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 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 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 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 in connection with the sale of securities and reinvestment
in other securities. 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 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
regulatory requirements may limit the use of index futures and
options transactions.
FOR A MORE DETAILED EXPLANATION OF INDEX FUTURES AND OPTIONS
TRANSACTIONS, INCLUDING THE RISKS ASSOCIATED WITH THEM, SEE THE
SAI.
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 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 (securities of
the U.S. government, its agencies or instrumentalities are not
considered to represent any industry);* or
(c) 15% of its net assets in any combination of securities that
are not readily marketable, securities restricted as to resale
(excluding securities determined by the Trustees (or the person
designated by the Trustees to make such determinations) to be
readily marketable), and 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 as otherwise noted in the SAI, all percentage
limitations described in this prospectus and the SAI will apply
at the time an investment is made, and will not be considered
violated unless an excess or deficiency occurs or exists
immediately after and as a result of such investment. 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 . Total return may also be
presented for other periods or based on investment at reduced
sales charge levels.
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 the 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.
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)
C. Beth Cotner 1998 Employed as an
Managing [/R] investment
Director[/R] professional by Putnam
Management since 1995.
Prior to
September, 1995, Ms.
Cotner was Executive
Vice President of Kemper
Financial Services.
Jeffrey R. Lindsey 1996 Employed as an
investment[/R]
Senior Vice President professional by Putnam
Management since 1994.
David J. Santos
1999
Employed as an
Senior Vice [/R] investment professional
President by Putnam[/R] Management
since 1986.
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 the fund and any
other series of the Trust on a basis that the Trustees deem fair
and equitable, which may be based on the nature of the services
performed and relative applicability to, or the relative assets
of, the fund and such series. 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 Growth Opportunities Fund is a series of Putnam Investment
Funds, a Massachusetts business trust organized on October
31, 1994. A copy of the Trust's 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 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, at any time,
establish one 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.; JOHN A. HILL, VICE
CHAIRMAN. Chairman and Managing Director, First Reserve
Corporation; WILLIAM F. POUNDS, VICE CHAIRMAN. Professor
Emeritus 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.; RONALD J. JACKSON,
Former Chairman, President and Chief Executive Officer of
Fisher-Price, Inc., Trustee of Salem Hospital and the Peabody
Essex Museum; PAUL L. JOSKOW, Professor of Economics and
Management, Massachusetts Institute of Technology. Director,
New England Electric System, State Farm Indemnity Company and
Whitehead Institute for Biomedical Research; 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.; JOHN H. MULLIN, III, Chairman
and CEO of Ridgeway Farm, Director of ACX Technologies, Inc.,
Alex. Brown Realty, Inc. and The Liberty Corporation; ROBERT E.
PATTERSON, President and Trustee of Cabot Industrial Trust and
Trustee of the SEA Education Association; GEORGE
PUTNAM, III,* President, New Generation Research, Inc.; A.J.C.
SMITH,* Chairman and Chief Executive Officer, Marsh & McLennan
Companies, Inc.; W. THOMAS STEPHENS, President and Chief
Executive Officer of MacMillan Bloedel Ltd., Director of Qwest
Communications and New Century Energies; 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 Cabot
Industrial Trust, 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 or its affiliates provide recordkeeping or other
services in connection with the purchase of class A shares) is
eligible to purchase fund shares at net asset value pursuant to
this prospectus if it initially invests at least $20 million in
Putnam funds and other investments managed by Putnam Management
or its affiliates or if its dealer of record has, with Putnam
Mutual Fund's approval, waived its commission or agreed to refund
its commission to Putnam Mutual Funds in the event the plan
redeems 90% or more of its cumulative purchases within two years
of its initial purchase. An employer-sponsored retirement plan,
other than a class A qualified benefit plan, is eligible to
purchase fund shares at net asset value pursuant to this
prospectus 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. Employer-sponsored
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.
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 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.
Putnam Mutual Funds makes quarterly payments 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, except that 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
shareholders investing $1 million or more or by employer-
sponsored retirement plans that have at least 200 eligible
employees or that are 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 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 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 employer's 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. 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 net capital gains are made after applying any
available capital loss carryovers.
The terms of your employer's plan will govern how your
employer's plan may receive distributions from the fund.
Generally, periodic distributions from the fund to your
employer's plan are reinvested in additional fund shares,
although your employer's 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
income taxes on income and gains it distributes .
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
designated by the fund as deriving from net gains on securities
held for more than one year will be taxed as such
regardless of how long you have held your shares.
However, distributions by the fund to employer-
sponsored defined contribution 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 foreign, 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 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 located at One Post Office Square, Boston,
Massachusetts 02109 and, except for a minority stake owned by
employees, are 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.
