Prospectus Supplement
dated March 28, 2000 to: 59852 3/00
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PUTNAM SMALL CAP VALUE FUND
Prospectus dated April 13, 1999
PUTNAM TAX SMART EQUITY FUND
Prospectus dated February 29, 2000
Effective March 28, 2000, each fund listed above will offer class M shares.
This document provides important information about class M shares and
supplements the prospectus of each fund.
The section "Fees and Expenses" is supplemented as follows:
FEES AND EXPENSES
This table summarizes the fees and expenses you may pay if you invest in
class M shares of the fund.
Shareholder Fees (fees paid directly from your investment)
Class M
Maximum Sales Charge (Load)
Imposed On Purchases (as a
percentage of the offering price) 3.50%
Maximum Deferred Sales Charge
(Load)(as a percentage of the
original purchase price or redemption
proceeds, whichever is lower) NONE
Annual Fund Operating Expenses
(expenses that are deducted from fund assets)
Total Annual
Management Distribution Other Fund Operating
Fees (12b-1) Fees Expenses Expenses+
Small Cap Value 0.80% 0.75% 0.45% 2.00%
Tax Smart Equity 0.70% 0.75% 0.44% 1.89%
+ Reflects estimated expenses for each fund's first full fiscal year.
EXAMPLE
The example translates the expenses shown in the preceding table into
dollar amounts. By doing this, you can more easily compare the cost of
investing in the fund to the cost of investing in other mutual funds. The
example makes certain assumptions. It assumes that you invest $10,000 in
the fund for the time periods shown and then redeem all your shares at the
end of those periods. It also assumes a 5% return on your investment each
year and that the fund's operating expenses remain the same. The example is
hypothetical; your actual costs and returns may be higher or lower.
1 year 3 years
Small Cap Value $546 $955
Tax Smart Equity $535 $923
The section "How do I buy fund shares?" is replaced by the following:
How do I buy fund shares?
You can open a fund account with as little as $500 and make additional
investments at any time with as little as $50 ($25 through systematic
investing). The fund sells its shares at the offering price, which is the
NAV plus any applicable sales charge. Your financial advisor or Putnam
Investor Services generally must receive your completed buy order before
the close of regular trading on the New York Stock Exchange for your shares
to be bought at that day's offering price.
You can buy shares:
* Through a financial advisor. Your advisor will be responsible for
furnishing all necessary documents to Putnam Investor Services, and may
charge you for his or her services.
* 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 through your advisor or
Putnam Investor Services at 1-800-225-1581.
You may also complete an order form and write a check for the amount you
wish to invest, payable to the fund. Return the check and completed form to
Putnam Mutual Funds.
The fund may periodically close to new purchases of shares or refuse any
order to buy shares if the fund determines that doing so would be in the
best interests of the fund and its shareholders.
WHICH CLASS OF SHARES IS BEST FOR ME?
This prospectus offers you a choice of four classes of fund shares: A, B, C
and M. This allows you to choose among different types of sales charges
and different levels of ongoing operating expenses, as illustrated in the
"Fees and expenses" section. The class of shares that is best for you
depends on a number of factors, including the amount you plan to invest and
how long you plan to hold the shares. Here is a summary of the differences
among the classes of shares:
Class A shares
* Initial sales charge of up to 5.75%
* Lower sales charge for investments of $50,000 or more
* No deferred sales charge (except on certain redemptions of shares bought
without an initial sales charge)
* Lower annual expenses, and higher dividends, than class B, C or M shares
because of lower 12b-1 fee
Class B shares
* No initial sales charge; your entire investment goes to work for you
* Deferred sales charge of up to 5.00% if you sell shares within 6 years
after purchase
* Higher annual expenses, and lower dividends, than class A or M shares
because of higher 12b-1 fee
* Convert automatically to class A shares after 8 years, reducing the future
12b-1 fee (may convert sooner in some cases)
* Orders for class B shares for $250,000 or more are treated as orders for
class A shares or refused
Class C shares
* No initial sales charge; your entire investment goes to work for you
* Deferred sales charge of 1.00% if you sell shares within one year after
purchase
* Higher annual expenses, and lower dividends, than class A or M shares
because of higher 12b-1 fee
* No conversion to class A shares, so future 12b-1 fee does not decrease
* Orders of $1,000,000 or more and orders that, because of a right of
accumulation or statement of intent, would qualify for the purchase of
class A shares without an initial sales charge, will be treated as orders
for class A shares or refused
Class M shares
* Initial sales charge of up to 3.50%
* Lower sales charge for investments of $50,000 or more
* No deferred sales charge
* Lower annual expenses, and higher dividends, than class B or C shares
because of lower 12b-1 fee
* Higher annual expenses, and lower dividends, than class A shares because
of higher 12b-1 fee
* No conversion to class A shares, so future 12b-1 fee does not decrease
Initial sales charges for class A and M shares
Class A sales charge Class M sales charge
as a percentage of: as a percentage of:
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Amount of purchase Net amount Offering Net amount Offering
at offering price ($) invested price* invested price*
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Under 50,000 6.10% 5.75% 3.63% 3.50%
50,000 but under
100,000 4.71 4.50 2.56 2.50
100,000 but under
250,000 3.63 3.50 1.52 1.50
250,000 but under
500,000 2.56 2.50 1.01 1.00
500,000 but under
1,000,000 2.04 2.00 NONE NONE
1,000,000 and above NONE NONE NONE NONE
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*Offering price includes sales charge.
Deferred sales charges for class B, class C and certain class A shares
If you sell (redeem) class B shares within six years after you bought them,
you will generally pay a deferred sales charge according to the following
schedule.
Year after
purchase 1 2 3 4 5 6 7+
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Charge 5% 4% 3% 3% 2% 1% 0%
A deferred sales charge of 1% will apply to class C shares if redeemed
within one year of purchase. A deferred sales charge of up to 1% may apply
to class A shares purchased without an initial sales charge, if redeemed
within two years of purchase.
Deferred sales charges will be based on the lower of the shares' cost and
current NAV. Shares not subject to any charge will be redeemed first,
followed by shares held longest. You may sell shares acquired by
reinvestment of distributions without a charge at any time.
* You may be eligible for reductions and waivers of sales charges. Sales
charges may be reduced or waived under certain circumstances and for
certain groups. Information about reductions and waivers of sales charges
is included in the SAI. You may consult your financial advisor or Putnam
Mutual Funds for assistance.
* Distribution (12b-1) plans. Each fund has adopted distribution plans to
pay for the marketing of fund shares and for services provided to
shareholders. The plans provide for payments at annual rates (based on
average net assets) of up to 0.35% on class A shares and 1.00% on class B,
class C and class M shares. The Trustees currently limit payments on class
A and class M shares to 0.25% and 0.75% of average net assets,
respectively. Because these fees are paid out of the fund's assets on an
ongoing basis, they will increase the cost of your investment. The higher
fees for class B, class C and class M shares may cost you more than paying
the initial sales charge for class A shares. Because class C and class M
shares, unlike class B shares, do not convert to class A shares, class C
and class M shares may cost you more over time than class B shares.
