-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GWo27qGkWxZzcQL/QWY6GQgzdged/Uh3nZoct8oKXC79KICmA48LxSzdhXpqYgF5 R8HvVmoFe4LWP4U/SP3yxQ== 0000928816-04-001144.txt : 20041028 0000928816-04-001144.hdr.sgml : 20041028 20041028112558 ACCESSION NUMBER: 0000928816-04-001144 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 20041028 DATE AS OF CHANGE: 20041028 EFFECTIVENESS DATE: 20041030 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PUTNAM NEW OPPORTUNITIES FUND CENTRAL INDEX KEY: 0000865177 IRS NUMBER: 043091455 STATE OF INCORPORATION: MA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1933 Act SEC FILE NUMBER: 033-35576 FILM NUMBER: 041101411 BUSINESS ADDRESS: STREET 1: ONE POST OFFICE SQUARE CITY: BOSTON STATE: A6 ZIP: 02109 BUSINESS PHONE: 6172921000 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PUTNAM NEW OPPORTUNITIES FUND CENTRAL INDEX KEY: 0000865177 IRS NUMBER: 043091455 STATE OF INCORPORATION: MA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-06128 FILM NUMBER: 041101412 BUSINESS ADDRESS: STREET 1: ONE POST OFFICE SQUARE CITY: BOSTON STATE: A6 ZIP: 02109 BUSINESS PHONE: 6172921000 485BPOS 1 no1.txt PUTNAM NEW OPPORTUNITIES FUND As filed with the Securities and Exchange Commission on October 28, 2004 Registration No. 33-35576 811-6128 - ------------------------------------------------------------------------ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------- FORM N-1A ---- REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X / ---- ---- Pre-Effective Amendment No. / / ---- ---- Post-Effective Amendment No. 15 / X / and ---- ---- REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY / X / ACT OF 1940 ---- ---- Amendment No. 16 / X / (Check appropriate box or boxes) ---- --------------- PUTNAM NEW OPPORTUNITIES FUND (Exact name of registrant as specified in charter) One Post Office Square, Boston, Massachusetts 02109 (Address of principal executive offices) Registrant's Telephone Number, including Area Code (617) 292-1000 --------------- It is proposed that this filing will become effective (check appropriate box) - ---- / / immediately upon filing pursuant to paragraph (b) - ---- - ---- / X / on (October 30, 2004) pursuant to paragraph (b) - ---- - ---- / / 60 days after filing pursuant to paragraph (a) (1) - ---- - ---- / / on (date) pursuant to paragraph (a) (1) - ---- - ---- / / 75 days after filing pursuant to paragraph (a) (2) - ---- - ---- / / on (date) pursuant to paragraph (a) (2) of Rule 485. - ---- If appropriate, check the following box: - ---- / / this post-effective amendment designates a new - ---- effective date for a previously filed post-effective amendment. ------------------ BETH S. MAZOR, Vice President PUTNAM NEW OPPORTUNITIES FUND One Post Office Square Boston, Massachusetts 02109 (Name and address of agent for service) ------------------ Copy to: JOHN W. GERSTMAYR, Esquire ROPES & GRAY LLP One International Place Boston, Massachusetts 02110 Prospectus October 30, 2004 Putnam New Opportunities Fund Class A, B, C, M and R shares Investment Category: Growth This prospectus explains what you should know about this mutual fund before you invest. Please read it carefully. Putnam Investment Management, LLC (Putnam Management), which has managed mutual funds since 1937, manages the fund. These securities have not been approved or disapproved by the Securities and Exchange Commission nor has the Commission passed upon the accuracy or adequacy of this prospectus. Any statement to the contrary is a crime. You may qualify for sales charge discounts on class A or class M shares. Please notify your financial advisor of other accounts that may help you obtain a sales charge discount. See "How do I buy fund shares?" for details. CONTENTS 2 Fund summary 2 Goal 2 Main investment strategies 2 Main risks 2 Performance information 4 Fees and expenses 6 What are the fund's main investment strategies and related risks? 10 Who manages the fund? 13 How does the fund price its shares? 14 How do I buy fund shares? 19 How do I sell fund shares? 21 How do I exchange fund shares? 22 Fund distributions and taxes 23 Financial highlights [SCALE LOGO OMITTED] Fund summary GOAL The fund seeks long-term capital appreciation. MAIN INVESTMENT STRATEGIES -- GROWTH STOCKS We invest mainly in common stocks of U.S. companies, with a focus on growth stocks. Growth stocks are issued by companies that we believe are fast-growing and whose earnings we believe are likely to increase over time. Growth in earnings may lead to an increase in the price of the stock. We may invest in companies of any size. MAIN RISKS The main risks that could adversely affect the value of the fund's shares and the total return on your investment include: * The risk that the stock price of one or more of the companies in the fund's portfolio will fall, or will fail to rise. Many factors can adversely affect a stock's performance, including both general financial market conditions and factors related to a specific company or industry. This risk is generally greater for small and midsized companies, which tend to be more vulnerable to adverse developments. * The risk that movements in financial markets will adversely affect the price of the fund's investments, regardless of how well the companies in which we invest perform. The market as a whole may not favor the types of investments we make. You can lose money by investing in the fund. The fund may not achieve its goal, and is not intended as a complete investment program. An investment in the fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. PERFORMANCE INFORMATION The following information provides some indication of the fund's risks. The chart shows year-to-year changes in the performance of one of the fund's classes of shares, class A shares. The table following the chart compares the fund's performance to that of a broad measure of market performance. Of course, a fund's past performance is not an indication of future performance. [GRAPHIC OMITTED: vertical bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS A SHARES] CALENDAR YEAR TOTAL RETURNS FOR CLASS A SHARES 1994 3.31% 1995 46.28% 1996 10.86% 1997 22.52% 1998 24.39% 1999 69.64% 2000 -26.14% 2001 -30.09% 2002 -30.63% 2003 32.64% Performance figures in the bar chart do not reflect the impact of sales charges. If they did, performance would be less than that shown. Year-to-date performance through 9/30/04 was -2.12%. During the periods shown in the bar chart, the highest return for a quarter was 50.00% (quarter ending 12/31/99) and the lowest return for a quarter was -29.29% (quarter ending 9/30/01). Average Annual Total Returns (for periods ending 12/31/03) - ------------------------------------------------------------------------------ Past Past Past 1 year 5 years 10 years - ------------------------------------------------------------------------------ Class A before taxes 25.66% -5.25% 6.91% Class A after taxes on distributions 25.66% -6.21% 6.18% Class A after taxes on distributions and sale of fund shares 16.68% -4.38% 6.03% Class B before taxes 26.63% -5.18% 6.72% Class C before taxes 30.66% -4.93% 6.68% Class M before taxes 27.37% -5.37% 6.57% Class R before taxes 32.43% -4.44% 7.23% Russell 3000 Growth Index (no deduction for fees, expenses and taxes) 30.97% -4.69% 8.81% - ------------------------------------------------------------------------------ Unlike the bar chart, this performance information reflects the impact of sales charges. Class A and class M share performance reflects the current maximum initial sales charges (which for class A shares reflects a reduction that took effect after 12/31/03); class B and class C share performance reflects the maximum applicable deferred sales charge if shares had been redeemed on 12/31/03 and, for class B shares, does not assume conversion to class A shares after eight years. For periods before the inception of class C shares (7/26/99), class M shares (12/1/94) and class R shares (1/21/03), performance shown for these classes in the table is based on the performance of the fund's class A shares, adjusted to reflect the appropriate sales charge and the higher 12b-1 fees paid by the class C, class M and class R shares. The fund's performance is compared to the Russell 3000 Growth Index, an unmanaged index of those companies in the Russell 3000 Index chosen for their growth orientation. The fund's performance was previously compared to the Russell Midcap Growth Index, an unmanaged index of medium and medium/small companies in the Russell 1000 Index chosen for their growth orientation. This index was replaced by the Russell 3000 Growth Index, which is more representative of the types of securities generally held by the fund. The average annual total returns of the Russell Midcap Growth Index for the 1-year, 5-year, and 10-year periods ending on 12/31/03 were 42.71%, 2.01% and 9.40%, respectively. After-tax returns reflect the highest individual federal income tax rates and do not reflect state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown. After-tax returns are shown for class A shares only and will vary for other classes. After-tax returns are not relevant to those investing through 401(k) plans, IRAs or other tax-deferred arrangements. FEES AND EXPENSES This table summarizes the fees and expenses you may pay if you invest in the fund. Expenses are based on the fund's last fiscal year. Shareholder Fees (fees paid directly from your investment)* - ------------------------------------------------------------------------------ Class A Class B Class C Class M Class R - ------------------------------------------------------------------------------ Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of the offering price) 5.25% NONE NONE 3.50% NONE Maximum Deferred Sales Charge (Load) (as a percentage of the original purchase price or redemption proceeds, whichever is lower) NONE** 5.00% 1.00% NONE** NONE Maximum Redemption Fee*** (as a percentage of total redemption proceeds) 2.00% 2.00% 2.00% 2.00% 2.00% - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Annual Fund Operating Expenses+ (expenses that are deducted from fund assets) - ------------------------------------------------------------------------------ Total Annual Management Distribution Other Fund Operating Peer Group Fees (12b-1) Fees Expenses Expenses Expense Ratio++ - ------------------------------------------------------------------------------ Class A 0.51% 0.25% 0.33% 1.09% 1.56% Class B 0.51% 1.00% 0.33% 1.84% 2.31% Class C 0.51% 1.00% 0.33% 1.84% 2.31% Class M 0.51% 0.75% 0.33% 1.59% 2.06% Class R 0.51% 0.50% 0.33%+++ 1.34% 1.81% - ------------------------------------------------------------------------------ * Certain investments in class A and class M shares may qualify for discounts on applicable sales charges. See "How do I buy fund shares?" for details. ** A deferred sales charge of up to 1.00% on class A shares and of 0.65% on class M shares may be imposed on certain redemptions of shares bought without an initial sales charge. *** A 2.00% redemption fee (also referred to as a "short-term trading fee") may apply to any shares that are redeemed (either by selling or exchanging into another fund) within 5 days of purchase. + See the section "Who manages the fund?" for a discussion of regulatory matters and litigation. ++ Average of the expenses of front-end load funds viewed by Lipper Inc. as having the same investment classification or objective as the fund, as of September 30, 2004, calculated in accordance with Lipper's standard reporting methodology for comparing expenses within a given universe. For class B, C, M and R shares, Putnam has adjusted this average to reflect the higher 12b-1 fees carried by these classes of shares. The peer group may include funds that are significantly larger or smaller than the fund, which may limit the comparability of the fund's expenses to the Lipper average. +++ Other expenses shown for class R shares have been annualized. 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, except as shown for class B shares and class C shares, 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 5 years 10 years - ------------------------------------------------------------------------------ Class A $630 $853 $1,094 $1,784 Class B $687 $879 $1,195 $1,962* Class B (no redemption) $187 $579 $995 $1,962* Class C $287 $579 $995 $2,159 Class C (no redemption) $187 $579 $995 $2,159 Class M $506 $834 $1,185 $2,173 Class R $136 $425 $734 $1,613 - ------------------------------------------------------------------------------ * Reflects conversion of class B shares to class A shares, which pay lower 12b-1 fees. Conversion occurs eight years after purchase. What are the fund's main investment strategies and related risks? Any investment carries with it some level of risk that generally reflects its potential for reward. We pursue the fund's goal by investing mainly in growth stocks. We will consider, among other factors, a company's financial strength, competitive position in its industry, projected future earnings, cash flows and dividends when deciding whether to buy or sell investments. A description of the risks associated with the fund's main investment strategies follows. * Common stocks. Common stock represents an ownership interest in a company. The value of a company's stock may fall as a result of factors directly relating to that company, such as decisions made by its management or lower demand for the company's products or services. A stock's value may also fall because of factors affecting not just the company, but also companies in the same industry or in a number of different industries, such as increases in production costs. The value of a company's stock may also be affected by changes in financial markets that are relatively unrelated to the company or its industry, such as changes in interest rates or currency exchange rates. In addition, a company's stock generally pays dividends only after the company invests in its own business and makes required payments to holders of its bonds and other debt. For this reason, the value of a company's stock will usually react more strongly than its bonds and other debt to actual or perceived changes in the company's financial condition or prospects. Stocks of smaller companies may be more vulnerable to adverse developments than those of larger companies. Stocks of companies we believe are fast-growing may trade at a higher multiple of current earnings than other stocks. The value of such stocks may be more sensitive to changes in current or expected earnings than the values of other stocks. If our assessment of the prospects for a company's earnings growth is wrong, or if our judgment of how other investors will value the company's earnings growth is wrong, then the price of the company's stock may fall or not approach the value that we have placed on it. Seeking earnings growth may result in significant investments in the technology sector, which may be subject to greater volatility than other sectors of the economy. * Small and midsized companies. These companies, some of which may have a market capitalization of less than $1 billion, are more likely than larger companies to have limited product lines, markets or financial resources, or to depend on a small, inexperienced management group. Stocks of these companies often trade less frequently and in limited volume, and their prices may fluctuate more than stocks of larger companies. Stocks of small and midsized companies may therefore be more vulnerable to adverse developments than those of larger companies. * Foreign investments. We may invest in foreign investments. Foreign investments involve certain special risks. For example, their values may decline in response to changes in currency exchange rates, unfavorable political and legal developments, unreliable or untimely information, and economic and financial instability. In addition, the liquidity of these investments may be more limited than for most U.S. investments, which means we may at times be unable to sell them at desirable prices. Foreign settlement procedures may also involve additional risks. These risks are generally greater in the case of developing (also known as emerging) markets with less developed legal and financial systems. Certain of these risks may also apply to some extent to U.S.-traded investments that are denominated in foreign currencies, investments in U.S. companies that are traded in foreign markets or investments in U.S. - -companies that have significant foreign operations. Special U.S. tax considerations may apply to the fund's foreign investments. * Derivatives. We may engage in a variety of transactions involving derivatives, such as futures, options, warrants and swap contracts. Derivatives are financial instruments whose value depends upon, or is derived from, the value of something else, such as one or more underlying investments, pools of investments, indexes or currencies. We may use derivatives both for hedging and non-hedging purposes. However, we may also choose not to use derivatives, based on our evaluation of market conditions or the availability of suitable derivatives. Investments in derivatives may be applied toward meeting a requirement to invest in a particular kind of investment if the derivatives have economic characteristics similar to that investment. Derivatives involve special risks and may result in losses. The successful use of derivatives depends on our ability to manage these sophisticated instruments. The prices of derivatives may move in unexpected ways due to the use of leverage or other factors, especially in unusual market conditions, and may result in increased volatility. The use of derivatives may also increase the amount of taxes payable by shareholders. Other risks arise from our potential inability to terminate or sell derivatives positions. A liquid secondary market may not always exist for the fund's derivatives positions at any time. In fact, many over-the-counter instruments (investments not traded on an exchange) will not be liquid. Over-the-counter instruments also involve the risk that the other party to the derivative transaction will not meet its obligations. For further information about the risks of derivatives, see the statement of additional information (SAI). * Other investments. In addition to the main investment strategies described above, we may make other types of investments, such as investments in preferred stocks, convertible securities, and debt instruments, which may be subject to other risks, as described in the SAI. * Alternative strategies. Under normal market conditions, we keep the fund's portfolio fully invested, with minimal cash holdings. However, at times we may judge that market conditions make pursuing the fund's usual investment strategies inconsistent with the best interests of its shareholders. We then may temporarily use alternative strategies that are mainly designed to limit losses. However, we may choose not to use these strategies for a variety of reasons, even in very volatile market conditions. These strategies may cause the fund to miss out on investment opportunities, and may prevent the fund from achieving its goal. * Changes in policies. The Trustees may change the fund's goal, investment strategies and other policies without shareholder approval, except as otherwise indicated. * Portfolio transactions and portfolio turnover rate. Transactions on stock exchanges, commodities markets and futures markets involve the payment by the fund of brokerage commissions. The fund paid $20,725,286 in brokerage commissions during the 2004 fiscal year, representing 0.23% of the fund's average net assets. Of this amount, $7,275,339, representing 0.08% of the fund's average net assets, was paid to brokers who also provide research (including statistical and quotation) services. Additional information regarding Putnam's brokerage selection procedures is included in the SAI. Although brokerage commissions and other portfolio transaction costs are not reflected in the fund's Total Annual Fund Operating Expenses ratio (as shown in the Annual Fund Operating Expenses table in the section "Fees and expenses"), they are reflected in the fund's total return. Combining the brokerage commissions paid by the fund during the last fiscal year (as a percentage of the fund's average net assets) with the fund's Total Annual Fund Operating Expenses ratio for class A shares results in a "combined cost ratio" of 1.32% of the fund's average net assets for class A shares for the last fiscal year. Investors should exercise caution in comparing brokerage commissions and combined cost ratios for different types of funds. For example, while brokerage commissions represent one component of the fund's transaction costs, they do not reflect any undisclosed amount of profit or "mark-up" included in the price paid by the fund for principal transactions (transactions made directly with a dealer or other counterparty), including most fixed income securities and certain derivatives. In addition, brokerage commissions do not reflect other elements of transaction costs, including the extent to which the fund's purchase and sale transactions may change the market price for an investment (the "market impact"). Another factor in transaction costs is the fund's portfolio turnover rate, which measures how frequently the fund buys and sells investments. During the past five years, the fund's fiscal year portfolio turnover rate and the average turnover rate for the fund's Lipper category were as follows. Turnover Comparison - ------------------------------------------------------------------------------ 2004 2003 2002 2001 2000 - ------------------------------------------------------------------------------ Putnam New Opportunities Fund 61% 42% 77% 68% 53% Lipper Multi-Cap Growth Funds Average* 140% 158% 159% 186% 145% - ------------------------------------------------------------------------------ * Average portfolio turnover rate of funds viewed by Lipper Inc. as having the same investment classification or objective as the fund. The Lipper category average portfolio turnover rate is calculated using the portfolio turnover rate for the fiscal year end of each fund in the Lipper category. Fiscal years may vary across funds in the Lipper category, which may limit the comparability of the fund's portfolio turnover rate to the Lipper average. Comparative data for 2004 is based on information available as of June 30, 2004. Both the fund's portfolio turnover rate and the amount of brokerage commissions it pays will vary over time based on market conditions. High turnover may lead to increased costs and shareholder taxes and decreased performance. As a matter of policy, Putnam Management is not permitted to consider sales of shares of the fund (or of the other Putnam funds) as a factor in the selection of broker-dealers to execute portfolio transactions for the fund. Who manages the fund? The fund's Trustees oversee the general conduct of the fund's business. The Trustees have retained Putnam Management to be the fund's investment manager, responsible for making investment decisions for the fund and managing the fund's other affairs and business. The fund pays Putnam Management a quarterly management fee for these services based on the fund's average net assets. The fund paid Putnam Management a management fee of 0.51% of average net assets for the fund's last fiscal year. Putnam Management's address is One Post Office Square, Boston, MA 02109. * Investment management teams. Putnam Management's investment professionals are organized into investment management teams, with a particular team dedicated to a specific asset class. The members of the Small and Emerging Growth and Mid Cap Growth Teams are responsible for the day-to-day management of the fund. The names of all team members can be found at www.putnaminvestments.com. The following team members coordinate the teams' management of the fund's portfolio. Their experience as investment professionals over the last five years is shown. The following table also shows the dollar range of shares of the fund owned by these professionals as of September 30, 2004, including investments by their immediate family members and amounts invested through retirement and deferred compensation plans.
- ----------------------------------------------------------------------------------------- Dollar Range Positions Over of Fund Portfolio leaders Since Employer Past Five Years Shares Owned - ----------------------------------------------------------------------------------------- Kevin M. Divney 2004 Putnam Co-Chief Investment $0 Management Officer, Mid Cap Growth 1997 - Present - ----------------------------------------------------------------------------------------- Paul E. Marrkand 2004 Putnam Co-Chief Investment over $100,000 Management Officer, Mid Cap Growth 1987 - Present - ----------------------------------------------------------------------------------------- Dollar Range Positions Over of Fund Portfolio member Since Employer Past Five Years Shares Owned - ----------------------------------------------------------------------------------------- Richard B. Weed 2003 Putnam Senior Portfolio $0 Management Manager, Small 2000 - Present and Emerging Growth State Street Senior Portfolio Manager Global Advisors Prior to Dec. 2000 - ----------------------------------------------------------------------------------------- Named Investment Professionals Total over $100,000 - -----------------------------------------------------------------------------------------
* Investment in the fund by Putnam employees and the Trustees. As of September 30, 2004, all of the 11 Trustees owned fund shares. The table shows the approximate value of investments in the fund and all Putnam funds as of that date by Putnam employees and the fund's Trustees, including in each case investments by their immediate family members and amounts invested through retirement and deferred compensation plans. - ------------------------------------------------------------------------------ Fund All Putnam funds - ------------------------------------------------------------------------------ Putnam employees $19,445,000 $449,133,000 - ------------------------------------------------------------------------------ Trustees $434,000 $40,000,000 - ------------------------------------------------------------------------------ * Compensation of investment professionals. Putnam Management believes that its investment management teams should be compensated primarily based on their success in helping investors achieve their goals. The portion of Putnam Investments' total incentive compensation pool that is available to Putnam Management's Investment Division is based primarily on its delivery, across all of the portfolios it manages, of consistent, dependable and superior performance over time. The peer group for the fund, Multi Cap Growth, is its broad investment category as determined by Lipper Inc. The portion of the incentive compensation pool available to each of your investment management teams is also based primarily on its delivery, across all of the portfolios it manages, of consistent, dependable and superior performance over time. * Consistent performance means being above median over one year. * Dependable performance means not being in the 4th quartile of the peer group over one, three or five years. * Superior performance (which is the largest component of Putnam Management's incentive compensation program) means being in the top third of the peer group over three and five years. In determining an investment management team's portion of the incentive compensation pool and allocating that portion to individual team members, Putnam Management retains discretion to reward or penalize teams or individuals as it deems appropriate, based on other factors. The size of the overall incentive compensation pool each year is determined by Putnam Management's parent company, Marsh & McLennan Companies, Inc., and depends in large part on Putnam's profitability for the year. Incentive compensation generally represents at least 70% of the total compensation paid to investment team members. * Regulatory matters and litigation. On April 8, 2004, Putnam Management entered into agreements with the Securities and Exchange Commission ("SEC") and the Massachusetts Securities Division representing a final settlement of all charges brought against Putnam Management by those agencies on October 28, 2003 in connection with excessive short-term trading by Putnam employees and, in the case of the charges brought by the Massachusetts Securities Division, by participants in some Putnam-administered 401(k) plans. The settlement with the SEC requires Putnam Management to pay $5 million in disgorgement plus a civil monetary penalty of $50 million, and the settlement with the Massachusetts Securities Division requires Putnam Management to pay $5 million in restitution and an administrative fine of $50 million. The settlements also leave intact the process established under an earlier partial settlement with the SEC under which Putnam Management agreed to pay the amount of restitution determined by an independent consultant, which may exceed the disgorgement and restitution amounts specified above, pursuant to a plan to be developed by the independent consultant. Putnam Management, and not the investors in any Putnam fund, will bear all costs, including restitution, civil penalties and associated legal fees stemming from both of these proceedings. The SEC's and Massachusetts Securities Division's allegations and related matters also serve as the general basis for numerous lawsuits, including purported class action lawsuits filed against Putnam Management and certain related parties, including certain Putnam funds. Putnam Management has agreed to bear any costs incurred by Putnam funds in connection with these lawsuits. Based on currently available information, Putnam Management believes that the likelihood that the pending private lawsuits and purported class action lawsuits will have a material adverse financial impact on the fund is remote, and the pending actions are not likely to materially affect its ability to provide investment management services to its clients, including the Putnam funds. Review of these matters by counsel for Putnam Management and by separate independent counsel for the Putnam funds and their independent Trustees is continuing. The fund may experience increased redemptions as a result of these matters, which could result in increased transaction costs and operating expenses. How does the fund price its shares? The price of the fund's shares is based on its net asset value (NAV). The NAV per share of each class equals the total value of its assets, less its liabilities, divided by the number of its outstanding shares. Shares are only valued as of the close of regular trading on the New York Stock Exchange each day the exchange is open. The fund values its investments for which market quotations are readily available at market value. It values short-term investments that will mature within 60 days at amortized cost, which approximates market value. It values all other investments and assets at their fair value. The fund translates prices for its investments quoted in foreign currencies into U.S. dollars at current exchange rates. As a result, changes in the value of those currencies in relation to the U.S. dollar may affect the fund's NAV. Because foreign markets may be open at different times than the New York Stock Exchange, the value of the fund's shares may change on days when shareholders are not able to buy or sell them. If events materially affecting the values of the fund's foreign investments occur between the close of foreign markets and the close of regular trading on the New York Stock Exchange, these investments will be valued at their fair value. 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 weekly, semi-monthly or monthly 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. * Subsequent investments via the Internet. If you have an existing Putnam fund account and you have completed and returned an Electronic Investment Authorization Form, you can buy additional shares online at www.putnaminvestments.com. For more information, contact 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 Investor Services. Mutual funds must obtain and verify information that identifies investors opening new accounts. If the fund is unable to collect the required information, Putnam Investor Services may not be able to open your fund account. Investors must provide their full name, residential or business address, Social Security or tax identification number, and date of birth. Entities, such as trusts, estates, corporations and partnerships, must also provide other identifying information. Putnam Investor Services may share identifying information with third parties for the purpose of verification. If Putnam Investor Services cannot verify identifying information after opening your account, the fund reserves the right to close your account. 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. Qualified employee-benefit plans may also choose class R shares. 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. Please consult your financial advisor as to which share class is most appropriate for you. Here is a summary of the differences among the classes of shares: Class A shares * Initial sales charge of up to 5.25% * Lower sales charges available 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 fees Class B shares * No initial sales charge; your entire investment goes to work immediately * Deferred sales charge of up to 5.00% if shares are sold within six years of purchase * Higher annual expenses, and lower dividends, than class A or M shares because of higher 12b-1 fees * Convert automatically to class A shares after eight years, thereby reducing the future 12b-1 fees * Orders for class B shares of one or more Putnam funds will be refused when the total value of the purchase, plus existing account balances that are eligible to be linked under a right of accumulation for purchases of class A shares (as described below), is $100,000 or more. Investors considering cumulative purchases over $100,000 should consider whether class A shares would be more advantageous and consult their financial advisor. Class C shares * No initial sales charge; your entire investment goes to work immediately * Deferred sales charge of 1.00% if shares are sold within one year of purchase * Higher annual expenses, and lower dividends, than class A or M shares because of higher 12b-1 fees * No conversion to class A shares, so future 12b-1 fees do not decline over time * Orders for class C shares of one or more Putnam funds will be refused when the total value of the purchase, plus existing account balances that are eligible to be linked under a right of accumulation for purchases of class A shares (as described below), is $1,000,000 or more. Investors considering cumulative purchases over $1,000,000 should consider whether class A shares would be more advantageous and consult their financial advisor. Class M shares * Initial sales charge of up to 3.50% * Lower sales charges available for investments of $50,000 or more * No deferred sales charge (except on certain redemptions of shares bought without an initial sales charge) * Lower annual expenses, and higher dividends, than class B or C shares because of lower 12b-1 fees * Higher annual expenses, and lower dividends, than class A shares because of higher 12b-1 fees * No conversion to class A shares, so future 12b-1 fees do not decline over time Class R shares (available to qualified plans only) * No initial sales charge; your entire investment goes to work immediately * No deferred sales charge * Lower annual expenses, and higher dividends, than class B, C or M shares because of lower 12b-1 fees * Higher annual expenses, and lower dividends, than class A shares because of higher 12b-1 fees * No conversion to class A shares, so future 12b-1 fees do not decline over time - ------------------------------------------------------------------------------ Initial sales charges for class A and M shares - ------------------------------------------------------------------------------ Class A sales charge Class M sales charge as a percentage of: as a percentage of: - ------------------------------------------------------------------------------ Amount of purchase Net amount Offering Net amount Offering at offering price ($) invested price* invested price* - ------------------------------------------------------------------------------ Under 50,000 5.54% 5.25% 3.63% 3.50% 50,000 but under 100,000 4.17 4.00 2.56 2.50 100,000 but under 250,000 3.09 3.00 1.52 1.50 250,000 but under 500,000 2.30 2.25 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 - ------------------------------------------------------------------------------ * Offering price includes sales charge. The fund offers two principal ways for you to qualify for discounts on initial sales charges on class A and class M shares, often referred to as "breakpoint discounts": * Right of accumulation. You can add the amount of your current purchases of class A or class M shares of the fund and other Putnam funds to the value of your existing accounts in the fund and other Putnam funds. Individuals can also include purchases by, and accounts owned by, their spouse and minor children, including accounts established through different financial advisors. For your current purchases, you will pay the initial sales charge applicable to the total value of the linked accounts and purchases, which may be lower than the sales charge otherwise applicable to each of your current purchases. Shares of Putnam money market funds, other than money market fund shares acquired by exchange from other Putnam funds, are not included for purposes of the right of accumulation. To calculate the total value of your existing accounts and any linked accounts, the fund will use the current maximum public offering price of those shares. * Statement of intention. A statement of intention is a document in which you agree to make purchases of class A or class M shares in a specified amount within a period of 13 months. For each purchase you make under the statement of intention you will pay the initial sales charge applicable to the total amount you have agreed to purchase. While a statement of intention is not a binding obligation on you, if you do not purchase the full amount of shares within 13 months, the fund will redeem shares from your account in an amount equal to the higher initial sales charge you would have paid in the absence of the statement of intention. Account types that may be linked with each other to obtain breakpoint discounts using the methods described above include: * Individual accounts * Joint accounts * Accounts established as part of a retirement plan and IRA accounts (some restrictions may apply) * Shares of Putnam funds owned through accounts in the name of your dealer or other financial intermediary (with documentation identifying beneficial ownership of shares) * Accounts held as part of a Section 529 college savings plan managed by Putnam Management (some restrictions may apply) In order to obtain a breakpoint discount, you should inform your financial advisor at the time you purchase shares of the existence of other accounts or purchases that are eligible to be linked for the purpose of calculating the initial sales charge. The fund or your financial advisor may ask you for records or other information about other shares held in your accounts and linked accounts, including accounts opened with a different financial advisor. Restrictions may apply to certain accounts and transactions. Further details about breakpoint discounts can be found on Putnam Management's website www.putnam.com/individual by selecting "Mutual Funds", and in the SAI. Deferred sales charges for class B, class C and certain class A and class M shares If you sell (redeem) class B shares within six years of purchase, you will generally pay a deferred sales charge according to the following schedule. Year after purchase 1 2 3 4 5 6 7+ - ------------------------------------------------------------------------------ Charge 5% 4% 3% 3% 2% 1% 0% A deferred sales charge of 1.00% will apply to class C shares if redeemed within one year of purchase. Unless otherwise agreed with Putnam Retail Management, class A shares that are part of a purchase of $1 million or more (other than by a qualified retirement plan) will be subject to a 1.00% deferred sales charge if redeemed within one year of purchase and a 0.50% deferred sales charge if redeemed in the second year after purchase. A deferred sales charge of 0.65% may apply to class M shares purchased without a sales charge for certain rollover IRA accounts if redeemed within one year 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. In addition to the breakpoint discount methods described above, sales charges may be reduced or waived under certain circumstances and for certain groups. Information about reductions and waivers of sales charges, including deferred sales charges, is included in the SAI. You may consult your financial advisor or Putnam Retail Management for assistance. * Distribution (12b-1) plans. The 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, class M and class R shares. The Trustees currently limit payments on class A, class M and class R shares to 0.25%, 0.75% and 0.50% 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, class M and class R 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. Class R shares will generally be less expensive than Class B shares for shareholders who are eligible to purchase either class. * Payments to dealers. As disclosed in the SAI, Putnam Retail Manage ment pays commissions, sales charge reallowances, and ongoing payments to dealers who sell certain classes of fund shares. In addition, Putnam Retail Management may, at its expense, pay concessions to dealers that satisfy certain criteria established from time to time by Putnam Retail Management relating to increasing net sales of shares of the Putnam funds over prior periods and certain other factors. How do I sell fund shares? You can sell your shares back to the fund any day the New York Stock Exchange is open, either through your financial advisor or directly to the fund. Payment for redemption may be delayed until the fund collects the purchase price of shares, which may be up to 10 calendar days after the purchase date. The fund will impose a short-term trading fee of 2.00% of the total redemption amount (calculated at market value) if you sell or exchange your shares after holding them for 5 days or less. The short-term trading fee is paid directly to the fund and is designed to offset brokerage commissions, market impact and other costs associated with short-term trading. The short-term trading fee will not apply in certain circumstances, such as redemptions to pay distributions or loans from defined contribution plans administered by Putnam, redemptions of shares purchased directly with contributions by a plan participant or sponsor, redemptions for loan repayment, redemptions from certain omnibus accounts, redemptions in the event of shareholder death or post-purchase disability and redemptions made as part of a systematic withdrawal plan. For purposes of determining whether the short-term trading fee applies, the shares that were held the longest will be redeemed first. Administrators, trustees or sponsors of retirement plans may also impose short-term trading fees. Please see the SAI for details. * Selling shares through your financial advisor. Your advisor must receive your request in proper form before the close of regular trading on the New York Stock Exchange for you to receive that day's NAV, less any applicable deferred sales charge and short-term trading fee. Your advisor will be responsible for furnishing all necessary documents to Putnam Investor Services on a timely basis and may charge you for his or her services. * Selling shares directly to the fund. Putnam Investor Services must receive your request in proper form before the close of regular trading on the New York Stock Exchange in order to receive that day's NAV, less any applicable sales charge and short-term trading fee. By mail. Send a letter of instruction signed by all registered owners or their legal representatives to Putnam Investor Services. If you have certificates for the shares you want to sell, you must include them along with completed stock power forms. By telephone. You may use Putnam's telephone redemption privilege to redeem shares valued at less than $100,000 unless you have notified Putnam Investor Services of an address change within the preceding 15 days, in which case other requirements may apply. Unless you indicate otherwise on the account application, Putnam Investor Services will be authorized to accept redemption instructions received by telephone. The telephone redemption privilege is not available if there are certificates for your shares. The telephone redemption privilege may be modified or terminated without notice. * Additional requirements. In certain situations, for example, if you sell shares with a value of $100,000 or more, the signatures of all registered owners or their legal representatives must be guaranteed by a bank, broker-dealer or certain other financial institutions. In addition, Putnam Investor Services usually requires additional documents for the sale of shares by a corporation, partnership, agent or fiduciary, or a -surviving joint owner. For more information concerning Putnam's signature guarantee and documentation requirements, contact Putnam Investor Services. * When will the fund pay me? The fund generally sends you payment for your shares the business day after your request is received. Under unusual circumstances, the fund may suspend redemptions, or postpone payment for more than seven days, as permitted by federal securities law. * Redemption by the fund. If you own fewer shares than the minimum set by the Trustees (presently 20 shares), the fund may redeem your shares without your permission and send you the proceeds. The fund may also redeem shares if you own more than a maximum amount set by the Trustees. There is presently no maximum, but the Trustees could set a maximum that would apply to both present and future shareholders. How do I exchange fund shares? If you want to switch your investment from one Putnam fund to another, you can exchange your fund shares for shares of the same class of another Putnam fund at NAV. Not all Putnam funds offer all classes of shares or are open to new investors. If you exchange shares subject to a deferred sales charge, the transaction will not be subject to the deferred sales charge. When you redeem the shares acquired through the exchange, the redemption may be subject to the deferred sales charge, depending upon when you originally purchased the shares. The deferred sales charge will be computed using the schedule of any fund into or from which you have exchanged your shares that would result in your paying the highest deferred sales charge applicable to your class of shares. For purposes of computing the deferred sales charge, the length of time you have owned your shares will be measured from the date of original purchase and will not be affected by any subsequent exchanges among funds. To exchange your shares, complete and return an Exchange Authori zation Form, which is available from Putnam Investor Services. A telephone exchange privilege is currently available for amounts up to $500,000. The telephone exchange privilege is not available if the fund issued certificates for your shares. You may also exchange shares via the Internet at www.putnaminvestments.com. Ask your financial advisor or Putnam Investor Services for prospectuses of other Putnam funds. Some Putnam funds are not available in all states. The exchange privilege is not intended as a vehicle for short-term trading. Excessive exchange activity may interfere with portfolio management and have an adverse effect on all shareholders. In order to limit excessive exchange activity and otherwise to promote the best interests of the fund, the fund will impose a short-term trading fee of 2.00% of the total exchange amount (calculated at market value) on exchanges of shares held for 5 days or less. In the case of defined contribution plans administered by Putnam, the 2.00% short-term trading fee applies to exchanges of shares purchased by exchange that are held in a plan participant's account for 5 days or less. Administrators, trustees or sponsors of retirement plans may also impose short-term trading fees. The fund also reserves the right to revise or terminate the exchange privilege, limit the amount or number of exchanges or reject any exchange. The fund into which you would like to exchange may also reject your exchange. These actions may apply to all shareholders or only to those shareholders whose exchanges Putnam Management determines are likely to have a negative effect on the fund or other Putnam funds. Consult Putnam Investor Services before requesting an exchange. Fund distributions and taxes The fund normally distributes any net investment income and any net realized capital gains annually. You may choose to: * reinvest all distributions in additional shares; * receive any distributions from net investment income in cash while reinvesting capital gains distributions in additional shares; or * receive all distributions in cash. If you do not select an option when you open your account, all distributions will be reinvested. If you do not cash a distribution check within a specified period or notify Putnam Investor Services to issue a new check, the distribution will be reinvested in the fund. You will not receive any interest on uncashed distribution or redemption checks. Similarly, if any correspondence sent by the fund or Putnam Investor Services is returned as "undeliverable," fund distributions will automatically be reinvested in the fund or in another Putnam fund. For federal income tax purposes, distributions of investment income are taxable as ordinary income. Taxes on distributions of capital gains are determined by how long the fund owned the investments that generated them, rather than how long you have owned your shares. Distributions are taxable to you even if they are paid from income or gains earned by the fund before your investment (and thus were included in the price you paid). Distributions of gains from investments that the fund owned for more than one year are taxable as capital gains. Distributions of gains from investments that the fund owned for one year or less are taxable as ordinary income. Distributions are taxable whether you receive them in cash or reinvest them in additional shares. The fund's investments in foreign securities may be subject to foreign withholding taxes. In that case, the fund's return on those investments would be decreased. Shareholders generally will not be entitled to claim a credit or deduction with respect to foreign taxes. In addition, the fund's investment in foreign securities or foreign currencies may increase the amount of taxes payable by shareholders. Any gain resulting from the sale or exchange of your shares will generally also be subject to tax. You should consult your tax advisor for more information on your own tax situation, including possible foreign, state and local taxes. Financial highlights The financial highlights tables are intended to help you understand the fund's recent financial performance. Certain information reflects financial results for a single fund share. The total returns represent the rate that an investor would have earned or lost on an investment in the fund, assuming reinvestment of all dividends and distributions. This information has been derived from the fund's financial statements, which have been audited by PricewaterhouseCoopers LLP. Its report and the fund's financial statements are included in the fund's annual report to shareholders, which is available upon request.
FINANCIAL HIGHLIGHTS (For a common share outstanding throughout the period) CLASS A - ------------------------------------------------------------------------------------------------------------ Per-share operating performance Year ended June 30 - ------------------------------------------------------------------------------------------------------------ 2004 2003 2002 2001 2000 - ------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $32.79 $32.28 $47.97 $96.61 $65.61 - ------------------------------------------------------------------------------------------------------------ Investment operations: - ------------------------------------------------------------------------------------------------------------ Net investment loss (a) (.19)(d) (.17) (.22) (.37) (.54) - ------------------------------------------------------------------------------------------------------------ Net realized and unrealized gain (loss) on investments 6.36 .68 (15.47) (38.81) 38.84 - ------------------------------------------------------------------------------------------------------------ Total from investment operations 6.17 .51 (15.69) (39.18) 38.30 - ------------------------------------------------------------------------------------------------------------ Less distributions: - ------------------------------------------------------------------------------------------------------------ From net realized gain on investments -- -- -- (9.46) (7.30) - ------------------------------------------------------------------------------------------------------------ Total distributions -- -- -- (9.46) (7.30) - ------------------------------------------------------------------------------------------------------------ Net asset value, end of period $38.96 $32.79 $32.28 $47.97 $96.61 - ------------------------------------------------------------------------------------------------------------ Total return at net asset value (%)(b) 18.82 1.58 (32.71) (43.10) 60.49 - ------------------------------------------------------------------------------------------------------------ Ratios and supplemental data - ------------------------------------------------------------------------------------------------------------ Net assets, end of period (in thousands) $5,075,005 $6,262,164 $7,683,016 $12,595,034 $21,138,863 - ------------------------------------------------------------------------------------------------------------ Ratio of expenses to average net assets (%)(c) 1.09 (d) 1.09 .98 .89 .86 - ------------------------------------------------------------------------------------------------------------ Ratio of net investment loss to average net assets (%) (.52)(d) (.57) (.57) (.55) (.64) - ------------------------------------------------------------------------------------------------------------ Portfolio turnover (%) 60.86 42.43 76.67 67.74 53.13 - ------------------------------------------------------------------------------------------------------------ (a) Per share net investment loss has been determined on the basis of the weighted average number of shares outstanding during the period. (b) Total return assumes dividend reinvestment and does not reflect the effect of sales charges. (c) Includes amounts paid through expense offset and brokerage service arrangements. (d) Reflects waivers of certain fund expenses in connection with investments in Putnam Prime Money Market Fund during the period. As a result of such waivers, the expenses of the fund for the period ended June 30, 2004 reflect a reduction of less than 0.01% of average net assets for class A shares.
FINANCIAL HIGHLIGHTS (For a common share outstanding throughout the period) CLASS B - ------------------------------------------------------------------------------------------------------------ Per-share operating performance Year ended June 30 - ------------------------------------------------------------------------------------------------------------ 2004 2003 2002 2001 2000 - ------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $29.96 $29.72 $44.50 $91.07 $62.51 - ------------------------------------------------------------------------------------------------------------ Investment operations: - ------------------------------------------------------------------------------------------------------------ Net investment loss (a) (.43)(d) (.36) (.48) (.77) (.98) - ------------------------------------------------------------------------------------------------------------ Net realized and unrealized gain (loss) on investments 5.81 .60 (14.30) (36.34) 36.84 - ------------------------------------------------------------------------------------------------------------ Total from investment operations 5.38 .24 (14.78) (37.11) 35.86 - ------------------------------------------------------------------------------------------------------------ Less distributions: - ------------------------------------------------------------------------------------------------------------ From net realized gain on investments -- -- -- (9.46) (7.30) - ------------------------------------------------------------------------------------------------------------ Total distributions -- -- -- (9.46) (7.30) - ------------------------------------------------------------------------------------------------------------ Net asset value, end of period $35.34 $29.96 $29.72 $44.50 $91.07 - ------------------------------------------------------------------------------------------------------------ Total return at net asset value (%)(b) 17.96 0.81 (33.21) (43.48) 59.53 - ------------------------------------------------------------------------------------------------------------ Ratios and supplemental data - ------------------------------------------------------------------------------------------------------------ Net assets, end of period (in thousands) $1,674,238 $1,850,775 $2,739,100 $6,137,938 $12,343,996 - ------------------------------------------------------------------------------------------------------------ Ratio of expenses to average net assets (%)(c) 1.84 (d) 1.84 1.73 1.53 1.46 - ------------------------------------------------------------------------------------------------------------ Ratio of net investment loss to average net assets (%) (1.27)(d) (1.33) (1.32) (1.19) (1.24) - ------------------------------------------------------------------------------------------------------------ Portfolio turnover (%) 60.86 42.43 76.67 67.74 53.13 - ------------------------------------------------------------------------------------------------------------ (a) Per share net investment loss has been determined on the basis of the weighted average number of shares outstanding during the period. (b) Total return assumes dividend reinvestment and does not reflect the effect of sales charges. (c) Includes amounts paid through expense offset and brokerage service arrangements. (d) Reflects waivers of certain fund expenses in connection with investments in Putnam Prime Money Market Fund during the period. As a result of such waivers, the expenses of the fund for the period ended June 30, 2004 reflect a reduction of less than 0.01% of average net assets for class B shares.
FINANCIAL HIGHLIGHTS (For a common share outstanding throughout the period) CLASS C - ------------------------------------------------------------------------------------------------------------ For the period Per-share July 26, 1999+ operating performance Year ended June 30 to June 30 - ------------------------------------------------------------------------------------------------------------ 2004 2003 2002 2001 2000 - ------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $31.79 $31.53 $47.21 $95.94 $65.31 - ------------------------------------------------------------------------------------------------------------ Investment operations: - ------------------------------------------------------------------------------------------------------------ Net investment loss (a) (.45)(d) (.37) (.50) (.82) (1.13) - ------------------------------------------------------------------------------------------------------------ Net realized and unrealized gain (loss) on investments 6.15 .63 (15.18) (38.45) 39.06 - ------------------------------------------------------------------------------------------------------------ Total from investment operations 5.70 .26 (15.68) (39.27) 37.93 - ------------------------------------------------------------------------------------------------------------ Less distributions: - ------------------------------------------------------------------------------------------------------------ From net realized gain on investments -- -- -- (9.46) (7.30) - ------------------------------------------------------------------------------------------------------------ Total distributions -- -- -- (9.46) (7.30) - ------------------------------------------------------------------------------------------------------------ Net asset value, end of period $37.49 $31.79 $31.53 $47.21 $95.94 - ------------------------------------------------------------------------------------------------------------ Total return at net asset value (%)(b) 17.93 0.83 (33.21) (43.53) 60.14* - ------------------------------------------------------------------------------------------------------------ Ratios and supplemental data - ------------------------------------------------------------------------------------------------------------ Net assets, end of period (in thousands) $55,005 $64,015 $79,149 $136,417 $118,720 - ------------------------------------------------------------------------------------------------------------ Ratio of expenses to average net assets (%)(c) 1.84 (d) 1.84 1.73 1.64 1.50* - ------------------------------------------------------------------------------------------------------------ Ratio of net investment loss to average net assets (%) (1.27)(d) (1.32) (1.32) (1.29) (1.30)* - ------------------------------------------------------------------------------------------------------------ Portfolio turnover (%) 60.86 42.43 76.67 67.74 53.13 - ------------------------------------------------------------------------------------------------------------ + Commencement of operations. * Not annualized. (a) Per share net investment loss has been determined on the basis of the weighted average number of shares outstanding during the period. (b) Total return assumes dividend reinvestment and does not reflect the effect of sales charges. (c) Includes amounts paid through expense offset and brokerage service arrangements. (d) Reflects waivers of certain fund expenses in connection with investments in Putnam Prime Money Market Fund during the period. As a result of such waivers, the expenses of the fund for the period ended June 30, 2004 reflect a reduction of less than 0.01% of average net assets for class C shares.
FINANCIAL HIGHLIGHTS (For a common share outstanding throughout the period) CLASS M - ------------------------------------------------------------------------------------------------------------ Per-share operating performance Year ended June 30 - ------------------------------------------------------------------------------------------------------------ 2004 2003 2002 2001 2000 - ------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $31.15 $30.82 $46.03 $93.63 $64.05 - ------------------------------------------------------------------------------------------------------------ Investment operations: - ------------------------------------------------------------------------------------------------------------ Net investment loss (a) (.36)(d) (.30) (.40) (.69) (.93) - ------------------------------------------------------------------------------------------------------------ Net realized and unrealized gain (loss) on investments 6.04 .63 (14.81) (37.45) 37.81 - ------------------------------------------------------------------------------------------------------------ Total from investment operations 5.68 .33 (15.21) (38.14) 36.88 - ------------------------------------------------------------------------------------------------------------ Less distributions: - ------------------------------------------------------------------------------------------------------------ From net realized gain on investments -- -- -- (9.46) (7.30) - ------------------------------------------------------------------------------------------------------------ Total distributions -- -- -- (9.46) (7.30) - ------------------------------------------------------------------------------------------------------------ Net asset value, end of period $36.83 $31.15 $30.82 $46.03 $93.63 - ------------------------------------------------------------------------------------------------------------ Total return at net asset value (%)(b) 18.24 1.07 (33.04) (43.38) 59.71 - ------------------------------------------------------------------------------------------------------------ Ratios and supplemental data - ------------------------------------------------------------------------------------------------------------ Net assets, end of period (in thousands) $134,157 $171,675 $223,964 $411,251 $770,194 - ------------------------------------------------------------------------------------------------------------ Ratio of expenses to average net assets (%)(c) 1.59 (d) 1.59 1.48 1.39 1.36 - ------------------------------------------------------------------------------------------------------------ Ratio of net investment loss to average net assets (%) (1.02)(d) (1.07) (1.07) (1.05) (1.14) - ------------------------------------------------------------------------------------------------------------ Portfolio turnover (%) 60.86 42.43 76.67 67.74 53.13 - ------------------------------------------------------------------------------------------------------------ (a) Per share net investment loss has been determined on the basis of the weighted average number of shares outstanding during the period. (b) Total return assumes dividend reinvestment and does not reflect the effect of sales charges. (c) Includes amounts paid through expense offset and brokerage service arrangements. (d) Reflects waivers of certain fund expenses in connection with investments in Putnam Prime Money Market Fund during the period. As a result of such waivers, the expenses of the fund for the period ended June 30, 2004 reflect a reduction of less than 0.01% of average net assets for class M shares.
FINANCIAL HIGHLIGHTS (For a common share outstanding throughout the period) CLASS R - ------------------------------------------------------------------------------ For the period Year January 21, Per-share ended 2003+ operating performance June 30 to June 30 - ------------------------------------------------------------------------------ 2004 2003 - ------------------------------------------------------------------------------ Net asset value, beginning of period $32.76 $28.90 - ------------------------------------------------------------------------------ Investment operations: - ------------------------------------------------------------------------------ Net investment loss (a) (.27)(d) (.10) - ------------------------------------------------------------------------------ Net realized and unrealized gain on investments 6.36 3.96 - ------------------------------------------------------------------------------ Total from investment operations 6.09 3.86 - ------------------------------------------------------------------------------ Net asset value, end of period $38.85 $32.76 - ------------------------------------------------------------------------------ Total return at net asset value (%)(b) 18.59 13.36* - ------------------------------------------------------------------------------ Ratios and supplemental data - ------------------------------------------------------------------------------ Net assets, end of period (in thousands) $25 $1 - ------------------------------------------------------------------------------ Ratio of expenses to average net assets (%)(c) 1.34 (d) .59* - ------------------------------------------------------------------------------ Ratio of net investment loss to average net assets (%) (.76)(d) (.36)* - ------------------------------------------------------------------------------ Portfolio turnover (%) 60.86 42.43 - ------------------------------------------------------------------------------ + Commencement of operations. * Not annualized. (a) Per share net investment loss has been determined on the basis of the weighted average number of shares outstanding during the period. (b) Total return assumes dividend reinvestment. (c) Includes amounts paid through expense offset and brokerage service arrangements. (d) Reflects waivers of certain fund expenses in connection with investments in Putnam Prime Money Market Fund during the period. As a result of such waivers, the expenses of the fund for the period ended June 30, 2004 reflect a reduction of less than 0.01% of average net assets for class R shares. Make the most of your Putnam privileges The following services are available to you as a Putnam mutual fund shareholder. * SYSTEMATIC INVESTMENT PLAN Invest as much as you wish ($25 or more). The amount you choose will be automatically transferred weekly, semi-monthly or monthly from your checking or savings account. * SYSTEMATIC WITHDRAWAL Make regular withdrawals of $50 or more monthly, quarterly, semiannu ally, or annually from your Putnam mutual fund account valued at $5,000 or more. * SYSTEMATIC EXCHANGE Transfer assets automatically from one Putnam account to another on a regular, prearranged basis. * EXCHANGE PRIVILEGE Exchange money between Putnam funds in the same class of shares. The exchange privilege allows you to adjust your investments as your objectives change. A signature guarantee is required for exchanges of more than $500,000 and shares of all Putnam funds may not be available to all investors. A 2.00% short-term trading fee will apply to exchanges of shares from Putnam funds (other than money market funds) held for 5 days or less. A separate 1.00% short- term trading fee may apply to exchanges of shares of certain Putnam funds that occur within 6 to 90 days of purchase. Please read the prospectus of the applicable fund for more details. Investors may not maintain, within the same fund, simultaneous plans for systematic investment or exchange (into the fund) and systematic withdrawal or exchange (out of the fund). These privileges are subject to change or termination. Many of these services can be accessed online at www.putnaminvestments.com. For more information about any of these services and privileges, call your financial advisor or a Putnam customer service representative toll free at 1-800-225-1581. Putnam Family of Funds a The following is a complete list of Putnam's open-end mutual funds offered to the public. Please call your financial advisor or Putnam at 1-800-225-1581 to obtain a prospectus for any Putnam fund. It contains more complete information, including charges and expenses. Please read it carefully before you invest or send money. PUTNAM GROWTH FUNDS Putnam Discovery Growth Fund Putnam Growth Opportunities Fund Putnam Health Sciences Trust Putnam International New Opportunities Fund Putnam New Opportunities Fund Putnam OTC & Emerging Growth Fund Putnam Small Cap Growth Fund Putnam Vista Fund Putnam Voyager Fund PUTNAM BLEND FUNDS Putnam Capital Appreciation Fund Putnam Capital Opportunities Fund Putnam Europe Equity Fund Putnam Global Equity Fund Putnam Global Natural Resources Fund Putnam International Capital Opportunities Fund Putnam International Equity Fund Putnam Investors Fund Putnam Research Fund Putnam Tax Smart Equity Fund Putnam Utilities Growth and Income Fund PUTNAM VALUE FUNDS Putnam Classic Equity Fund Putnam Convertible Income-Growth Trust Putnam Equity Income Fund The George Putnam Fund of Boston The Putnam Fund for Growth and Income Putnam International Growth and Income Fund Putnam Mid Cap Value Fund Putnam New Value Fund Putnam Small Cap Value Fund b PUTNAM INCOME FUNDS Putnam American Government Income Fund Putnam Diversified Income Trust Putnam Floating Rate Income Fund Putnam Global Income Trust Putnam High Yield Advantage Fund b Putnam High Yield Trust Putnam Income Fund Putnam Intermediate U.S. Government Income Fund Putnam Money Market Fund c Putnam Prime Money Market Fund c Putnam U.S. Government Income Trust PUTNAM TAX-FREE INCOME FUNDS Putnam Municipal Income Fund e Putnam Tax Exempt Income Fund Putnam Tax Exempt Money Market Fund c Putnam Tax-Free High Yield Fund Putnam Tax-Free Insured Fund Putnam State tax-free income funds d Arizona, California, Florida, Massachusetts, Michigan, Minnesota, New Jersey, New York, Ohio and Pennsylvania PUTNAM ASSET ALLOCATION FUNDS Putnam Asset Allocation Funds -- three investment portfolios that spread your money across a variety of stocks, bonds, and money market investments. The three portfolios: Putnam Asset Allocation: Balanced Portfolio Putnam Asset Allocation: Conservative Portfolio Putnam Asset Allocation: Growth Portfolio a As of 9/30/04. b Closed to new investors. c An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although these funds seek to preserve your investment at $1.00 per share, it is possible to lose money by investing in such funds. d Not available in all states. e Closing to new accounts after November 15, 2004. For more information about Putnam New Opportunities Fund The fund's statement of additional information (SAI) and annual and semi-annual reports to shareholders include additional information about the fund. The SAI, and the independent registered public accounting firm's report and financial statements included in the fund's most recent annual report to its shareholders, are incorporated by reference into this prospectus, which means they are part of this prospectus for legal purposes. The fund's annual report discusses the market conditions and investment strategies that significantly affected the fund's performance during its last fiscal year. You may get free copies of these materials, request other information about any Putnam fund, or make shareholder inquiries, by contacting your financial advisor, by visiting Putnam's Internet site, or by calling Putnam toll-free at 1-800-225-1581. You may review and copy information about a fund, including its SAI, at the Securities and Exchange Commission's public reference room in Washington, D.C. You may call the Commission at 1-202-942-8090 for information about the operation of the public reference room. You may also access reports and other information about the fund on the EDGAR Database on the Commission's Internet site at http://www.sec.gov. You may get copies of this information, with payment of a duplication fee, by electronic request at the following E-mail address: publicinfo@sec.gov, or by writing the Commission's Public Reference Section, Washington, D.C. 20549-0102. You may need to refer to the fund's file number. PUTNAM INVESTMENTS One Post Office Square Boston, Massachusetts 02109 1-800-225-1581 Address correspondence to Putnam Investor Services P.O. Box 41203 Providence, Rhode Island 02940-1203 www.putnaminvestments.com File No. 811-6128 NP013 210635 10/04 Prospectus October 30, 2004 Putnam New Opportunities Fund Class A shares -- for eligible retirement plans Investment Category: Growth This prospectus explains what you should know about this mutual fund before you invest. Please read it carefully. This prospectus only offers class A shares of the fund without a sales charge to eligible retirement plans. Putnam Investment Management, LLC (Putnam Management), which has managed mutual funds since 1937, manages the fund. These securities have not been approved or disapproved by the Securities and Exchange Commission nor has the Commission passed upon the accuracy or adequacy of this prospectus. Any statement to the contrary is a crime. CONTENTS 2 Fund summary 2 Goal 2 Main investment strategies 2 Main risks 2 Performance information 3 Fees and expenses 4 What are the fund's main investment strategies and related risks? 8 Who manages the fund? 11 How does the fund price its shares? 11 How do I buy fund shares? 12 How do I sell fund shares? 13 How do I exchange fund shares? 14 Fund distributions and taxes 14 Financial highlights Putnam Defined Contribution Plans [SCALE LOGO OMITTED] Fund summary GOAL The fund seeks long-term capital appreciation. MAIN INVESTMENT STRATEGIES -- GROWTH STOCKS We invest mainly in common stocks of U.S. companies, with a focus on growth stocks. Growth stocks are issued by companies that we believe are fast-growing and whose earnings we believe are likely to increase over time. Growth in earnings may lead to an increase in the price of the stock. We may invest in companies of any size. MAIN RISKS The main risks that could adversely affect the value of the fund's shares and the total return on your investment include: * The risk that the stock price of one or more of the companies in the fund's portfolio will fall, or will fail to rise. Many factors can adversely affect a stock's performance, including both general financial market conditions and factors related to a specific company or industry. This risk is generally greater for small and midsized companies, which tend to be more vulnerable to adverse developments. * The risk that movements in financial markets will adversely affect the price of the fund's investments, regardless of how well the companies in which we invest perform. The market as a whole may not favor the types of investments we make. You can lose money by investing in the fund. The fund may not achieve its goal, and is not intended as a complete investment program. An investment in the fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. PERFORMANCE INFORMATION The following information provides some indication of the fund's risks. The chart shows year-to-year changes in the performance of the fund's class A shares. The table following the chart compares the fund's performance to that of a broad measure of market performance. Of course, a fund's past performance is not an indication of future performance. [GRAPHIC OMITTED: vertical bar chart CALENDAR YEAR TOTAL RETURNS] CALENDAR YEAR TOTAL RETURNS 1994 3.31% 1995 46.28% 1996 10.86% 1997 22.52% 1998 24.39% 1999 69.64% 2000 -26.14% 2001 -30.09% 2002 -30.63% 2003 32.64% Year-to-date performance through 9/30/04 was -2.12%. During the periods shown in the bar chart, the highest return for a quarter was 50.00% (quarter ending 12/31/99) and the lowest return for a quarter was -29.29% (quarter ending 9/30/01). Average Annual Total Returns (for periods ending 12/31/03) - ------------------------------------------------------------------------------- Past Past Past 1 year 5 years 10 years - ------------------------------------------------------------------------------- Class A 32.64% -4.22% 7.48% Russell 3000 Growth Index 30.97% -4.69% 8.81% - ------------------------------------------------------------------------------- Class A share performance reflects the waiver of sales charges for purchases through eligible retirement plans. The fund's performance is compared to the Russell 3000 Growth Index, an unmanaged index of those companies in the Russell 3000 Index chosen for their growth orientation. The fund's performance was previously compared to the Russell Midcap Growth Index, an unmanaged index of medium and medium/small companies in the Russell 1000 Index chosen for their growth orientation. This index was replaced by the Russell 3000 Growth Index, which is more representative of the types of securities generally held by the fund. The average annual total returns of the Russell Midcap Growth Index for the 1-year, 5-year, and 10-year periods ending on 12/31/03 were 42.71%, 2.01% and 9.40%, respectively. FEES AND EXPENSES This table summarizes the fees and expenses you may pay if you invest in class A shares of the fund. Expenses are based on the fund's last fiscal year. Shareholder Fees (fees paid directly from your investment) - ------------------------------------------------------------------------------- Maximum Sales Charge (Load) NONE Maximum Deferred Sales Charge (Load) NONE Maximum Redemption Fee* (as a percentage of total redemption proceeds) 2.00% - ------------------------------------------------------------------------------- Annual Fund Operating Expenses+ (expenses that are deducted from fund assets) - ------------------------------------------------------------------------------- Total Distri- Annual Peer bution Fund Group Management (12b-1) Other Operating Expense Fees Fees Expenses Expenses Ratio++ - ------------------------------------------------------------------------------- Class A 0.51% 0.25% 0.33% 1.09% 1.56% - ------------------------------------------------------------------------------- * A 2.00% redemption fee (also referred to as a "short-term trading fee") may apply to any shares that are redeemed (either by selling or exchanging into another fund) within 5 days of purchase. + See the section "Who manages the fund?" for a discussion of regulatory matters and litigation. ++ Average of the expenses of front-end load funds viewed by Lipper Inc. as having the same investment classification or objective as the fund, as of September 30, 2004, calculated in accordance with Lipper's standard reporting methodology for comparing expenses within a given universe. The peer group may include funds that are significantly larger or smaller than the fund, which may limit the comparability of the fund's expenses to the Lipper average. 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 5 years 10 years - ------------------------------------------------------------------------------- Class A $111 $347 $601 $1,329 - ------------------------------------------------------------------------------- What are the fund's main investment strategies and related risks? Any investment carries with it some level of risk that generally reflects its potential for reward. We pursue the fund's goal by investing mainly in growth stocks. We will consider, among other factors, a company's financial strength, competitive position in its industry, projected future earnings, cash flows and dividends when deciding whether to buy or sell investments. A description of the risks associated with the fund's main investment strategies follows. * Common stocks. Common stock represents an ownership interest in a company. The value of a company's stock may fall as a result of factors directly relating to that company, such as decisions made by its management or lower demand for the company's products or services. A stock's value may also fall because of factors affecting not just the company, but also companies in the same industry or in a number of different industries, such as increases in production costs. The value of a company's stock may also be affected by changes in financial markets that are relatively unrelated to the company or its industry, such as changes in interest rates or currency exchange rates. In addition, a company's stock generally pays dividends only after the company invests in its own business and makes required payments to holders of its bonds and other debt. For this reason, the value of a company's stock will usually react more strongly than its bonds and other debt to actual or perceived changes in the company's financial condition or prospects. Stocks of smaller companies may be more vulnerable to adverse developments than those of larger companies. Stocks of companies we believe are fast-growing may trade at a higher multiple of current earnings than other stocks. The value of such stocks may be more sensitive to changes in current or expected earnings than the values of other stocks. If our assessment of the prospects for a company's earnings growth is wrong, or if our judgment of how other investors will value the company's earnings growth is wrong, then the price of the company's stock may fall or not approach the value that we have placed on it. Seeking earnings growth may result in significant investments in the technology sector, which may be subject to greater volatility than other sectors of the economy. * Small and midsized companies. These companies, some of which may have a market capitalization of less than $1 billion, are more likely than larger companies to have limited product lines, markets or financial resources, or to depend on a small, inexperienced management group. Stocks of these companies often trade less frequently and in limited volume, and their prices may fluctuate more than stocks of larger companies. Stocks of small and midsized companies may therefore be more vulnerable to adverse developments than those of larger companies. * Foreign investments. We may invest in foreign investments. Foreign investments involve certain special risks. For example, their values may decline in response to changes in currency exchange rates, unfavorable political and legal developments, unreliable or untimely information, and economic and financial instability. In addition, the liquidity of these investments may be more limited than for most U.S. investments, which means we may at times be unable to sell them at desirable prices. Foreign settlement procedures may also involve additional risks. These risks are generally greater in the case of developing (also known as emerging) markets with less developed legal and financial systems. Certain of these risks may also apply to some extent to U.S.-traded investments that are denominated in foreign currencies, investments in U.S. companies that are traded in foreign markets or investments in U.S. companies that have significant foreign operations. * Derivatives. We may engage in a variety of transactions involving derivatives, such as futures, options, warrants and swap contracts. Derivatives are financial instruments whose value depends upon, or is derived from, the value of something else, such as one or more underlying investments, pools of investments, indexes or currencies. We may use derivatives both for hedging and non-hedging purposes. However, we may also choose not to use derivatives, based on our evaluation of market conditions or the availability of suitable derivatives. Investments in derivatives may be applied toward meeting a requirement to invest in a particular kind of investment if the derivatives have economic characteristics similar to that investment. Derivatives involve special risks and may result in losses. The successful use of derivatives depends on our ability to manage these sophisticated instruments. The prices of derivatives may move in unexpected ways due to the use of leverage or other factors, especially in unusual market conditions, and may result in increased volatility. Other risks arise from our potential inability to terminate or sell derivatives positions. A liquid secondary market may not always exist for the fund's derivatives positions at any time. In fact, many over-the-counter instruments (investments not traded on an exchange) will not be liquid. Over-the-counter instruments also involve the risk that the other party to the derivative transaction will not meet its obligations. For further information about the risks of derivatives, see the statement of additional information (SAI). * Other investments. In addition to the main investment strategies described above, we may make other types of investments, such as investments in preferred stocks, convertible securities, and debt instruments, which may be subject to other risks, as described in the SAI. * Alternative strategies. Under normal market conditions, we keep the fund's portfolio fully invested, with minimal cash holdings. However, at times we may judge that market conditions make pursuing the fund's usual investment strategies inconsistent with the best interests of its shareholders. We then may temporarily use alternative strategies that are mainly designed to limit losses. However, we may choose not to use these strategies for a variety of reasons, even in very volatile market conditions. These strategies may cause the fund to miss out on investment opportunities, and may prevent the fund from achieving its goal. * Changes in policies. The Trustees may change the fund's goal, investment strategies and other policies without shareholder approval, except as otherwise indicated. * Portfolio transactions and portfolio turnover rate. Transactions on stock exchanges, commodities markets and futures markets involve the payment by the fund of brokerage commissions. The fund paid $20,725,286 in brokerage commissions during the 2004 fiscal year, representing 0.23% of the fund's average net assets. Of this amount, $7,275,339, representing 0.08% of the fund's average net assets, was paid to brokers who also provide research (including statistical and quotation) services. Additional information regarding Putnam's brokerage selection procedures is included in the SAI. Although brokerage commissions and other portfolio transaction costs are not reflected in the fund's Total Annual Fund Operating Expenses ratio (as shown in the Annual Fund Operating Expenses table in the section "Fees and expenses"), they are reflected in the fund's total return. Combining the brokerage commissions paid by the fund during the last fiscal year (as a percentage of the fund's average net assets) with the fund's Total Annual Fund Operating Expenses ratio for class A shares results in a "combined cost ratio" of 1.32% of the fund's average net assets for class A shares for the last fiscal year. Investors should exercise caution in comparing brokerage commissions and combined cost ratios for different types of funds. For example, while brokerage commissions represent one component of the fund's transaction costs, they do not reflect any undisclosed amount of profit or "mark-up" included in the price paid by the fund for principal transactions (transactions made directly with a dealer or other counterparty), including most fixed income securities and certain derivatives. In addition, brokerage commissions do not reflect other elements of transaction costs, including the extent to which the fund's purchase and sale transactions may change the market price for an investment (the "market impact"). Another factor in transaction costs is the fund's portfolio turnover rate, which measures how frequently the fund buys and sells investments. During the past five years, the fund's fiscal year portfolio turnover rate and the average turnover rate for the fund's Lipper category were as follows: - ------------------------------------------------------------------------------- Turnover Comparison - ------------------------------------------------------------------------------- 2004 2003 2002 2001 2000 - ------------------------------------------------------------------------------- Putnam New Opportunities Fund 61% 42% 77% 68% 53% Lipper Multi-Cap Growth Funds Average* 140% 158% 159% 186% 145% - ------------------------------------------------------------------------------- * Average portfolio turnover rate of funds viewed by Lipper Inc. as having the same investment classification or objective as the fund. The Lipper category average port folio turnover rate is calculated using the portfolio turnover rate for the fiscal year end of each fund in the Lipper category. Fiscal years may vary across funds in the Lipper category, which may limit the comparability of the fund's portfolio turnover rate to the Lipper average. Comparative data for 2004 is based on information available as of June 30, 2004. Both the fund's portfolio turnover rate and the amount of brokerage commissions it pays will vary over time based on market conditions. High turnover may lead to increased costs and decreased performance. As a matter of policy, Putnam Management is not permitted to consider sales of shares of the fund (or of the other Putnam funds) as a factor in the selection of broker-dealers to execute portfolio transactions for the fund. Who manages the fund? The fund's Trustees oversee the general conduct of the fund's business. The Trustees have retained Putnam Management to be the fund's investment manager, responsible for making investment decisions for the fund and managing the fund's other affairs and business. The fund pays Putnam Management a quarterly management fee for these services based on the fund's average net assets. The fund paid Putnam Management a management fee of 0.51% of average net assets for the fund's last fiscal year. Putnam Management's address is One Post Office Square, Boston, MA 02109. * Investment management teams. Putnam Management's investment professionals are organized into investment management teams, with a particular team dedicated to a specific asset class. The members of the Small and Emerging Growth and Mid Cap Growth Teams are responsible for the day-to-day management of the fund. The names of all team members can be found at www.putnaminvestments.com. The following team members coordinate the teams' management of the fund's portfolio. Their experience as investment professionals over the last five years is shown. The following table also shows the dollar range of shares of the fund owned by these professionals as of September 30, 2004, including investments by their immediate family members and amounts invested through retirement and deferred compensation plans.
- ------------------------------------------------------------------------------------------- Dollar Range Positions Over of Fund Portfolio leaders Since Employer Past Five Years Shares Owned - ------------------------------------------------------------------------------------------- Kevin M. Divney 2004 Putnam Co-Chief Investment $0 Management Officer, Mid Cap Growth 1997 - Present - ------------------------------------------------------------------------------------------- Paul E. Marrkand 2004 Putnam Co-Chief Investment over Management Officer, Mid Cap Growth $100,000 1987 - Present - ------------------------------------------------------------------------------------------- Dollar Range Positions Over of Fund Portfolio member Since Employer Past Five Years Shares Owned - ------------------------------------------------------------------------------------------- Richard B. Weed 2003 Putnam Senior Portfolio Manager, $0 Management Small and Emerging 2000 - Present Growth State Street Senior Portfolio Manager Global Advisors Prior to Dec. 2000 - ------------------------------------------------------------------------------------------- Named Investment Professionals Total over $100,000 - -------------------------------------------------------------------------------------------
* Investment in the fund by Putnam employees and the Trustees. As of September 30, 2004, all of the 11 Trustees owned fund shares. The table shows the approximate value of investments in the fund and all Putnam funds as of that date by Putnam employees and the fund's Trustees, including in each case investments by their immediate family members and amounts invested through retirement and deferred compensation plans. - ----------------------------------------------------------------- Fund All Putnam funds - ----------------------------------------------------------------- Putnam employees $19,445,000 $449,133,000 - ----------------------------------------------------------------- Trustees $434,000 $40,000,000 - ----------------------------------------------------------------- * Compensation of investment professionals. Putnam Management believes that its investment management teams should be compensated primarily based on their success in helping investors achieve their goals. The portion of Putnam Investments' total incentive compensation pool that is available to Putnam Management's Investment Division is based primarily on its delivery, across all of the portfolios it manages, of consistent, dependable and superior performance over time. The peer group for the fund, Multi Cap Growth, is its broad investment category as determined by Lipper Inc. The portion of the incentive compensation pool available to each of your investment management teams is also based primarily on its delivery, across all of the portfolios it manages, of consistent, dependable and superior performance over time. * Consistent performance means being above median over one year. * Dependable performance means not being in the 4th quartile of the peer group over one, three or five years. * Superior performance (which is the largest component of Putnam Management's incentive compensation program) means being in the top third of the peer group over three and five years. In determining an investment management team's portion of the incentive compensation pool and allocating that portion to individual team members, Putnam Management retains discretion to reward or penalize teams or individuals as it deems appropriate, based on other factors. The size of the overall incentive compensation pool each year is determined by Putnam Management's parent company, Marsh & McLennan Companies, Inc., and depends in large part on Putnam's profitability for the year. Incentive compensation generally represents at least 70% of the total compensation paid to investment team members. * Regulatory matters and litigation. On April 8, 2004, Putnam Management entered into agreements with the Securities and Exchange Commission ("SEC") and the Massachusetts Securities Division representing a final settlement of all charges brought against Putnam Management by those agencies on October 28, 2003 in connection with excessive short-term trading by Putnam employees and, in the case of the charges brought by the Massa chusetts Securities Division, by participants in some Putnam-administered 401(k) plans. The settlement with the SEC requires Putnam Management to pay $5 million in disgorgement plus a civil monetary penalty of $50 million, and the settlement with the Massachusetts Securities Division requires Putnam Management to pay $5 million in restitution and an administrative fine of $50 million. The settlements also leave intact the process established under an earlier partial settlement with the SEC under which Putnam Management agreed to pay the amount of restitution determined by an independent consultant, which may exceed the disgorgement and restitution amounts specified above, pursuant to a plan to be developed by the independent consultant. Putnam Management, and not the investors in any Putnam fund, will bear all costs, including restitution, civil penalties and associated legal fees stemming from both of these proceedings. The SEC's and Massachusetts Securities Division's allegations and related matters also serve as the general basis for numerous lawsuits, including purported class action lawsuits filed against Putnam Management and certain related parties, including certain Putnam funds. Putnam Management has agreed to bear any costs incurred by Putnam funds in connection with these lawsuits. Based on currently available information, Putnam Management believes that the likelihood that the pending private lawsuits and purported class action lawsuits will have a material adverse financial impact on the fund is remote, and the pending actions are not likely to materially affect its ability to provide investment management services to its clients, including the Putnam funds. Review of these matters by counsel for Putnam Management and by separate independent counsel for the Putnam funds and their independent Trustees is continuing. The fund may experience increased redemptions as a result of these matters, which could result in increased transaction costs and operating expenses. How does the fund price its shares? The price of the fund's shares is based on its net asset value (NAV). The NAV per share of each class equals the total value of its assets, less its liabilities, divided by the number of its outstanding shares. Shares are only valued as of the close of regular trading on the New York Stock Exchange each day the exchange is open. The fund values its investments for which market quotations are readily available at market value. It values short-term investments that will mature within 60 days at amortized cost, which approximates market value. It values all other investments and assets at their fair value. The fund translates prices for its investments quoted in foreign currencies into U.S. dollars at current exchange rates. As a result, changes in the value of those currencies in relation to the U.S. dollar may affect the fund's NAV. Because foreign markets may be open at different times than the New York Stock Exchange, the value of the fund's shares may change on days when shareholders are not able to buy or sell them. If events materially affecting the values of the fund's foreign investments occur between the close of foreign markets and the close of regular trading on the New York Stock Exchange, these investments will be valued at their fair value. How do I buy fund 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. Putnam Retail Management generally must receive your plan's completed buy order before the close of regular trading on the New York Stock Exchange for shares to be bought at that day's offering price. To eliminate the need for safekeeping, the fund will not issue certificates for shares. Mutual funds must obtain and verify information that identifies investors opening new accounts. If the fund is unable to collect the required information, Putnam Investor Services may not be able to open your fund account. Investors must provide their full name, residential or business address, Social Security or tax identification number, and date of birth. Entities, such as trusts, estates, corporations and partnerships, must also provide other identifying information. Putnam Investor Services may share identifying information with third parties for the purpose of verification. If Putnam Investor Services cannot verify identifying information after opening your account, the fund reserves the right to close your account. 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. * Distribution (12b-1) plan. The fund has adopted a distribution plan to pay for the marketing of class A shares and for services provided to shareholders. The plan provides for payments at an annual rate (based on average net assets) of up to 0.35%. The Trustees currently limit payments on class A shares to 0.25% of average net assets. Because the fees are paid out of the fund's assets on an ongoing basis, they will increase the cost of your investment. * Payments to dealers. As disclosed in the SAI, Putnam Retail Management pays commissions, sales charge reallowances, and ongoing payments to dealers who sell certain classes of fund shares. In addition, Putnam Retail Management may, at its expense, pay concessions to dealers that satisfy certain criteria established from time to time by Putnam Retail Management relating to increasing net sales of shares of the Putnam funds over prior periods and certain other factors. * Eligible retirement plans. An employer-sponsored retirement plan is eligible to purchase class A shares without an initial sales charge through this prospectus if it invests at least $1 million in class A shares. How do I sell fund shares? Subject to any restrictions imposed by your employer's plan, you can sell your shares through the plan back 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 the plan may impose, please consult your employer. The fund will impose a short-term trading fee of 2.00% of the total redemption amount (calculated at market value) if you sell or exchange your shares after holding them for 5 days or less. The short-term trading fee is paid directly to the fund, and is designed to offset brokerage commissions, market impact, and other costs associated with short-term trading. The short-term trading fee will not apply in certain circumstances, such as redemptions to pay distributions or loans from defined contribution plans administered by Putnam, redemptions of shares purchased directly with contributions by a plan participant or sponsor, redemptions for loan repayments, redemptions from certain omnibus accounts, redemptions in the event of shareholder death or post-purchase disability and redemptions made as part of a systematic withdrawal plan. For purposes of determining whether the short-term trading fee applies, the shares that were held the longest will be redeemed first. Administrators, trustees or sponsors of retirement plans may also impose short-term trading fees. Please see the SAI for details. Your plan administrator must send a signed letter of instruction to Putnam Investor Services. The price you will receive is the next NAV per share calculated after the fund receives the instruction in proper form. In order to receive that day's NAV, Putnam Investor Services must receive the instruction before the close of regular trading on the New York Stock Exchange. The fund generally sends payment for your shares the business day after your request is received. Under unusual circumstances, the fund may suspend redemptions, or postpone payment for more than seven days, as permitted by federal securities law. How do I exchange fund shares? Subject to any restrictions your plan imposes, you can exchange your fund shares for shares of other Putnam funds offered through your employer's plan without a sales charge. Contact your plan administrator or Putnam Investor Services for more information. 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 otherwise to promote the best interests of the fund, the fund will impose a short-term trading fee of 2.00% of the total exchange amount (calculated at market value) on exchanges of shares held for 5 days or less. In the case of defined contribution plans administered by Putnam, the 2.00% short-term trading fee applies to exchanges of shares purchased by exchange that are held in a plan participant's account for 5 days or less. Administra tors, trustees or sponsors of retirement plans may also impose short-term trading fees. The fund also reserves the right to revise or terminate the exchange privilege, limit the amount or number of exchanges or reject any exchange. The fund into which you would like to exchange may also reject your exchange. These actions may apply to all shareholders or only to those shareholders whose exchanges Putnam Manage ment determines are likely to have a negative effect on the fund or other Putnam funds. Fund distributions and taxes The fund normally distributes any net investment income and any net realized capital gains annually. 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 you do not select another option, all distributions will be reinvested in additional fund shares. Generally, for federal income tax purposes, fund distributions are taxable as ordinary income, except that any distributions of long-term capital gains will be taxed as such regardless of how long you have held your shares. However, distributions by the fund to 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 advisor 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 fund's investments in foreign securities may be subject to foreign withholding taxes. In that case, the fund's return on those investments would be decreased. You should consult your tax advisor for more information on your own tax situation, including possible foreign, state and local taxes. Financial highlights The financial highlights table is intended to help you understand the fund's recent financial performance. Certain information reflects financial results for a single fund share. The total returns represent the rate that an investor would have earned or lost on an investment in the fund, assuming reinvestment of all dividends and distributions. This information has been derived from the fund's financial statements, which have been audited by PricewaterhouseCoopers LLP. Its report and the fund's financial statements are included in the fund's annual report to shareholders, which is available upon request.
FINANCIAL HIGHLIGHTS (For a common share outstanding throughout the period) CLASS A - ------------------------------------------------------------------------------------------------------------ Per-share operating performance Year ended June 30 - ------------------------------------------------------------------------------------------------------------ 2004 2003 2002 2001 2000 - ------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $32.79 $32.28 $47.97 $96.61 $65.61 - ------------------------------------------------------------------------------------------------------------ Investment operations: - ------------------------------------------------------------------------------------------------------------ Net investment loss (a) (.19) (d) (.17) (.22) (.37) (.54) - ------------------------------------------------------------------------------------------------------------ Net realized and unrealized gain (loss) on investments 6.36 .68 (15.47) (38.81) 38.84 - ------------------------------------------------------------------------------------------------------------ Total from investment operations 6.17 .51 (15.69) (39.18) 38.30 - ------------------------------------------------------------------------------------------------------------ Less distributions: - ------------------------------------------------------------------------------------------------------------ From net realized gain on investments -- -- -- (9.46) (7.30) - ------------------------------------------------------------------------------------------------------------ Total distributions -- -- -- (9.46) (7.30) - ------------------------------------------------------------------------------------------------------------ Net asset value, end of period $38.96 $32.79 $32.28 $47.97 $96.61 - ------------------------------------------------------------------------------------------------------------ Total return at net asset value (%)(b) 18.82 1.58 (32.71) (43.10) 60.49 - ------------------------------------------------------------------------------------------------------------ Ratios and supplemental data - ------------------------------------------------------------------------------------------------------------ Net assets, end of period (in thousands) $5,075,005 $6,262,164 $7,683,016 $12,595,034 $21,138,863 - ------------------------------------------------------------------------------------------------------------ Ratio of expenses to average net assets (%) (c) 1.09 (d) 1.09 .98 .89 .86 - ------------------------------------------------------------------------------------------------------------ Ratio of net investment loss to average net assets (%) (.52) (d) (.57) (.57) (.55) (.64) - ------------------------------------------------------------------------------------------------------------ Portfolio turnover (%) 60.86 42.43 76.67 67.74 53.13 - ------------------------------------------------------------------------------------------------------------ (a) Per share net investment loss has been determined on the basis of the weighted average number of shares outstanding during the period. (b) Total return assumes dividend reinvestment and does not reflect the effect of sales charges. (c) Includes amounts paid through expense offset and brokerage service arrangements. (d) Reflects waivers of certain fund expenses in connection with investments in Putnam Prime Money Market Fund during the period. As a result of such waivers, the expenses of the fund for the period ended June 30, 2004 reflect a reduction of less than 0.01% of average net assets for class A shares.
For more information about Putnam New Opportunities Fund The fund's statement of additional information (SAI) and annual and semi-annual reports to shareholders include additional information about the fund. The SAI, and the independent registered public accounting firm's report and financial statements included in the fund's most recent annual report to its shareholders, are incorporated by reference into this prospectus, which means they are part of this prospectus for legal purposes. The fund's annual report discusses the market conditions and investment strategies that significantly affected the fund's performance during its last fiscal year. You may get free copies of these materials, request other information about any Putnam fund, or make shareholder inquiries, by calling Putnam toll-free at 1-800-752-9894. You may review and copy information about a fund, including its SAI, at the Securities and Exchange Commission's public reference room in Washington, D.C. You may call the Commission at 1-202-942-8090 for information about the operation of the public reference room. You may also access reports and other information about the fund on the EDGAR Database on the Commission's Internet site at http://www.sec.gov. You may get copies of this information, with payment of a duplication fee, by electronic request at the following E-mail address: publicinfo@sec.gov, or by writing the Commission's Public Reference Section, Washington, D.C. 20549-0102. You may need to refer to the fund's file number. PUTNAM INVESTMENTS Putnam Defined Contribution Plans One Post Office Square Boston, Massachusetts 02109 1-800-752-9894 Address correspondence to Putnam Investor Services P.O. Box 9740 Providence, Rhode Island 02940-9740 www.putnaminvestments.com DA013 218786 10/04 File No. 811-6128 Prospectus October 30, 2004 Putnam New Opportunities Fund Class Y shares Investment Category: Growth This prospectus explains what you should know about this mutual fund before you invest. Please read it carefully. Putnam Investment Management, LLC (Putnam Management), which has managed mutual funds since 1937, manages the fund. These securities have not been approved or disapproved by the Securities and Exchange Commission nor has the Commission passed upon the accuracy or adequacy of this prospectus. Any statement to the contrary is a crime. CONTENTS 2 Fund summary 2 Goal 2 Main investment strategies 2 Main risks 2 Performance information 3 Fees and expenses 4 What are the fund's main investment strategies and related risks? 8 Who manages the fund? 11 How does the fund price its shares? 11 How do I buy fund shares? 13 How do I sell fund shares? 13 How do I exchange fund shares? 14 Fund distributions and taxes 14 Financial highlights Putnam Defined Contribution Plans [SCALE LOGO OMITTED] Fund summary GOAL The fund seeks long-term capital appreciation. MAIN INVESTMENT STRATEGIES -- GROWTH STOCKS We invest mainly in common stocks of U.S. companies, with a focus on growth stocks. Growth stocks are issued by companies that we believe are fast-growing and whose earnings we believe are likely to increase over time. Growth in earnings may lead to an increase in the price of the stock. We may invest in companies of any size. MAIN RISKS The main risks that could adversely affect the value of the fund's shares and the total return on your investment include: * The risk that the stock price of one or more of the companies in the fund's portfolio will fall, or will fail to rise. Many factors can adversely affect a stock's performance, including both general financial market conditions and factors related to a specific com pany or industry. This risk is generally greater for small and midsized companies, which tend to be more vulnerable to adverse developments. * The risk that movements in financial markets will adversely affect the price of the fund's investments, regardless of how well the companies in which we invest perform. The market as a whole may not favor the types of investments we make. You can lose money by investing in the fund. The fund may not achieve its goal, and is not intended as a complete investment program. An investment in the fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. PERFORMANCE INFORMATION The following information provides some indication of the fund's risks. The chart shows year-to-year changes in the performance of the fund's class Y shares. The table following the chart compares the fund's performance to that of a broad measure of market performance. Of course, a fund's past performance is not an indication of future performance. [GRAPHIC OMITTED: vertical bar chart CALENDAR YEAR TOTAL RETURNS] CALENDAR YEAR TOTAL RETURNS 1994 3.48% 1995 46.60% 1996 11.14% 1997 22.82% 1998 24.71% 1999 70.09% 2000 -25.95% 2001 -29.90% 2002 -30.46% 2003 32.97% Year-to-date performance through 9/30/04 was -1.93%. During the periods shown in the bar chart, the highest return for a quarter was 50.09% (quarter ending 12/31/99) and the lowest return for a quarter was -29.26% (quarter ending 9/30/01). Average Annual Total Returns (for periods ending 12/31/03) - ------------------------------------------------------------------------------- Past Past Past 1 year 5 years 10 years - ------------------------------------------------------------------------------- Class Y 32.97% -3.98% 7.74% Russell 3000 Growth Index 30.97% -4.69% 8.81% - ------------------------------------------------------------------------------- Performance information shown in the bar chart and table above, for periods prior to the inception of class Y shares on 7/19/94, is derived from the historical performance of the fund's class A shares (not offered by this prospectus). Performance of class Y shares does not reflect the initial sales charge currently applicable to class A shares or differences in operating expenses which, for class Y shares, are lower than the operating expenses applicable to class A shares. The fund's performance is compared to the Russell 3000 Growth Index, an unmanaged index of those companies in the Russell 3000 Index chosen for their growth orientation. The fund's performance was previously compared to the Russell Midcap Growth Index, an unmanaged index of medium and medium/small companies in the Russell 1000 Index chosen for their growth orientation. This index was replaced by the Russell 3000 Growth Index, which is more representative of the types of securities generally held by the fund. The average annual total returns of the Russell Midcap Growth Index for the 1-year, 5-year, and 10-year periods ending on 12/31/03 were 42.71%, 2.01% and 9.40%, respectively. FEES AND EXPENSES This table summarizes the fees and expenses you may pay if you invest in class Y shares of the fund. Expenses are based on the fund's last fiscal year. - ------------------------------------------------------------------------------- Shareholder Fees (fees paid directly from your investment) - ------------------------------------------------------------------------------- Maximum Sales Charge (Load) NONE Maximum Deferred Sales Charge (Load) 0.75%* Maximum Redemption Fee* (as a percentage of total redemption proceeds) 2.00% - ------------------------------------------------------------------------------- Annual Fund Operating Expenses+ (expenses that are deducted from fund assets) - ------------------------------------------------------------------------------- Total Annual Peer Fund Group Management Other Operating Expense Fees Expenses Expenses Ratio++ - ------------------------------------------------------------------------------- Class Y 0.51% 0.33% 0.84% 1.31% - ------------------------------------------------------------------------------- * A 2.00% redemption fee (also referred to as a "short-term trading fee") may apply to any shares that are redeemed (either by selling or exchanging into another fund) within 5 days of purchase. + See the section "Who manages the fund?" for a discussion of regulatory matters and litigation. ++ Average of the expenses of class A shares of front-end load funds viewed by Lipper Inc. as having the same investment classification or objective as the fund, as of September 30, 2004, calculated in accordance with Lipper's standard reporting methodology for comparing expenses within a given universe. For class Y shares, Putnam had adjusted this average to reflect the fact that class Y shares do not pay any 12b-1 fees. The peer group may include funds that are significantly larger or smaller than the fund, which may limit the comparability of the fund's expenses to the Lipper average. 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 5 years 10 years - ------------------------------------------------------------------------------- Class Y $86 $268 $466 $1,037 - ------------------------------------------------------------------------------- What are the fund's main investment strategies and related risks? Any investment carries with it some level of risk that generally reflects its potential for reward. We pursue the fund's goal by investing mainly in growth stocks. We will consider, among other factors, a company's financial strength, competitive position in its industry, projected future earnings, cash flows and dividends when deciding whether to buy or sell investments. A description of the risks associated with the fund's main investment strategies follows. * Common stocks. Common stock represents an ownership interest in a company. The value of a company's stock may fall as a result of factors directly relating to that company, such as decisions made by its management or lower demand for the company's products or services. A stock's value may also fall because of factors affecting not just the company, but also companies in the same industry or in a number of different industries, such as increases in production costs. The value of a company's stock may also be affected by changes in financial markets that are relatively unrelated to the company or its industry, such as changes in interest rates or cur rency exchange rates. In addition, a company's stock generally pays dividends only after the company invests in its own business and makes required payments to holders of its bonds and other debt. For this reason, the value of a company's stock will usually react more strongly than its bonds and other debt to actual or perceived changes in the company's financial condition or prospects. Stocks of smaller companies may be more vulnerable to adverse developments than those of larger companies. Stocks of companies we believe are fast-growing may trade at a higher multiple of current earnings than other stocks. The value of such stocks may be more sensitive to changes in current or expected earnings than the values of other stocks. If our assessment of the prospects for a company's earnings growth is wrong, or if our judgment of how other investors will value the company's earnings growth is wrong, then the price of the company's stock may fall or not approach the value that we have placed on it. Seeking earnings growth may result in significant investments in the technology sector, which may be subject to greater volatility than other sectors of the economy. * Small and midsized companies. These companies, some of which may have a market capitalization of less than $1 billion, are more likely than larger companies to have limited product lines, markets or financial resources, or to depend on a small, inexperienced management group. Stocks of these companies often trade less frequently and in limited volume, and their prices may fluctuate more than stocks of larger companies. Stocks of small and midsized companies may therefore be more vulnerable to adverse developments than those of larger companies. * Foreign investments. We may invest in foreign investments. Foreign investments involve certain special risks. For example, their values may decline in response to changes in currency exchange rates, unfavorable political and legal developments, unreliable or untimely information, and economic and financial instability. In addition, the liquidity of these investments may be more limited than for most U.S. investments, which means we may at times be unable to sell them at desirable prices. Foreign settlement procedures may also involve additional risks. These risks are generally greater in the case of developing (also known as emerging) markets with less developed legal and financial systems. Certain of these risks may also apply to some extent to U.S.-traded investments that are denominated in foreign currencies, investments in U.S. companies that are traded in foreign markets or investments in U.S. companies that have significant foreign operations. * Derivatives. We may engage in a variety of transactions involving derivatives, such as futures, options, warrants and swap contracts. Derivatives are financial instruments whose value depends upon, or is derived from, the value of something else, such as one or more underlying investments, pools of investments, indexes or currencies. We may use derivatives both for hedging and non-hedging purposes. However, we may also choose not to use derivatives, based on our evaluation of market conditions or the avail ability of suitable derivatives. Investments in derivatives may be applied toward meeting a requirement to invest in a particular kind of investment if the derivatives have economic characteristics similar to that investment. Derivatives involve special risks and may result in losses. The successful use of derivatives depends on our ability to manage these sophisticated instruments. The prices of derivatives may move in unexpected ways due to the use of leverage or other factors, especially in unusual market conditions, and may result in increased volatility. Other risks arise from our potential inability to terminate or sell derivatives positions. A liquid secondary market may not always exist for the fund's derivatives positions at any time. In fact, many over-the-counter instruments (investments not traded on an exchange) will not be liquid. Over-the-counter instruments also involve the risk that the other party to the derivative transaction will not meet its obligations. For further information about the risks of derivatives, see the statement of additional information (SAI). * Other investments. In addition to the main investment strategies described above, we may make other types of investments, such as investments in preferred stocks, convertible securities, and debt instruments, which may be subject to other risks, as described in the SAI. * Alternative strategies. Under normal market conditions, we keep the fund's portfolio fully invested, with minimal cash holdings. However, at times we may judge that market conditions make pursuing the fund's usual investment strategies inconsistent with the best interests of its shareholders. We then may temporarily use alternative strategies that are mainly designed to limit losses. However, we may choose not to use these strategies for a variety of reasons, even in very volatile market conditions. These strategies may cause the fund to miss out on investment opportunities, and may prevent the fund from achieving its goal. * Changes in policies. The Trustees may change the fund's goal, investment strategies and other policies without shareholder approval, except as otherwise indicated. * Portfolio transactions and portfolio turnover rate. Transactions on stock exchanges, commodities markets and futures markets involve the payment by the fund of brokerage commissions. The fund paid $20,725,286 in brokerage commissions during the 2004 fiscal year, representing 0.23% of the fund's average net assets. Of this amount, $7,275,339, representing 0.08% of the fund's average net assets, was paid to brokers who also provide research (including statistical and quotation) services. Additional information regarding Putnam's brokerage selection procedures is included in the SAI. Although brokerage commissions and other portfolio transaction costs are not reflected in the fund's Total Annual Fund Operating Expenses ratio (as shown in the Annual Fund Operating Expenses table in the section "Fees and expenses"), they are reflected in the fund's total return. Combining the brokerage commissions paid by the fund during the last fiscal year (as a percentage of the fund's average net assets) with the fund's Total Annual Fund Operating Expenses ratio for class Y shares results in a "combined cost ratio" of 1.07% of the fund's average net assets for class Y shares for the last fiscal year. Investors should exercise caution in comparing brokerage commissions and combined cost ratios for different types of funds. For example, while brokerage commissions represent one component of the fund's transaction costs, they do not reflect any undisclosed amount of profit or "mark-up" included in the price paid by the fund for principal transactions (transactions made directly with a dealer or other counterparty), including most fixed income securities and certain derivatives. In addition, brokerage commissions do not reflect other elements of transaction costs, including the extent to which the fund's purchase and sale transactions may change the market price for an investment (the "market impact"). Another factor in transaction costs is the fund's portfolio turnover rate, which measures how frequently the fund buys and sells investments. During the past five years, the fund's fiscal year portfolio turnover rate and the average turnover rate for the fund's Lipper category were as follows: Turnover Comparison - ------------------------------------------------------------------------------- 2004 2003 2002 2001 2000 - ------------------------------------------------------------------------------- Putnam New Opportunities Fund 61% 42% 77% 68% 53% Lipper Multi-Cap Growth Funds Average* 140% 158% 159% 186% 145% - ------------------------------------------------------------------------------- * Average portfolio turnover rate of funds viewed by Lipper Inc. as having the same investment classification or objective as the fund. The Lipper category average portfolio turnover rate is calculated using the portfolio turnover rate for the fiscal year end of each fund in the Lipper category. Fiscal years may vary across funds in the Lipper category, which may limit the comparability of the fund's portfolio turnover rate to the Lipper average. Comparative data for 2004 is based on information available as of June 30, 2004. Both the fund's portfolio turnover rate and the amount of brokerage commissions it pays will vary over time based on market conditions. High turnover may lead to increased costs and decreased performance. As a matter of policy, Putnam Management is not permitted to consider sales of shares of the fund (or of the other Putnam funds) as a factor in the selection of broker-dealers to execute portfolio transactions for the fund. Who manages the fund? The fund's Trustees oversee the general conduct of the fund's business. The Trustees have retained Putnam Management to be the fund's investment manager, responsible for making investment decisions for the fund and managing the fund's other affairs and business. The fund pays Putnam Management a quarterly management fee for these services based on the fund's average net assets. The fund paid Putnam Management a management fee of 0.51% of average net assets for the fund's last fiscal year. Putnam Management's address is One Post Office Square, Boston, MA 02109. * Investment management teams. Putnam Management's investment professionals are organized into investment management teams, with a particular team dedicated to a specific asset class. The members of the Small and Emerging Growth and Mid Cap Growth Teams are responsible for the day-to-day management of the fund. The names of all team members can be found at www.putnaminvestments.com. The following team members coordinate the teams' management of the fund's portfolio. Their experience as investment professionals over the last five years is shown. The following table also shows the dollar range of shares of the fund owned by these professionals as of September 30, 2004, including investments by their immediate family members and amounts invested through retirement and deferred compensation plans.
- ------------------------------------------------------------------------------------------- Dollar Range Positions Over of Fund Portfolio leaders Since Employer Past Five Years Shares Owned - ------------------------------------------------------------------------------------------- Kevin M. Divney 2004 Putnam Management Co-Chief Investment $0 1997 - Present Officer, Mid Cap Growth - ------------------------------------------------------------------------------------------- Paul E. Marrkand 2004 Putnam Management Co-Chief Investment over $100,000 1987 - Present Officer, Mid Cap Growth - ------------------------------------------------------------------------------------------- Portfolio Positions Over member Since Employer Past Five Years - ------------------------------------------------------------------------------------------- Richard B. Weed 2003 Putnam Management Senior Portfolio Manger, $0 2000 - Present Small and Emerging Growth State Street Senior Portfolio Manager Global Advisors - ------------------------------------------------------------------------------------------- Named Investment Professionals Total Over $100,000 - -------------------------------------------------------------------------------------------
* Investment in the fund by Putnam employees and the Trustees. As of September 30, 2004, all of the 11 Trustees owned fund shares. The table shows the approximate value of investments in the fund and all Putnam funds as of that date by Putnam employees and the fund's Trustees, including in each case investments by their immediate family members and amounts invested through retirement and deferred compensation plans. - ------------------------------------------------------------------------------- Fund All Putnam funds - ------------------------------------------------------------------------------- Putnam employees $19,445,000 $449,133,000 - ------------------------------------------------------------------------------- Trustees $434,000 $40,000,000 - ------------------------------------------------------------------------------- * Compensation of investment professionals. Putnam Management believes that its investment management teams should be compensated primarily based on their success in helping investors achieve their goals. The portion of Putnam Investments' total incentive compensation pool that is available to Putnam Management's Investment Division is based primarily on its delivery, across all of the portfolios it manages, of consistent, dependable and superior performance over time. The peer group for the fund, Multi Cap Growth, is its broad investment category as determined by Lipper Inc. The portion of the incentive compensation pool available to each of your investment management teams is also based primarily on its delivery, across all of the portfolios it manages, of consistent, dependable and superior performance over time. * Consistent performance means being above median over one year. * Dependable performance means not being in the 4th quartile of the peer group over one, three or five years. * Superior performance (which is the largest component of Putnam Management's incentive compensation program) means being in the top third of the peer group over three and five years. In determining an investment management team's portion of the incentive compensation pool and allocating that portion to individual team members, Putnam Management retains discretion to reward or penalize teams or individuals as it deems appropriate, based on other factors. The size of the overall incentive compensation pool each year is determined by Putnam Management's parent company, Marsh & McLennan Companies, Inc., and depends in large part on Putnam's profitability for the year. Incentive compensation generally represents at least 70% of the total compensation paid to investment team members. * Regulatory matters and litigation. On April 8, 2004, Putnam Management entered into agreements with the Securities and Exchange Commission ("SEC") and the Massachusetts Securities Division representing a final settlement of all charges brought against Putnam Management by those agencies on October 28, 2003 in connection with excessive short-term trading by Putnam employees and, in the case of the charges brought by the Massachusetts Securities Division, by participants in some Putnam-administered 401(k) plans. The settlement with the SEC requires Putnam Management to pay $5 million in disgorgement plus a civil monetary penalty of $50 million, and the settlement with the Massachusetts Securities Division requires Putnam Management to pay $5 million in restitution and an administrative fine of $50 million. The settlements also leave intact the process established under an earlier partial settlement with the SEC under which Putnam Management agreed to pay the amount of restitution determined by an independent consultant, which may exceed the disgorgement and restitution amounts specified above, pursuant to a plan to be developed by the independent consultant. Putnam Management, and not the investors in any Putnam fund, will bear all costs, including restitution, civil penalties and associated legal fees stemming from both of these proceedings. The SEC's and Massachusetts Securities Division's allegations and related matters also serve as the general basis for numerous lawsuits, including purported class action lawsuits filed against Putnam Management and certain related parties, including certain Putnam funds. Putnam Management has agreed to bear any costs incurred by Putnam funds in connection with these lawsuits. Based on currently available information, Putnam Management believes that the likelihood that the pending private lawsuits and purported class action lawsuits will have a material adverse financial impact on the fund is remote, and the pending actions are not likely to materially affect its ability to provide investment management services to its clients, including the Putnam funds. Review of these matters by counsel for Putnam Management and by separate independent counsel for the Putnam funds and their independent Trustees is continuing. The fund may experience increased redemptions as a result of these matters, which could result in increased transaction costs and operating expenses. How does the fund price its shares? The price of the fund's shares is based on its net asset value (NAV). The NAV per share of each class equals the total value of its assets, less its liabilities, divided by the number of its outstanding shares. Shares are only valued as of the close of regular trading on the New York Stock Exchange each day the exchange is open. The fund values its investments for which market quotations are readily available at market value. It values short-term investments that will mature within 60 days at amortized cost, which approximates market value. It values all other investments and assets at their fair value. The fund translates prices for its investments quoted in foreign currencies into U.S. dollars at current exchange rates. As a result, changes in the value of those currencies in relation to the U.S. dollar may affect the fund's NAV. Because foreign markets may be open at different times than the New York Stock Exchange, the value of the fund's shares may change on days when shareholders are not able to buy or sell them. If events materially affecting the values of the fund's foreign investments occur between the close of foreign markets and the close of regular trading on the New York Stock Exchange, these investments will be valued at their fair value. How do I buy fund 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. Putnam Retail Management generally must receive your plan's completed buy order before the close of regular trading on the New York Stock Exchange for shares to be bought at that day's offering price. To eliminate the need for safekeeping, the fund will not issue certificates for shares. Mutual funds must obtain and verify information that identifies investors opening new accounts. If the fund is unable to collect the required information, Putnam Investor Services may not be able to open your fund account. Investors must provide their full name, residential or business address, Social Security or tax iden tification number, and date of birth. Entities, such as trusts, estates, corporations and partnerships, must also provide other identifying information. Putnam Investor Services may share identifying information with third parties for the purpose of veri fication. If Putnam Investor Services cannot verify identifying information after opening your account, the fund reserves the right to close your account. 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. * Eligible purchasers. A defined contribution plan (including a corporate IRA) is eligible to purchase class Y shares if approved by Putnam and if * the plan, its sponsor and other employee benefit plans of the sponsor invest at least $150 million in Putnam funds and other investments managed by Putnam Management or its affiliates, or the average investment in Putnam-managed assets of accounts in the plan is at least $30,000; or * the plan's sponsor confirms a good faith expectation that, within such period after initial purchase as is agreed by the sponsor and Putnam, investments in Putnam-managed assets will attain the level or average account size specified above, using the higher of purchase price or current market value, and agrees that class Y shares may be redeemed and class A shares purchased if that level is not attained. College savings plans that qualify for tax-exempt treatment under Section 529 of the Internal Revenue Code, bank trust departments and trust companies, other defined contribution plans, and other Putnam funds and Putnam investment products, if approved by Putnam, are also eligible to purchase class Y shares. * Payments to dealers. As disclosed in the SAI, Putnam Retail Management pays commissions, sales charge reallowances, and ongoing payments to dealers who sell certain classes of fund shares. In addition, Putnam Retail Management may, at its expense, pay concessions to dealers that satisfy certain criteria established from time to time by Putnam Retail Management relating to increasing net sales of shares of the Putnam funds over prior periods and certain other factors. How do I sell fund shares? Subject to any restrictions imposed by your employer's plan, you can sell your shares through the plan back 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 the plan may impose, please consult your employer. The fund will impose a short-term trading fee of 2.00% of the total redemption amount (calculated at market value) if you sell or exchange your shares after holding them for 5 days or less. The short-term trading fee is paid directly to the fund, and is designed to offset brokerage commissions, market impact, and other costs associated with short-term trading. The short-term trading fee will not apply in certain circumstances, such as redemptions to pay distributions or loans from defined contribution plans administered by Putnam, redemptions of shares purchased directly with contributions by a plan participant or sponsor, redemptions for loan repayments, redemptions from certain omnibus accounts, redemptions in the event of shareholder death or post-purchase disability and redemptions made as part of a systematic withdrawal plan. For purposes of determining whether the short-term trading fee applies, the shares that were held the longest will be redeemed first. Administrators, trustees or sponsors of retirement plans may also impose short-term trading fees. Please see the SAI for details. Your plan administrator must send a signed letter of instruction to Putnam Investor Services. The price you will receive is the next NAV per share calculated after the fund receives the instruction in proper form. In order to receive that day's NAV, Putnam Investor Services must receive the instruction before the close of regular trading on the New York Stock Exchange. The fund generally sends payment for your shares the business day after your request is received. Under unusual circumstances, the fund may suspend redemptions, or postpone payment for more than seven days, as permitted by federal securities law. How do I exchange fund shares? Subject to any restrictions your plan imposes, you can exchange your fund shares for shares of other Putnam funds offered through your employer's plan without a sales charge. Contact your plan administrator or Putnam Investor Services for more information. 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 otherwise to promote the best interests of the fund, the fund will impose a short-term trading fee of 2.00% of the total exchange amount (calculated at market value) on exchanges of shares held for 5 days or less. In the case of defined contribution plans administered by Putnam, the 2.00% short-term trading fee applies to exchanges of shares purchased by exchange that are held in a plan participant's account for 5 days or less. Administrators, trustees or sponsors of retirement plans may also impose short-term trading fees. The fund also reserves the right to revise or terminate the exchange privilege, limit the amount or number of exchanges or reject any exchange. The fund into which you would like to exchange may also reject your exchange. These actions may apply to all shareholders or only to those shareholders whose exchanges Putnam Management determines are likely to have a negative effect on the fund or other Putnam funds. Fund distributions and taxes The fund normally distributes any net investment income and any net realized capital gains annually. 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 you do not select another option, all distributions will be reinvested in additional fund shares. Generally, for federal income tax purposes, fund distributions are taxable as ordinary income, except that any distributions of long-term capital gains will be taxed as such regardless of how long you have held your shares. However, distributions by the fund to 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 advisor 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 fund's investments in foreign securities may be subject to foreign withholding taxes. In that case, the fund's return on those investments would be decreased. You should consult your tax advisor for more information on your own tax situation, including possible foreign, state and local taxes. Financial highlights The financial highlights table is intended to help you understand the fund's recent financial performance. Certain information reflects financial results for a single fund share. The total returns represent the rate that an investor would have earned or lost on an investment in the fund, assuming reinvestment of all dividends and distributions. This information has been derived from the fund's financial statements, which have been audited by PricewaterhouseCoopers LLP. Its report and the fund's financial statements are included in the fund's annual report to shareholders, which is available upon request.
FINANCIAL HIGHLIGHTS (For a common share outstanding throughout the period) CLASS Y - ------------------------------------------------------------------------------------------------------------ Per-share operating performance Year ended June 30 - ------------------------------------------------------------------------------------------------------------ 2004 2003 2002 2001 2000 - ------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $33.70 $33.09 $49.05 $98.28 $66.49 - ------------------------------------------------------------------------------------------------------------ Investment operations: - ------------------------------------------------------------------------------------------------------------ Net investment loss (a) (.10) (d) (.10) (.13) (.21) (.34) - ------------------------------------------------------------------------------------------------------------ Net realized and unrealized gain (loss) on investments 6.54 .71 (15.83) (39.56) 39.43 - ------------------------------------------------------------------------------------------------------------ Total from investment operations 6.44 .61 (15.96) (39.77) 39.09 - ------------------------------------------------------------------------------------------------------------ Less distributions: - ------------------------------------------------------------------------------------------------------------ From net realized gain on investments -- -- -- (9.46) (7.30) - ------------------------------------------------------------------------------------------------------------ Total distributions: -- -- -- (9.46) (7.30) - ------------------------------------------------------------------------------------------------------------ Net asset value, end of period $40.14 $33.70 $33.09 $49.05 $98.28 - ------------------------------------------------------------------------------------------------------------ Total return at net asset value (%)(b) 19.11 1.85 (32.54) (42.96) 60.88 - ------------------------------------------------------------------------------------------------------------ Ratios and supplemental data - ------------------------------------------------------------------------------------------------------------ Net assets, end of period (in thousands) $851,430 $930,912 $1,170,852 $1,703,399 $2,684,761 - ------------------------------------------------------------------------------------------------------------ Ratio of expenses to average net assets (%) (c) .84 (d) .84 .73 .64 .61 - ------------------------------------------------------------------------------------------------------------ Ratio of net investment loss to average net assets (%) (.27) (d) (.33) (.32) (.30) (.39) - ------------------------------------------------------------------------------------------------------------ Portfolio turnover (%) 60.86 42.43 76.67 67.74 53.13 - ------------------------------------------------------------------------------------------------------------ (a) Per share net investment loss has been determined on the basis of the weighted average number of shares outstanding during the period. (b) Total return assumes dividend reinvestment. (c) Includes amounts paid through expense offset and brokerage service arrangements. (d) Reflects waivers of certain fund expenses in connection with investments in Putnam Prime Money Market Fund during the period. As a result of such waivers, the expenses of the fund for the period ended June 30, 2004 reflect a reduction of less than 0.01% of average net assets for class Y shares.
[This page left intentionally blank] [This page left intentionally blank] [This page left intentionally blank] For more information about Putnam New Opportunities Fund The fund's statement of additional information (SAI) and annual and semi-annual reports to shareholders include additional information about the fund. The SAI, and the independent registered public accounting firm's report and financial statements included in the fund's most recent annual report to its shareholders, are incorporated by reference into this prospectus, which means they are part of this prospectus for legal purposes. The fund's annual report discusses the market conditions and investment strategies that significantly affected the fund's performance during its last fiscal year. You may get free copies of these materials, request other information about any Putnam fund, or make shareholder inquiries, by calling Putnam toll-free at 1-800-752-9894. You may review and copy information about a fund, including its SAI, at the Securities and Exchange Commission's public reference room in Washington, D.C. You may call the Commission at 1-202-942-8090 for information about the operation of the public reference room. You may also access reports and other information about the fund on the EDGAR Database on the Commission's Internet site at http://www.sec.gov. You may get copies of this information, with payment of a duplication fee, by electronic request at the following E-mail address: publicinfo@sec.gov, or by writing the Commission's Public Reference Section, Washington, D.C. 20549-0102. You may need to refer to the fund's file number. PUTNAM INVESTMENTS Putnam Defined Contribution Plans One Post Office Square Boston, Massachusetts 02109 1-800-752-9894 Address correspondence to Putnam Investor Services P.O. Box 9740 Providence, Rhode Island 02940-9740 www.putnaminvestments.com DY013 218787 10/04 File No. 811-6128 Putnam New Opportunities Fund FORM N-1A PART B STATEMENT OF ADDITIONAL INFORMATION ("SAI") October 30, 2004 This SAI is not a prospectus. If the fund has more than one form of current prospectus, each reference to the prospectus in this SAI shall include all of the fund's prospectuses, unless otherwise noted. The SAI should be read together with the applicable prospectus. Certain disclosure has been incorporated by reference from the fund's annual report. For a free copy of the fund's annual report or prospectus dated October 30, 2004, as revised from time to time, call Putnam Investor Services at 1-800-225-1581 or write Putnam Investor Services, Mailing address: P.O. Box 41203, Providence, RI 02940-1203. Part I of this SAI contains specific information about the fund. Part II includes information about the fund and the other Putnam funds. 502125 TABLE OF CONTENTS PART I FUND ORGANIZATION AND CLASSIFICATION......................................I-3 INVESTMENT RESTRICTIONS...................................................I-4 CHARGES AND EXPENSES......................................................I-6 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AND FINANCIAL STATEMENTS...I-14 PART II MISCELLANEOUS INVESTMENTS, INVESTMENT PRACTICES AND RISKS................II-1 TAXES...................................................................II-25 MANAGEMENT..............................................................II-28 DETERMINATION OF NET ASSET VALUE........................................II-36 HOW TO BUY SHARES.......................................................II-37 DISTRIBUTION PLANS......................................................II-48 INVESTOR SERVICES.......................................................II-52 SIGNATURE GUARANTEES....................................................II-56 SUSPENSION OF REDEMPTIONS...............................................II-56 SHAREHOLDER LIABILITY...................................................II-56 PROXY VOTING GUIDELINES AND PROCEDURES..................................II-57 SECURITIES RATINGS......................................................II-58 DEFINITIONS.............................................................II-61 APPENDIX A..............................................................II-66 SAI PART I FUND ORGANIZATION AND CLASSIFICATION Putnam New Opportunities Fund is a Massachusetts business trust organized on June 25, 1990. A copy of the Agreement and Declaration of Trust, which is governed by Massachusetts law, is on file with the Secretary of The Commonwealth of Massachusetts. The fund is an open-end management investment company with an unlimited number of authorized shares of beneficial interest. The Trustees may, without shareholder approval, create two or more series of shares representing separate investment portfolios. Any such series of shares may be divided without shareholder approval into two or more classes of shares having such preferences and special or relative rights and privileges as the Trustees determine. The fund offers classes of shares with different sales charges and expenses. 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 fund 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. The fund has voluntarily undertaken to hold a shareholder meeting at which the Board of Trustees would be elected at least every five years beginning in 2004. 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 with certain exceptions described under "Investment restrictions." 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. INVESTMENT RESTRICTIONS As fundamental investment restrictions, which may not be changed without a vote of a majority of the outstanding voting securities, the fund may not and will not: (1) Borrow money in excess of 10% of the value (taken at the lower of cost or current value) of its total assets (not including the amount borrowed) at the time the borrowing is made, and then only from banks as a temporary measure to facilitate the meeting of redemption requests (not for leverage) which might otherwise require the untimely disposition of portfolio investments or for extraordinary or emergency purposes. Such borrowings will be repaid before any additional investments are purchased. (2) Underwrite securities issued by other persons except to the extent that, in connection with the disposition of its portfolio investments, it may be deemed to be an underwriter under certain federal securities laws. (3) Purchase or sell real estate, although it may purchase securities of issuers which deal in real estate, securities which are secured by interests in real estate, and securities representing interests in real estate, and it may acquire and dispose of real estate or interests in real estate acquired through the exercise of its rights as a holder of debt obligations secured by real estate or interests therein. (4) Purchase or sell commodities or commodity contracts, except that the fund may purchase and sell financial futures contracts and options and may enter into foreign exchange contracts and other financial transactions not involving physical commodities. (5) Make loans, except by purchase of debt obligations in which the fund may invest consistent with its investment policies, by entering into repurchase agreements or by lending its portfolio securities. (6) With respect to 75% of its total assets, invest in the securities of any issuer if, immediately after such investment, more than 5% of the total assets of the fund (taken at current value) would be invested in the securities of such issuer; provided that this limitation does not apply to obligations issued or guaranteed as to interest and principal by the U.S. government or its agencies or instrumentalities. (7) With respect to 75% of its total assets, acquire more than 10% of the outstanding voting securities of any issuer. (8) Purchase securities (other than securities of the U.S. government, its agencies or instrumentalities) if as a result of such purchase, more than 25% of the fund's total assets would be invested in any one industry. (9) Issue any class of securities which is senior to the fund's shares of beneficial interest, except for permitted borrowings. Subject to shareholder approval at a meeting scheduled for November 11, 2004 (or at a later time if such meeting is adjourned), the Trustees have approved the following modifications to fundamental restrictions (1), (5) and (6) above: The fund may not... (1) "Borrow money in excess of 33 1/3% of the value of its total assets (not including the amount borrowed) at the time the borrowing is made." (5) "Make loans, except by purchase of debt obligations in which the fund may invest consistent with its investment policies (including without limitation debt obligations issued by other Putnam funds), by entering into repurchase agreements, or by lending its portfolio securities." (6) "With respect to 75% of its total assets, invest in securities of any issuer if, immediately after such investment, more than 5% of the total assets of the fund (taken at current value) would be invested in the securities of such issuer; provided that this limitation does not apply to obligations issued or guaranteed as to interest or principal by the U.S. government or its agencies or instrumentalities or to securities issued by other investment companies." The Investment Company Act of 1940 provides that a "vote of a majority of the outstanding voting securities" of the fund means the affirmative vote of the lesser of (1) more than 50% of the outstanding fund shares, or (2) 67% or more of the shares present at a meeting if more than 50% of the outstanding fund shares are represented at the meeting in person or by proxy. The following non-fundamental investment policies may be changed by the Trustees without shareholder approval: The fund will not invest in (a) securities which are not readily marketable, (b) securities restricted as to resale (excluding securities determined by the Trustees of the fund (or the person designated by the Trustees of the fund to make such determinations) to be readily marketable), and (c) repurchase agreements maturing in more than seven days, if, as a result, more than 15% of the fund's net assets (taken at current value) would be invested in securities described in (a), (b) and (c). All percentage limitations on investments (other than pursuant to the non-fundamental restriction) will apply at the time of the making of an investment and shall not be considered violated unless an excess or deficiency occurs or exists immediately after and as a result of such investment. CHARGES AND EXPENSES Management fees Under a Management Contract dated July 01, 2000, the fund pays a quarterly fee to Putnam Management based on the average net assets of the fund, as determined at the close of each business day during the quarter, at the annual rate of: 0.70% of the first $500 million of average net assets; 0.60% of the next $500 million of average net assets; 0.55% of the next $500 million of average net assets; 0.50% of the next $5 billion of average net assets; 0.475% of the next $5 billion of average net assets; 0.455% of the next $5 billion of average net assets; 0.44% of the next $5 billion of average net assets; 0.43% of the next $5 billion of average net assets; 0.42% of the next $5 billion of average net assets; 0.41% of the next $5 billion of average net assets; 0.40% of the next $5 billion of average net assets; 0.39% of the next $5 billion of average net assets; 0.38% of the next $8.5 billion of average net assets; and 0.37% above $55.0 billion of average net assets. For the past three fiscal years, pursuant to the management contract, the fund incurred the following fees: Amount management fee Amount of would have been management fee without expense Fiscal year Management fee paid waived limitation 2004 $45,940,552 $19,413 $45,959,965 2003 $47,705,161 $0 $0 2002 $77,950,742 $0 $0 Expense limitation. The fund invests a portion of its assets in Putnam Prime Money Market Fund. In connection with such investments, management fees paid by the fund are reduced by an amount equal to the management fees paid by Putnam Prime Money Market Fund with respect to assets invested by the fund in Putnam Prime Money Market Fund. Management fees paid for fiscal 2004 reflect the waiver of $19,413 in management fees otherwise payable by the fund to Putnam Management in respect of such investments. Brokerage commissions The following table shows brokerage commissions paid during the fiscal periods indicated: Fiscal year Brokerage commissions 2004 $20,725,286 2003 $21,357,333 2002 $29,306,153 The following table shows transactions placed with brokers and dealers during the most recent fiscal year to recognize research, statistical and quotation services received by Putnam Management and its affiliates: Dollar value of these Percentage of total Amount of transactions transactions commissions $4,837,461,209 31.06% $7,275,339 Administrative expense reimbursement The fund reimbursed Putnam Management for administrative services during fiscal 2004, including compensation of certain fund officers and contributions to the Putnam Investments Profit Sharing Retirement Plan for their benefit, as follows: Portion of total reimbursement for Total compensation and reimbursement contributions $58,869 $46,168 Trustee responsibilities and fees 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 table below shows the value of each Trustee's holdings in the fund and in all of the Putnam Funds as of December 31, 2003. Dollar range of Aggregate dollar range Putnam New of shares held in all Opportunities Fund of the Putnam funds Name of Trustee shares owned overseen by Trustee Jameson A. Baxter $50,001-$100,000 over $100,000 Charles B. Curtis $1-$10,000 over $100,000 John A. Hill none over $100,000 Ronald J. Jackson $1-$10,000 over $100,000 Paul L. Joskow $10,001-$50,000 over $100,000 Elizabeth T. Kennan $1-$10,000 over $100,000 John H. Mullin, III over $100,000 over $100,000 Robert E. Patterson $10,001-$50,000 over $100,000 W. Thomas Stephens $1-$10,000 over $100,000 *George Putnam, III $10,001-$50,000 over $100,000 *A.J.C. Smith $10,001-$50,000 over $100,000 * Trustees who are or may be deemed to be "interested persons" (as defined in the Investment Company Act of 1940) of the fund, Putnam Management, Putnam Retail Management Limited Partnership ("Putnam Retail Management") or Marsh & McLennan Companies, Inc., the parent company of Putnam Investments and its affiliated companies. Messrs. Putnam, III and Smith are deemed "interested persons" by virtue of their positions as officers of the fund, Putnam Management, Putnam Retail Management, or Marsh & McLennan Companies, Inc., or shareholders of Marsh & McLennan Companies, Inc. Mr. Putnam is the President of the fund and each of the other Putnam funds. Mr. Smith is the Chairman of Putnam Investments and serves as a Director of and consultant to Marsh & McLennan Companies, Inc. The balance of the Trustees are not "interested persons." Each independent Trustee of the fund receives a fee for his or her services. Each independent Trustee of the fund also receives fees for serving as Trustee of the other Putnam funds. Each independent Trustee of the fund receives an annual retainer fee and an additional meeting fee for each Trustees' meeting attended. Independent Trustees who serve on board committees receive additional fees for attendance at certain committee meetings and for special services rendered in that connection. All of the current independent Trustees of the fund are Trustees of all the Putnam funds and receive fees for their services from each fund. Mr. Putnam also receives the foregoing fees for his services as Trustee of each Putnam fund. The Trustees periodically review their fees to ensure that such fees continue to be appropriate in light of their responsibilities as well as in relation to fees paid to trustees of other mutual fund complexes. The Board Policy and Nominating Committee, which consists solely of independent Trustees of the fund, estimates that committee and Trustee meeting time, together with the appropriate preparation, requires the equivalent of at least three business days per Trustee meeting. The Committees of the Board of Trustees, and the number of times each committee met during your fund's fiscal year, are shown in the table below. Audit and Pricing Committee 20 Board Policy and Nominating Committee 9 Brokerage and Custody Committee 6 Communication, Service and Marketing Committee 10 Contract Committee 15 Distributions Committee 6 Executive Committee 1 Investment Oversight Committees 32 The following table shows the year each Trustee was first elected a Trustee of the Putnam funds, the fees paid to each Trustee by the fund for fiscal 2004, and the fees paid to each Trustee by all of the Putnam funds during calendar year 2003:
COMPENSATION TABLE Estimated annual Total Aggregate Pension or retirement benefits from all compensation compensation from benefits accrued as Putnam funds upon from all Putnam Trustees/Year the fund (1) part of fund expenses retirement (2) funds (3) (4) - ---------------------------------------------------------------------------------------- Jameson A. Baxter/ 1994 (5) $7,753 $2,210 $100,000 $215,500 Charles B. Curtis/ 2001 $7,506 $2,491 $100,000 $210,250 John A. Hill/ 1985 (5)(7) $15,126 $2,704 $200,000 $413,625 Ronald J. Jackson/ 1996 (5) $7,699 $2,174 $100,000 $214,500 Paul L. Joskow/ 1997 (5) $7,980 $1,556 $100,000 $215,250 Elizabeth T. Kennan/ 1992 $7,389 $2,785 $100,000 $207,000 Lawrence J. Lasser/ 1992 (8) $0 $635 $93,333 $0 John H. Mullin, III/ 1997 (5) $7,450 $2,390 $100,000 $208,750 Robert E. Patterson/ 1984 $7,496 $1,513 $100,000 $206,500 George Putnam, III/ 1984 (7) $9,312 $1,245 $125,000 $260,500 A.J. C. Smith/ 1986 (6) $0 $2,907 $93,333 $0 W. Thomas Stephens/ 1997 (5) $7,582 $2,173 $100,000 $206,500 W. Nicholas Thorndike/ 1992 (9) $7,756 $3,590 $100,000 $212,250
(1) Includes an annual retainer and an attendance fee for each meeting attended. (2) Assumes that each Trustee retires at the normal retirement date. For Trustees who are not within three years of retirement, estimated benefits for each Trustee are based on Trustee fee rates in effect during calendar 2003. (3) As of December 31, 2003, there were 101 funds in the Putnam family. For Mr. Hill, amounts shown also include compensation for service as a trustee of TH Lee, Putnam Emerging Opportunities Portfolio, a closed-end fund advised by an affiliate of Putnam Management. (4) Includes amounts (ranging from $2,000 to $11,000 per Trustee) for which the Putnam funds were reimbursed by Putnam Management for special Board and committee meetings in connection with certain regulatory and other matters relating to alleged improper trading by certain Putnam Management employees and participants in certain 401(k) plans administered by Putnam Fiduciary Trust Company. (5) Includes compensation deferred pursuant to a Trustee Compensation Deferral Plan. As of June 30, 2004, the total amounts of deferred compensation payable by the fund, including income earned on such amounts, to certain Trustees were: Ms. Baxter - $57,965; Mr. Hill - $186,291; Mr. Jackson - $94,281; Mr. Joskow - $65,742; Mr. Mullin - $66,104; and Mr. Stephens - $, including income earned on such amounts19,579. (6) Marsh & McLennan Companies, Inc. compensates Mr. Smith for his service as Trustee. Mr. Smith has waived any retirement benefits that he is entitled to receive under the retirement plan of the Putnam funds. (7) Includes additional compensation to Messrs. Hill and Putnam for service as Chairman of the Trustees and President of the Funds, respectively. (8) Mr. Lasser resigned from the Board of Trustees of the Putnam funds on November 3, 2003. (9) Mr. Thorndike resigned from the Board of Trustees of the Putnam funds on June 30, 2004. Under a Retirement Plan for Trustees of the Putnam funds (the "Plan"), each Trustee who retires with at least five years of service as a Trustee of the funds is entitled to receive an annual retirement benefit equal to one-half of the average annual compensation paid to such Trustee for the last three years of service prior to retirement. This retirement benefit is payable during a Trustee's lifetime, beginning the year following retirement, for a number of years equal to such Trustee's years of service. A death benefit, also available under the Plan, ensures that the Trustee and his or her beneficiaries will receive benefit payments for the lesser of an aggregate period of (i) ten years or (ii) such Trustee's total years of service. The Plan Administrator (currently the Board Policy and Nominating Committee) may terminate or amend the Plan at any time, but no termination or amendment will result in a reduction in the amount of benefits (i) currently being paid to a Trustee at the time of such termination or amendment, or (ii) to which a current Trustee would have been entitled had he or she retired immediately prior to such termination or amendment. The Trustees have terminated the Plan with respect to any Trustee first elected to the board after 2003. For additional information concerning the Trustees, see "Management" in Part II of this SAI. Share ownership At September 30, 2004, the officers and Trustees of the fund as a group owned less than 1% of the outstanding shares of each class of the fund, and, except as noted below, no person owned of record or to the knowledge of the fund beneficially 5% or more of any class of shares of the fund. A VALIC 12.30% 2929 Allen Parkway, #L7-01 Houston, TX 77019 A Edward D. Jones & Co. 7.00% PO Box 2500 Maryland Heights, MO 63043 B Citigroup Global Markets Inc. 5.10% 333 W 34th St. FL 3 New York NY 10001-2402 C Merrill Lynch, Pierce, Fenner & Smith 7.00% 165 Broadway One Liberty Plaza New York, NY 10006 C Citigroup Global Markets Inc. 5.80% 333 W 34th St. FL 3 New York NY 10001-2402 M National City Bank 10.40% PO Box 94984 Cleveland, OH 44101-4984 M Edward D. Jones & Co. 5.50% PO Box 2500 Maryland Heights, MO 63043 R Putnam Investments 77.50% One Post office Square Boston, MA 02109 Y* IBEW Local 3 21.37% Y* Illinois Toolworks Inc. Savings and 13.08% Investment Plan Y* Worldcom 401(k) Salary Savings Plan 11.97% Y* United Technology Carriers 9.53% * The address for the names listed is: c/o Putnam Fiduciary Trust Company, as trustee or agent, Investors Way, Norwood, MA 02062. Distribution fees During fiscal 2004, the fund paid the following 12b-1 fees to Putnam Retail Management: Class A Class B Class C Class M Class R $14,751,943 $18,379,074 $623,070 $1,189,976 $29 Class A sales charges and contingent deferred sales charges Putnam Retail Management received sales charges with respect to class A shares in the following amounts during the periods indicated: Sales charges Total retained by Putnam Contingent Fiscal front-end Retail Management deferred sales year sales charges after dealer concessions charges 2004 $2,902,407 $415,385 $44,612 2003 $3,686,918 $604,277 $19,007 2002 $7,396,004 $1,230,104 $68,729 Class B contingent deferred sales charges Putnam Retail Management received contingent deferred sales charges upon redemptions of class B shares in the following amounts during the periods indicated: Fiscal year Contingent deferred sales charges 2004 $3,373,687 2003 $3,047,628 2002 $7,200,921 Class C contingent deferred sales charges Putnam Retail Management received contingent deferred sales charges upon redemptions of class C shares in the following amounts during the periods indicated: Fiscal year Contingent deferred sales charges 2004 $9,042 2003 $10,207 2002 $27,999 Class M sales charges and contingent deferred sales charges Putnam Retail Management received sales charges with respect to class M shares in the following amounts during the periods indicated: Sales charges Total retained by Putnam Contingent Fiscal front-end Retail Management deferred sales year sales charges after dealer concessions charges 2004 $61,039 $10,001 $0 2003 $82,557 $12,838 $0 2002 $203,467 $32,412 $0 Investor servicing and custody fees and expenses During the 2004 fiscal year, the fund incurred $18,857,802 in fees and out-of-pocket expenses for investor servicing and custody services provided by Putnam Fiduciary Trust Company. INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AND FINANCIAL STATEMENTS PricewaterhouseCoopers LLP, 125 High Street, Boston, Massachusetts 02110, is the fund's independent registered public accounting firm providing audit services, tax return review and other tax consulting services and assistance and consultation in connection with the review of various Securities and Exchange Commission filings. The Report of Independent Registered Public Accounting Firm, financial highlights and financial statements included in the fund's Annual Report for the fiscal year ended June 30, 2004, filed electronically on August 27, 2004 (File No. 811-6128), are incorporated by reference into this SAI. The financial highlights included in the prospectus and incorporated by reference into this SAI and the financial statements incorporated by reference into the prospectus and this SAI have been so included and incorporated in reliance upon the report of the independent registered public accounting firm, given on their authority as experts in auditing and accounting. TABLE OF CONTENTS MISCELLANEOUS INVESTMENTS, INVESTMENT PRACTICES AND RISKS II-1 TAXES II-25 MANAGEMENT II-30 DETERMINATION OF NET ASSET VALUE II-41 HOW TO BUY SHARES II-43 DISTRIBUTION PLANS II-53 INVESTOR SERVICES II-57 SIGNATURE GUARANTEES II-61 SUSPENSION OF REDEMPTIONS II-61 SHAREHOLDER LIABILITY II-61 PROXY VOTING GUIDELINES AND PROCEDURES II-61 SECURITIES RATINGS II-62 DEFINITIONS II-66 APPENDIX A II-67 THE PUTNAM FUNDS STATEMENT OF ADDITIONAL INFORMATION ("SAI") PART II As noted in the prospectus, in addition to the principal investment strategies and the principal risks described in the prospectus, the fund may employ other investment practices and may be subject to other risks, which are described below. Because the following is a combined description of investment strategies of all of the Putnam funds, certain matters described herein may not apply to your fund. Unless a strategy or policy described below is specifically prohibited by the investment restrictions explained in the fund's prospectus or Part I of this SAI, or by applicable law, the fund may engage in each of the practices described below. Shareholders who purchase shares at net asset value through employer-sponsored defined contribution plans should also consult their employer for information about the extent to which the matters described below apply to them. MISCELLANEOUS INVESTMENTS, INVESTMENT PRACTICES AND RISKS Foreign Investments 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. There may be less information publicly available about a foreign issuer than about a U.S. issuer, and foreign issuers may not be 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, foreign securities may be subject to the risk of nationalization or expropriation of assets, imposition of currency exchange controls, foreign withholding taxes 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, including the risks of nationalization or expropriation of assets, typically are increased in connection with investments in "emerging markets." For example, political and economic structures in these countries may be in their infancy and developing rapidly, and such countries may lack the social, political and economic stability characteristic of more developed countries. Certain of these countries have in the past failed to recognize private property rights and have at times nationalized and expropriated the assets of private companies. 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 currencies of certain emerging market countries have experienced devaluations relative to the U.S. dollar, and future devaluations may adversely affect the value of assets denominated in such currencies. Many emerging market countries have experienced substantial, and in some periods extremely high, rates of inflation or deflation for many years, and future inflation may adversely affect the economies and securities markets of such countries. In addition, unanticipated political or social developments may affect the value of investments in emerging markets and the availability of additional investments in these markets. The small size, limited trading volume and relative inexperience of the securities markets in these countries may make investments in securities traded in emerging markets illiquid and more volatile than investments in securities traded in more developed countries, and the fund may be required to establish special custodial or other arrangements before making investments in securities traded in emerging markets. There may be little financial or accounting information available with respect to issuers of emerging market securities, and it may be difficult as a result to assess the value of prospects of an investment in such securities. 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. Foreign Currency Transactions To manage its exposure to foreign currencies, the fund may engage in foreign currency exchange transactions, including purchasing and selling foreign currency, foreign currency options, foreign currency forward contracts and foreign currency futures contracts and related options. In addition, the fund may write covered call and put options on foreign currencies for the purpose of increasing its current return. Generally, the fund may engage in both "transaction hedging" and "position hedging." The fund may also engage in foreign currency transactions for non-hedging purposes, subject to applicable law. When it engages in transaction hedging, the fund enters into foreign currency transactions with respect to specific receivables or payables, generally arising in connection with the purchase or sale of portfolio securities. The fund will engage in transaction hedging when it desires to "lock in" the U.S. dollar price of a security it has agreed to purchase or sell, or the U.S. dollar equivalent of a dividend or interest payment in a foreign currency. By transaction hedging the fund will attempt to protect itself against a possible loss resulting from an adverse change in the relationship between the U.S. dollar and the applicable foreign currency during the period between the date on which the security is purchased or sold, or on which the dividend or interest payment is earned, and the date on which such payments are made or received. The fund may purchase or sell a foreign currency on a spot (or cash) basis at the prevailing spot rate in connection with the settlement of transactions in portfolio securities denominated in that foreign currency. If conditions warrant, for transaction hedging purposes the fund may also enter into contracts to purchase or sell foreign currencies at a future date ("forward contracts") and purchase and sell foreign currency futures contracts. A foreign currency forward contract is a negotiated agreement to exchange currency at a future time at a rate or rates that may be higher or lower than the spot rate. Foreign currency futures contracts are standardized exchange-traded contracts and have margin requirements. In addition, for transaction hedging purposes the fund may also purchase or sell exchange-listed and over-the-counter call and put options on foreign currency futures contracts and on foreign currencies. For transaction hedging purposes the fund may also purchase exchange-listed and over-the-counter call and put options on foreign currency futures contracts and on foreign currencies. A put option on a futures contract gives the fund the right to assume a short position in the futures contract until the expiration of the option. A put option on a currency gives the fund the right to sell the currency at an exercise price until the expiration of the option. A call option on a futures contract gives the fund the right to assume a long position in the futures contract until the expiration of the option. A call option on a currency gives the fund the right to purchase the currency at the exercise price until the expiration of the option. The fund may engage in position hedging to protect against a decline in the value relative to the U.S. dollar of the currencies in which its portfolio securities are denominated or quoted (or an increase in the value of the currency in which the securities the fund intends to buy are denominated, when the fund holds cash or short-term investments). For position hedging purposes, the fund may purchase or sell, on exchanges or in over-the-counter markets, foreign currency futures contracts, foreign currency forward contracts and options on foreign currency futures contracts and on foreign currencies. In connection with position hedging, the fund may also purchase or sell foreign currency on a spot basis. It is impossible to forecast with precision the market value of portfolio securities at the expiration or maturity of a forward or futures contract. Accordingly, it may be necessary for the fund to purchase additional foreign currency on the spot market (and bear the expense of such purchase) if the market value of the security or securities being hedged is less than the amount of foreign currency the fund is obligated to deliver and a decision is made to sell the security or securities and make delivery of the foreign currency. Conversely, it may be necessary to sell on the spot market some of the foreign currency received upon the sale of the portfolio security or securities if the market value of such security or securities exceeds the amount of foreign currency the fund is obligated to deliver. Transaction and position hedging do not eliminate fluctuations in the underlying prices of the securities that the fund owns or intends to purchase or sell. They simply establish a rate of exchange which one can achieve at some future point in time. Additionally, although these techniques tend to minimize the risk of loss due to a decline in the value of the hedged currency, they tend to limit any potential gain which might result from the increase in value of such currency. See "Risk factors in options transactions." The fund may seek to increase its current return or to offset some of the costs of hedging against fluctuations in current exchange rates by writing covered call options and covered put options on foreign currencies. The fund receives a premium from writing a call or put option, which increases the fund's current return if the option expires unexercised or is closed out at a net profit. 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's currency hedging transactions may call for the delivery of one foreign currency in exchange for another foreign currency and may at times not involve currencies in which its portfolio securities are then denominated. Putnam Management will engage in such "cross hedging" activities when it believes that such transactions provide significant hedging opportunities for the fund. Cross hedging transactions by the fund involve the risk of imperfect correlation between changes in the values of the currencies to which such transactions relate and changes in the value of the currency or other asset or liability which is the subject of the hedge. The fund may also engage in non-hedging currency transactions. For example, Putnam Management may believe that exposure to a currency is in the fund's best interest but that securities denominated in that currency are unattractive. In that case the fund may purchase a currency forward contract or option in order to increase its exposure to the currency. In accordance with SEC regulations, the fund will segregate liquid assets in its portfolio to cover forward contracts used for non-hedging purposes. The value of any currency, including U.S. dollars and foreign currencies, may be affected by complex political and economic factors applicable to the issuing country. In addition, the exchange rates of foreign currencies (and therefore the values of foreign currency options, forward contracts and futures contracts) may be affected significantly, fixed, or supported directly or indirectly by U.S. and foreign government actions. Government intervention may increase risks involved in purchasing or selling foreign currency options, forward contracts and futures contracts, since exchange rates may not be free to fluctuate in response to other market forces. The value of a foreign currency option, forward contract or futures contract reflects the value of an exchange rate, which in turn reflects relative values of two currencies -- the U.S. dollar and the foreign currency in question. Because foreign currency transactions occurring in the interbank market involve substantially larger amounts than those that may be involved in the exercise of foreign currency options, forward contracts and futures contracts, investors may be disadvantaged by having to deal in an odd-lot market for the underlying foreign currencies in connection with options at prices that are less favorable than for round lots. Foreign governmental restrictions or taxes could result in adverse changes in the cost of acquiring or disposing of foreign currencies. There is no systematic reporting of last sale information for foreign currencies and there is no regulatory requirement that quotations available through dealers or other market sources be firm or revised on a timely basis. Available quotation information is generally representative of very large round-lot transactions in the interbank market and thus may not reflect exchange rates for smaller odd-lot transactions (less than $1 million) where rates may be less favorable. The interbank market in foreign currencies is a global, around-the-clock market. To the extent that options markets are closed while the markets for the underlying currencies remain open, significant price and rate movements may take place in the underlying markets that cannot be reflected in the options markets. 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. Currency forward and futures contracts. A forward foreign currency contract involves an obligation to purchase or sell a specific currency at a future date, which may be any fixed number of days from the date of the contract as agreed by the parties, at a price set at the time of the contract. In the case of a cancelable forward contract, the holder has the unilateral right to cancel the contract at maturity by paying a specified fee. The contracts are traded in the interbank market conducted directly between currency traders (usually large commercial banks) and their customers. A forward contract generally has no deposit requirement, and no commissions are charged at any stage for trades. A foreign currency futures contract is a standardized contract for the future delivery of a specified amount of a foreign currency at a price set at the time of the contract. Foreign currency futures contracts traded in the United States are designed by and traded on exchanges regulated by the CFTC, such as the New York Mercantile Exchange. Forward foreign currency exchange contracts differ from foreign currency futures contracts in certain respects. For example, the maturity date of a forward contract may be any fixed number of days from the date of the contract agreed upon by the parties, rather than a predetermined date in a given month. Forward contracts may be in any amount agreed upon by the parties rather than predetermined amounts. Also, forward foreign exchange contracts are traded directly between currency traders so that no intermediary is required. A forward contract generally requires no margin or other deposit. At the maturity of a forward or futures contract, the fund either may accept or make delivery of the currency specified in the contract, or at or prior to maturity enter into a closing transaction involving the purchase or sale of an offsetting contract. Closing transactions with respect to forward contracts are usually effected with the currency trader who is a party to the original forward contract. Closing transactions with respect to futures contracts are effected on a commodities exchange; a clearing corporation associated with the exchange assumes responsibility for closing out such contracts. Positions in the foreign currency futures contracts may be closed out only on an exchange or board of trade which provides a secondary market in such contracts. Although the fund intends to purchase or sell foreign currency futures contracts only on exchanges or boards of trade where there appears to be an active secondary market, there is no assurance that a secondary market on an exchange or board of trade will exist for any particular contract or at any particular time. In such event, it may not be possible to close a futures position and, in the event of adverse price movements, the fund would continue to be required to make daily cash payments of variation margin. Foreign currency options. In general, options on foreign currencies operate similarly to options on securities and are subject to many of the risks described above. Foreign currency options are traded primarily in the over-the-counter market, although options on foreign currencies are also listed on several exchanges. Options are traded not only on the currencies of individual nations, but also on the euro, the joint currency of most countries in the European Union. The fund will only purchase or write foreign currency options when Putnam Management believes that a liquid secondary market exists for such options. There can be no assurance that a liquid secondary market will exist for a particular option at any specific time. Options on foreign currencies are affected by all of those factors which influence foreign exchange rates and investments generally. Settlement procedures. Settlement procedures relating to the fund's investments in foreign securities and to the fund's foreign currency exchange transactions may be more complex than settlements with respect to investments in debt or equity securities of U.S. issuers, and may involve certain risks not present in the fund's domestic investments. For example, settlement of transactions involving foreign securities or foreign currencies may occur within a foreign country, and the fund may be required to accept or make delivery of the underlying securities or currency in conformity with any applicable U.S. or foreign restrictions or regulations, and may be required to pay any fees, taxes or charges associated with such delivery. Such investments may also involve the risk that an entity involved in the settlement may not meet its obligations. Foreign currency conversion. Although foreign exchange dealers do not charge a fee for currency conversion, they do realize a profit based on the difference (the "spread") between prices at which they are buying and selling various currencies. Thus, a dealer may offer to sell a foreign currency to the fund at one rate, while offering a lesser rate of exchange should the fund desire to resell that currency to the dealer. Options on Securities Writing covered options. The fund may write covered call options and covered put options on optionable securities held in its portfolio or that it has an absolute and immediate right to acquire without additional cash consideration (or, if additional cash consideration is required, cash or other assets determined to be liquid by Putnam in accordance with procedures established by the Trustees, in such amount are segregated by its custodian), when in the opinion of Putnam Management such transactions are consistent with the fund's investment objective(s) and policies. Call options written by the fund give the purchaser the right to buy the underlying securities from the fund at a stated exercise price; put options give the purchaser the right to sell the underlying securities to the fund at a stated price. The fund may write only covered options, which means that, so long as the fund is obligated as the writer of a call option, it will own the underlying securities subject to the option (or comparable securities satisfying the cover requirements of securities exchanges) or have an absolute and immediate right to acquire without additional cash consideration (or, if additional cash consideration is required, cash or other assets determined to be liquid by Putnam in accordance with procedures established by the Trustees, in such amount are segregated by its custodian). In the case of put options, the fund will segregate assets determined to be liquid by Putnam in accordance with procedures established by the Trustees equal to the price to be paid if the option is exercised. In addition, the fund will be considered to have covered a put or call option if and to the extent that it holds an option that offsets some or all of the risk of the option it has written. The fund may write combinations of covered puts and calls on the same underlying security. The fund will receive a premium from writing a put or call option, which increases the fund's return on the underlying security in the event the option expires unexercised or is closed out at a profit. The amount of the premium reflects, among other things, the relationship between the exercise price and the current market value of the underlying security, the volatility of the underlying security, the amount of time remaining until expiration, current interest rates, and the effect of supply and demand in the options market and in the market for the underlying security. By writing a call option, if the fund holds the security, the fund limits its opportunity to profit from any increase in the market value of the underlying security above the exercise price of the option but continues to bear the risk of a decline in the value of the underlying security. If the fund does not hold the underlying security, the fund bears the risk that, if the market price exceeds the option strike price, the fund will suffer a loss equal to the difference at the time of exercise. By writing a put option, the fund assumes the risk that it may be required to purchase the underlying security for an exercise price higher than its then-current market value, resulting in a potential capital loss unless the security subsequently appreciates in value. 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 offsetting option. The fund realizes a profit or loss from a closing transaction if the cost of the transaction (option premium plus transaction costs) is less or more than the premium received from writing the option. If the fund writes a call option but does not own the underlying security, and when it writes a put option, the fund may be required to deposit cash or securities with its broker as "margin," or collateral, for its obligation to buy or sell the underlying security. As the value of the underlying security varies, the fund may have to deposit additional margin with the broker. Margin requirements are complex and are fixed by individual brokers, subject to minimum requirements currently imposed by the Federal Reserve Board and by stock exchanges and other self-regulatory organizations. Purchasing put options. The fund may purchase put options to protect its portfolio holdings in an underlying security against a decline in market value. Such protection is provided during the life of the put option since the fund, as holder of the option, is able to sell the underlying security at the put exercise price regardless of any decline in the underlying security's market price. In order for a put option to be profitable, the market price of the underlying security must decline sufficiently below the exercise price to cover the premium and transaction costs. By using put options in this manner, the fund will reduce any profit it might otherwise have realized from appreciation of the underlying security by the premium paid for the put option and by transaction costs. Purchasing call options. The fund may purchase call options to hedge against an increase in the price of securities that the fund wants ultimately to buy. Such hedge protection is provided during the life of the call option since the fund, as holder of the call option, is able to buy the underlying security at the exercise price regardless of any increase in the underlying security's market price. In order for a call option to be profitable, the market price of the underlying security must rise sufficiently above the exercise price to cover the premium and transaction costs. Risk Factors in Options Transactions The successful use of the fund's options strategies depends on the ability of Putnam Management to forecast correctly interest rate and market movements. For example, if the fund were to write a call option based on Putnam Management's expectation that the price of the underlying security would fall, but the price were to rise instead, the fund could be required to sell the security upon exercise at a price below the current market price. Similarly, if the fund were to write a put option based on Putnam Management's expectation that the price of the underlying security would rise, but the price were to fall instead, the fund could be required to purchase the security upon exercise at a price higher than the current market price. When the fund purchases an option, it runs the risk that it will lose its entire investment in the option in a relatively short period of time, unless the fund exercises the option or enters into a closing sale transaction before the option's expiration. If the price of the underlying security does not rise (in the case of a call) or fall (in the case of a put) to an extent sufficient to cover the option premium and transaction costs, the fund will lose part or all of its investment in the option. This contrasts with an investment by the fund in the underlying security, since the fund will not realize a loss if the security's price does not change. The effective use of options also depends on the fund's ability to terminate option positions at times when Putnam Management deems it desirable to do so. There is no assurance that the fund will be able to effect closing transactions at any particular time or at an acceptable price. If a secondary market in options were to become unavailable, the fund could no longer engage in closing transactions. Lack of investor interest might adversely affect the liquidity of the market for particular options or series of options. A market may discontinue trading of a particular option or options generally. In addition, a market could become temporarily unavailable if unusual events -- such as volume in excess of trading or clearing capability -- were to interrupt its normal operations. A market may at times find it necessary to impose restrictions on particular types of options transactions, such as opening transactions. For example, if an underlying security ceases to meet qualifications imposed by the market or the Options Clearing Corporation, new series of options on that security will no longer be opened to replace expiring series, and opening transactions in existing series may be prohibited. If an options market were to become unavailable, the fund as a holder of an option would be able to realize profits or limit losses only by exercising the option, and the fund, as option writer, would remain obligated under the option until expiration or exercise. Disruptions in the markets for the securities underlying options purchased or sold by the fund could result in losses on the options. If trading is interrupted in an underlying security, the trading of options on that security is normally halted as well. As a result, the fund as purchaser or writer of an option will be unable to close out its positions until options trading resumes, and it may be faced with considerable losses if trading in the security reopens at a substantially different price. In addition, the Options Clearing Corporation or other options markets may impose exercise restrictions. If a prohibition on exercise is imposed at the time when trading in the option has also been halted, the fund as purchaser or writer of an option will be locked into its position until one of the two restrictions has been lifted. If the Options Clearing Corporation were to determine that the available supply of an underlying security appears insufficient to permit delivery by the writers of all outstanding calls in the event of exercise, it may prohibit indefinitely the exercise of put options. The fund, as holder of such a put option, could lose its entire investment if the prohibition remained in effect until the put option's expiration. Foreign-traded options are subject to many of the same risks presented by internationally-traded securities. In addition, because of time differences between the United States and various foreign countries, and because different holidays are observed in different countries, foreign options markets may be open for trading during hours or on days when U.S. markets are closed. As a result, option premiums may not reflect the current prices of the underlying interest in the United States. Over-the-counter ("OTC") options purchased by the fund and assets held to cover OTC options written by the fund may, under certain circumstances, be considered illiquid securities for purposes of any limitation on the fund's ability to invest in illiquid securities. Investments in Miscellaneous Fixed-Income Securities If the fund may invest in inverse floating obligations, premium securities, or interest-only or principal-only classes of mortgage-backed securities (IOs and POs), it may do so without limit. The fund, however, currently does not intend to invest more than 15% of its assets in inverse floating obligations or more than 35% of its assets in IOs and POs under normal market conditions. Lower-rated Securities The fund may invest in lower-rated fixed-income securities (commonly known as "junk bonds"). The lower ratings of certain securities held by the fund reflect a greater possibility that adverse changes in the financial condition of the issuer or in general economic conditions, or both, or an unanticipated rise in interest rates, may impair the ability of the issuer to make payments of interest and principal. The inability (or perceived inability) of issuers to make timely payment of interest and principal would likely make the values of securities held by the fund more volatile and could limit the fund's ability to sell its securities at prices approximating the values the fund had placed on such securities. In the absence of a liquid trading market for securities held by it, the fund at times may be unable to establish the fair value of such securities. Securities ratings are based largely on the issuer's historical financial condition and the rating agencies' analysis at the time of rating. Consequently, the rating assigned to any particular security is not necessarily a reflection of the issuer's current financial condition, which may be better or worse than the rating would indicate. In addition, the rating assigned to a security by Moody's Investors Service, Inc. or Standard & Poor's (or by any other nationally recognized securities rating agency) does not reflect an assessment of the volatility of the security's market value or the liquidity of an investment in the security. See "Securities ratings." Like those of other fixed-income securities, the values of lower-rated securities fluctuate in response to changes in interest rates. A decrease in interest rates will generally result in an increase in the value of the fund's assets. Conversely, during periods of rising interest rates, the value of the fund's assets will generally decline. The values of lower-rated securities may often be affected to a greater extent by changes in general economic conditions and business conditions affecting the issuers of such securities and their industries. Negative publicity or investor perceptions may also adversely affect the values of lower-rated securities. Changes by nationally recognized securities rating agencies in their ratings of any fixed-income security and changes in the ability of an issuer to make payments of interest and principal may also affect the value of these investments. Changes in the value of portfolio securities generally will not affect income derived from these securities, but will affect the fund's net asset value. The fund will not necessarily dispose of a security when its rating is reduced below its rating at the time of purchase. However, Putnam Management will monitor the investment to determine whether its retention will assist in meeting the fund's investment objective(s). Issuers of lower-rated securities are often highly leveraged, so that their ability to service their debt obligations during an economic downturn or during sustained periods of rising interest rates may be impaired. Such issuers may not have more traditional methods of financing available to them and may be unable to repay outstanding obligations at maturity by refinancing. The risk of loss due to default in payment of interest or repayment of principal by such issuers is significantly greater because such securities frequently are unsecured and subordinated to the prior payment of senior indebtedness. At times, a substantial portion of the fund's assets may be invested in an issue of which the fund, by itself or together with other funds and accounts managed by Putnam Management or its affiliates, holds all or a major portion. Although Putnam Management generally considers such securities to be liquid because of the availability of an institutional market for such securities, it is possible that, under adverse market or economic conditions or in the event of adverse changes in the financial condition of the issuer, the fund could find it more difficult to sell these securities when Putnam Management believes it advisable to do so or may be able to sell the securities only at prices lower than if they were more widely held. Under these circumstances, it may also be more difficult to determine the fair value of such securities for purposes of computing the fund's net asset value. In order to enforce its rights in the event of a default, the fund may be required to participate in various legal proceedings or take possession of and manage assets securing the issuer's obligations on such securities. This could increase the fund's operating expenses and adversely affect the fund's net asset value. In the case of tax-exempt funds, any income derived from the fund's ownership or operation of such assets would not be tax-exempt. The ability of a holder of a tax-exempt security to enforce the terms of that security in a bankruptcy proceeding may be more limited than would be the case with respect to securities of private issuers. In addition, the fund's intention to qualify as a "regulated investment company" under the Internal Revenue Code may limit the extent to which the fund may exercise its rights by taking possession of such assets. Certain securities held by the fund may permit the issuer at its option to "call," or redeem, its securities. If an issuer were to redeem securities held by the fund during a time of declining interest rates, the fund may not be able to reinvest the proceeds in securities providing the same investment return as the securities redeemed. The fund may invest without limit in so-called "zero-coupon" bonds and "payment-in-kind" bonds. Zero-coupon bonds are issued at a significant discount from their principal amount in lieu of paying interest periodically. Payment-in-kind bonds allow the issuer, at its option, to make current interest payments on the bonds either in cash or in additional bonds. Because zero-coupon and payment-in-kind bonds do not pay current interest in cash, their value is subject to greater fluctuation in response to changes in market interest rates than bonds that pay interest currently. Both zero-coupon and payment-in-kind bonds allow an issuer to avoid the need to generate cash to meet current interest payments. Accordingly, such bonds may involve greater credit risks than bonds paying interest currently in cash. The fund is required to accrue interest income on such investments and to distribute such amounts at least annually to shareholders even though such bonds do not pay current interest in cash. Thus, it may be necessary at times for the fund to liquidate investments in order to satisfy its dividend requirements. To the extent the fund invests in securities in the lower rating categories, the achievement of the fund's goals is more dependent on Putnam Management's investment analysis than would be the case if the fund were investing in securities in the higher rating categories. This also may be true with respect to tax-exempt securities, as the amount of information about the financial condition of an issuer of tax-exempt securities may not be as extensive as that which is made available by corporations whose securities are publicly traded. Loan Participations and Other Floating Rate Loans. The fund may invest in "loan participations." By purchasing a loan participation, the fund acquires some or all of the interest of a bank or other lending institution in a loan to a particular borrower. Many such loans are secured, and most impose restrictive covenants which must be met by the borrower. These loans are typically made by a syndicate of banks, represented by an agent bank which has negotiated and structured the loan and which is responsible generally for collecting interest, principal, and other amounts from the borrower on its own behalf and on behalf of the other lending institutions in the syndicate, and for enforcing its and their other rights against the borrower. Each of the lending institutions, including the agent bank, lends to the borrower a portion of the total amount of the loan, and retains the corresponding interest in the loan. The fund's ability to receive payments of principal and interest and other amounts in connection with loan participations held by it will depend primarily on the financial condition of the borrower. The failure by the fund to receive scheduled interest or principal payments on a loan participation would adversely affect the income of the fund and would likely reduce the value of its assets, which would be reflected in a reduction in the fund's net asset value. Banks and other lending institutions generally perform a credit analysis of the borrower before originating a loan or participating in a lending syndicate. In selecting the loan participations in which the fund will invest, however, Putnam Management will not rely solely on that credit analysis, but will perform its own investment analysis of the borrowers. Putnam Management's analysis may include consideration of the borrower's financial strength and managerial experience, debt coverage, additional borrowing requirements or debt maturity schedules, changing financial conditions, and responsiveness to changes in business conditions and interest rates. Putnam Management will be unable to access non-public information to which other investors in syndicated loans may have access. Because loan participations in which the fund may invest are not generally rated by independent credit rating agencies, a decision by the fund to invest in a particular loan participation will depend almost exclusively on Putnam Management's, and the original lending institution's, credit analysis of the borrower. Investments in loan participations may be of any quality, including "distressed" loans, and will be subject to the fund's credit quality policy. Loan participations may be structured in different forms, including novations, assignments and participating interests. In a novation, the fund assumes all of the rights of a lending institution in a loan, including the right to receive payments of principal and interest and other amounts directly from the borrower and to enforce its rights as a lender directly against the borrower. The fund assumes the position of a co-lender with other syndicate members. As an alternative, the fund may purchase an assignment of a portion of a lender's interest in a loan. In this case, the fund may be required generally to rely upon the assigning bank to demand payment and enforce its rights against the borrower, but would otherwise be entitled to all of such bank's rights in the loan. The fund may also purchase a participating interest in a portion of the rights of a lending institution in a loan. In such case, it will be entitled to receive payments of principal, interest and premium, if any, but will not generally be entitled to enforce its rights directly against the agent bank or the borrower, and must rely for that purpose on the lending institution. The fund may also acquire a loan participation directly by acting as a member of the original lending syndicate. The fund will in many cases be required to rely upon the lending institution from which it purchases the loan participation to collect and pass on to the fund such payments and to enforce the fund's rights under the loan. As a result, an insolvency, bankruptcy or reorganization of the lending institution may delay or prevent the fund from receiving principal, interest and other amounts with respect to the underlying loan. When the fund is required to rely upon a lending institution to pay to the fund principal, interest and other amounts received by it, Putnam Management will also evaluate the creditworthiness of the lending institution. The borrower of a loan in which the fund holds a participation interest may, either at its own election or pursuant to terms of the loan documentation, prepay amounts of the loan from time to time. There is no assurance that the fund will be able to reinvest the proceeds of any loan prepayment at the same interest rate or on the same terms as those of the original loan participation. Corporate loans in which the fund may purchase a loan participation are made generally to finance internal growth, mergers, acquisitions, stock repurchases, leveraged buy-outs and other corporate activities. Under current market conditions, most of the corporate loan participations purchased by the fund will represent interests in loans made to finance highly leveraged corporate acquisitions, known as "leveraged buy-out" transactions. The highly leveraged capital structure of the borrowers in such transactions may make such loans especially vulnerable to adverse changes in economic or market conditions. In addition, loan participations generally are subject to restrictions on transfer, and only limited opportunities may exist to sell such participations in secondary markets. As a result, the fund may be unable to sell loan participations at a time when it may otherwise be desirable to do so or may be able to sell them only at a price that is less than their fair market value. Certain of the loan participations acquired by the fund may involve revolving credit facilities under which a borrower may from time to time borrow and repay amounts up to the maximum amount of the facility. In such cases, the fund would have an obligation to advance its portion of such additional borrowings upon the terms specified in the loan participation. To the extent that the fund is committed to make additional loans under such a participation, it will at all times hold and maintain in a segregated account liquid assets in an amount sufficient to meet such commitments. Certain of the loan participations acquired by the fund may also involve loans made in foreign currencies. The fund's investment in such participations would involve the risks of currency fluctuations described above with respect to investments in the foreign securities. With respect to its management of investments in floating rate loans, Putnam will normally seek to avoid receiving material, non-public information ("Confidential Information") about the issuers of floating rate loans being considered for acquisition by the fund or held in the fund's portfolio. In many instances, issuers may offer to furnish Confidential Information to prospective purchasers, and to holders, of the issuer's floating rate loans. Putnam's decision not to receive Confidential Information may place Putnam at a disadvantage relative to other investors in floating rate loans (which could have an adverse effect on the price the fund pays or receives when buying or selling loans). Also, in instances where holders of floating rate loans are asked to grant amendments, waivers or consent, Putnam's ability to assess their significance or desirability may be adversely affected. For these and other reasons, it is possible that Putnam's decision not to receive Confidential Information under normal circumstances could adversely affect the fund's investment performance. Notwithstanding its intention generally not to receive material, non-public information with respect to its management of investments in floating rate loans, Putnam may from time to time come into possession of material, non-public information about the issuers of loans that may be held in the fund's portfolio. Possession of such information may in some instances occur despite Putnam's efforts to avoid such possession, but in other instances Putnam may choose to receive such information (for example, in connection with participation in a creditors' committee with respect to a financially distressed issuer). As, and to the extent, required by applicable law, Putnam's ability to trade in these loans for the account of the fund could potentially be limited by its possession of such information. Such limitations on Putnam's ability to trade could have an adverse effect on the fund by, for example, preventing the fund from selling a loan that is experiencing a material decline in value. In some instances, these trading restrictions could continue in effect for a substantial period of time. In some instances, other accounts managed by Putnam may hold other securities issued by borrowers whose floating rate loans may be held in the fund's portfolio. These other securities may include, for example, debt securities that are subordinate to the floating rate loans held in the fund's portfolio, convertible debt or common or preferred equity securities. In certain circumstances, such as if the credit quality of the issuer deteriorates, the interests of holders of these other securities may conflict with the interests of the holders of the issuer's floating rate loans. In such cases, Putnam may owe conflicting fiduciary duties to the fund and other client accounts. Putnam will endeavor to carry out its obligations to all of its clients to the fullest extent possible, recognizing that in some cases certain clients may achieve a lower economic return, as a result of these conflicting client interests, than if Putnam's client accounts collectively held only a single category of the issuer's securities. Floating Rate and Variable Rate Demand Notes Floating rate and variable rate demand notes and bonds may have a stated maturity in excess of one year, but may have features that permit a holder to demand payment of principal plus accrued interest upon a specified number of days notice. Frequently, such obligations are secured by letters of credit or other credit support arrangements provided by banks. The issuer has a corresponding right, after a given period, to prepay in its discretion the outstanding principal of the obligation plus accrued interest upon a specific number of days notice to the holders. The interest rate of a floating rate instrument may be based on a known lending rate, such as a bank's prime rate, and is reset whenever such rate is adjusted. The interest rate on a variable rate demand note is reset at specified intervals at a market rate. Mortgage Related and Asset-backed Securities Mortgage-backed securities, including collateralized mortgage obligations ("CMOs") and certain stripped mortgage-backed securities represent a participation in, or are secured by, mortgage loans. Asset-backed securities are structured like mortgage-backed securities, but instead of mortgage loans or interests in mortgage loans, the underlying assets may include such items as motor vehicle installment sales or installment loan contracts, leases of various types of real and personal property and receivables from credit card agreements. The ability of an issuer of asset-backed securities to enforce its security interest in the underlying assets may be limited. Mortgage-backed securities have yield and maturity characteristics corresponding to the underlying assets. Unlike traditional debt securities, which may pay a fixed rate of interest until maturity, when the entire principal amount comes due, payments on certain mortgage-backed securities include both interest and a partial repayment of principal. Besides the scheduled repayment of principal, repayments of principal may result from the voluntary prepayment, refinancing or foreclosure of the underlying mortgage loans. If property owners make unscheduled prepayments of their mortgage loans, these prepayments will result in early payment of the applicable mortgage-related securities. In that event the fund may be unable to invest the proceeds from the early payment of the mortgage-related securities in an investment that provides as high a yield as the mortgage-related securities. Consequently, early payment associated with mortgage-related securities may cause these securities to experience significantly greater price and yield volatility than that experienced by traditional fixed-income securities. The occurrence of mortgage prepayments is affected by factors including the level of interest rates, general economic conditions, the location and age of the mortgage and other social and demographic conditions. During periods of falling interest rates, the rate of mortgage prepayments tends to increase, thereby tending to decrease the life of mortgage-related securities. During periods of rising interest rates, the rate of mortgage prepayments usually decreases, thereby tending to increase the life of mortgage-related securities. If the life of a mortgage-related security is inaccurately predicted, the fund may not be able to realize the rate of return it expected. Mortgage-backed and asset-backed securities are less effective than other types of securities as a means of "locking in" attractive long-term interest rates. One reason is the need to reinvest prepayments of principal; another is the possibility of significant unscheduled prepayments resulting from declines in interest rates. These prepayments would have to be reinvested at lower rates. As a result, these securities may have less potential for capital appreciation during periods of declining interest rates than other securities of comparable maturities, although they may have a similar risk of decline in market value during periods of rising interest rates. Prepayments may also significantly shorten the effective maturities of these securities, especially during periods of declining interest rates. Conversely, during periods of rising interest rates, a reduction in prepayments may increase the effective maturities of these securities, subjecting them to a greater risk of decline in market value in response to rising interest rates than traditional debt securities, and, therefore, potentially increasing the volatility of the fund. Prepayments may cause losses on securities purchased at a premium. At times, some mortgage-backed and asset-backed securities will have higher than market interest rates and therefore will be purchased at a premium above their par value. CMOs may be issued by a U.S. government agency or instrumentality or by a private issuer. Although payment of the principal of, and interest on, the underlying collateral securing privately issued CMOs may be guaranteed by the U.S. government or its agencies or instrumentalities, these CMOs represent obligations solely of the private issuer and are not insured or guaranteed by the U.S. government, its agencies or instrumentalities or any other person or entity. Prepayments could cause early retirement of CMOs. CMOs are designed to reduce the risk of prepayment for investors by issuing multiple classes of securities, each having different maturities, interest rates and payment schedules, and with the principal and interest on the underlying mortgages allocated among the several classes in various ways. Payment of interest or principal on some classes or series of CMOs may be subject to contingencies or some classes or series may bear some or all of the risk of default on the underlying mortgages. CMOs of different classes or series are generally retired in sequence as the underlying mortgage loans in the mortgage pool are repaid. If enough mortgages are repaid ahead of schedule, the classes or series of a CMO with the earliest maturities generally will be retired prior to their maturities. Thus, the early retirement of particular classes or series of a CMO would have the same effect as the prepayment of mortgages underlying other mortgage-backed securities. Conversely, slower than anticipated prepayments can extend the effective maturities of CMOs, subjecting them to a greater risk of decline in market value in response to rising interest rates than traditional debt securities, and, therefore, potentially increasing their volatility. Prepayments could result in losses on stripped mortgage-backed securities. Stripped mortgage-backed securities are usually structured with two classes that receive different portions of the interest and principal distributions on a pool of mortgage loans. The yield to maturity on an interest only or "IO" class of stripped mortgage-backed securities is extremely sensitive not only to changes in prevailing interest rates but also to the rate of principal payments (including prepayments) on the underlying assets. A rapid rate of principal prepayments may have a measurable adverse effect on the fund's yield to maturity to the extent it invests in IOs. If the assets underlying the IO experience greater than anticipated prepayments of principal, the fund may fail to recoup fully its initial investment in these securities. Conversely, principal only or "POs" tend to increase in value if prepayments are greater than anticipated and decline if prepayments are slower than anticipated. The secondary market for stripped mortgage-backed securities may be more volatile and less liquid than that for other mortgage-backed securities, potentially limiting the fund's ability to buy or sell those securities at any particular time. Hybrid Instruments These instruments are generally considered derivatives and include indexed or structured securities, and combine the elements of futures contracts or options with those of debt, preferred equity or a depository instrument. A hybrid instrument may be a debt security, preferred stock, warrant, convertible security, certificate of deposit or other evidence of indebtedness on which a portion of or all interest payments, and/or the principal or stated amount payable at maturity, redemption or retirement, is determined by reference to prices, changes in prices, or differences between prices, of securities, currencies, intangibles, goods, articles or commodities (collectively, "underlying assets"), or by another objective index, economic factor or other measure, including interest rates, currency exchange rates, or commodities or securities indices (collectively, "benchmarks"). Hybrid instruments may take a number of forms, including, but not limited to, debt instruments with interest or principal payments or redemption terms determined by reference to the value of an index at a future time, preferred stock with dividend rates determined by reference to the value of a currency, or convertible securities with the conversion terms related to a particular commodity. The risks of investing in hybrid instruments reflect a combination of the risks of investing in securities, options, futures and currencies. An investment in a hybrid instrument may entail significant risks that are not associated with a similar investment in a traditional debt instrument that has a fixed principal amount, is denominated in U.S. dollars or bears interest either at a fixed rate or a floating rate determined by reference to a common, nationally published benchmark. The risks of a particular hybrid instrument will depend upon the terms of the instrument, but may include the possibility of significant changes in the benchmark(s) or the prices of the underlying assets to which the instrument is linked. Such risks generally depend upon factors unrelated to the operations or credit quality of the issuer of the hybrid instrument, which may not be foreseen by the purchaser, such as economic and political events, the supply and demand of the underlying assets and interest rate movements. Hybrid instruments may be highly volatile and their use by a fund may not be successful. Hybrid instruments may bear interest or pay preferred dividends at below market (or even relatively nominal) rates. Alternatively, hybrid instruments may bear interest at above market rates but bear an increased risk of principal loss (or gain). The latter scenario may result if "leverage" is used to structure the hybrid instrument. Leverage risk occurs when the hybrid instrument is structured so that a given change in a benchmark or underlying asset is multiplied to produce a greater value change in the hybrid instrument, thereby magnifying the risk of loss as well as the potential for gain. Hybrid instruments can be an efficient means of creating exposure to a particular market, or segment of a market, with the objective of enhancing total return. For example, a fund may wish to take advantage of expected declines in interest rates in several European countries, but avoid the transaction costs associated with buying and currency-hedging the foreign bond positions. One solution would be to purchase a U.S. dollar-denominated hybrid instrument whose redemption price is linked to the average three year interest rate in a designated group of countries. The redemption price formula would provide for payoffs of less than par if rates were above the specified level. Furthermore, a fund could limit the downside risk of the security by establishing a minimum redemption price so that the principal paid at maturity could not be below a predetermined minimum level if interest rates were to rise significantly. The purpose of this arrangement, known as a structured security with an embedded put option, would be to give the fund the desired European bond exposure while avoiding currency risk, limiting downside market risk, and lowering transaction costs. Of course, there is no guarantee that the strategy will be successful and a fund could lose money if, for example, interest rates do not move as anticipated or credit problems develop with the issuer of the hybrid instrument. Hybrid instruments are potentially more volatile and carry greater market risks than traditional debt instruments. Depending on the structure of the particular hybrid instrument, changes in a benchmark may be magnified by the terms of the hybrid instrument and have an even more dramatic and substantial effect upon the value of the hybrid instrument. Also, the prices of the hybrid instrument and the benchmark or underlying asset may not move in the same direction or at the same time. Hybrid instruments may also carry liquidity risk since the instruments are often "customized" to meet the portfolio needs of a particular investor, and therefore, the number of investors that are willing and able to buy such instruments in the secondary market may be smaller than that for more traditional debt securities. Under certain conditions, the redemption value of such an investment could be zero. In addition, because the purchase and sale of hybrid investments could take place in an over-the-counter market without the guarantee of a central clearing organization, or in a transaction between the fund and the issuer of the hybrid instrument, the creditworthiness of the counterparty of the issuer of the hybrid instrument would be an additional risk factor the fund would have to consider and monitor. Hybrid instruments also may not be subject to regulation by the CFTC, which generally regulates the trading of commodity futures by U.S. persons, the SEC, which regulates the offer and sale of securities by and to U.S. persons, or any other governmental regulatory authority. Structured investments. A structured investment is a security having a return tied to an underlying index or other security or asset class. Structured investments generally are individually negotiated agreements and may be traded over-the-counter. Structured investments are organized and operated to restructure the investment characteristics of the underlying security. This restructuring involves the deposit with or purchase by an entity, such as a corporation or trust, or specified instruments (such as commercial bank loans) and the issuance by that entity or one or more classes of securities ("structured securities") backed by, or representing interests in, the underlying instruments. The cash flow on the underlying instruments may be apportioned among the newly issued structured securities to create securities with different investment characteristics, such as varying maturities, payment priorities and interest rate provisions, and the extent of such payments made with respect to structured securities is dependent on the extent of the cash flow on the underlying instruments. Because structured securities typically involve no credit enhancement, their credit risk generally will be equivalent to that of the underlying instruments. Investments in structured securities are generally of a class of structured securities that is either subordinated or unsubordinated to the right of payment of another class. Subordinated structured securities typically have higher yields and present greater risks than unsubordinated structured securities. Structured securities are typically sold in private placement transactions, and there currently is no active trading market for structured securities. Investments in government and government-related and restructured debt instruments are subject to special risks, including the inability or unwillingness to repay principal and interest, requests to reschedule or restructure outstanding debt and requests to extend additional loan amounts. Securities of Other Investment Companies. Securities of other investment companies, including shares of closed-end investment companies, unit investment trusts and open-end investment companies, represent interests in professionally managed portfolios that may invest in any type of instrument. These types of instruments are often structured to perform in a similar fashion to a broad based securities index. Investing in these types of securities involves substantially the same risks as investing directly in the underlying instruments, but may involve additional expenses at the investment company-level, such as portfolio management fees and operating expenses. In addition, these types of investments involve the risk that they will not perform in exactly the same fashion, or in response to the same factors, as the index or underlying instruments. Certain types of investment companies, such as closed-end investment companies, issue a fixed number of shares that trade on a stock exchange or over-the-counter at a premium or a discount to their net asset value. Others are continuously offered at net asset value, but may also be traded in the secondary market. The extent to which a fund can invest in securities of other investment companies is limited by federal securities laws. Tax-exempt Securities General description. As used in this SAI, the term "Tax-exempt securities" includes debt obligations issued by a state, its political subdivisions (for example, counties, cities, towns, villages, districts and authorities) and their agencies, instrumentalities or other governmental units, the interest from which is, in the opinion of bond counsel, exempt from federal income tax and the corresponding state's personal income tax. Such obligations are issued to obtain funds for various public purposes, including the construction of a wide range of public facilities, such as airports, bridges, highways, housing, hospitals, mass transportation, schools, streets and water and sewer works. Other public purposes for which Tax-exempt securities may be issued include the refunding of outstanding obligations or the payment of general operating expenses. Short-term Tax-exempt securities are generally issued by state and local governments and public authorities as interim financing in anticipation of tax collections, revenue receipts or bond sales to finance such public purposes. In addition, certain types of "private activity" bonds may be issued by public authorities to finance projects such as privately operated housing facilities; certain local facilities for supplying water, gas or electricity; sewage or solid waste disposal facilities; student loans; or public or private institutions for the construction of educational, hospital, housing and other facilities. Such obligations are included within the term Tax-exempt securities if the interest paid thereon is, in the opinion of bond counsel, exempt from federal income tax and state personal income tax (such interest may, however, be subject to federal alternative minimum tax). Other types of private activity bonds, the proceeds of which are used for the construction, repair or improvement of, or to obtain equipment for, privately operated industrial or commercial facilities, may also constitute Tax-exempt securities, although the current federal tax laws place substantial limitations on the size of such issues. Participation interests (Money Market Funds only). The money market funds may invest in Tax-exempt securities either by purchasing them directly or by purchasing certificates of accrual or similar instruments evidencing direct ownership of interest payments or principal payments, or both, on Tax-exempt securities, provided that, in the opinion of counsel, any discount accruing on a certificate or instrument that is purchased at a yield not greater than the coupon rate of interest on the related Tax-exempt securities will be exempt from federal income tax to the same extent as interest on the Tax-exempt securities. The money market funds may also invest in Tax-exempt securities by purchasing from banks participation interests in all or part of specific holdings of Tax-exempt securities. These participations may be backed in whole or in part by an irrevocable letter of credit or guarantee of the selling bank. The selling bank may receive a fee from the money market funds in connection with the arrangement. The money market funds will not purchase such participation interests unless it receives an opinion of counsel or a ruling of the Internal Revenue Service that interest earned by it on Tax-exempt securities in which it holds such participation interests is exempt from federal income tax. No money market fund expects to invest more than 5% of its assets in participation interests. Stand-by commitments. When the fund purchases Tax-exempt securities, it has the authority to acquire stand-by commitments from banks and broker-dealers with respect to those Tax-exempt securities. A stand-by commitment may be considered a security independent of the Tax-exempt security to which it relates. The amount payable by a bank or dealer during the time a stand-by commitment is exercisable, absent unusual circumstances, would be substantially the same as the market value of the underlying Tax-exempt security to a third party at any time. The fund expects that stand-by commitments generally will be available without the payment of direct or indirect consideration. The fund does not expect to assign any value to stand-by commitments. Yields. The yields on Tax-exempt securities depend on a variety of factors, including general money market conditions, effective marginal tax rates, the financial condition of the issuer, general conditions of the Tax-exempt security market, the size of a particular offering, the maturity of the obligation and the rating of the issue. The ratings of nationally recognized securities rating agencies represent their opinions as to the credit quality of the Tax-exempt securities which they undertake to rate. It should be emphasized, however, that ratings are general and are not absolute standards of quality. Consequently, Tax-exempt securities with the same maturity and interest rate but with different ratings may have the same yield. Yield disparities may occur for reasons not directly related to the investment quality of particular issues or the general movement of interest rates and may be due to such factors as changes in the overall demand or supply of various types of Tax-exempt securities or changes in the investment objectives of investors. Subsequent to purchase by the fund, an issue of Tax-exempt securities or other investments may cease to be rated, or its rating may be reduced below the minimum rating required for purchase by the fund. Neither event will require the elimination of an investment from the fund's portfolio, but Putnam Management will consider such an event in its determination of whether the fund should continue to hold an investment in its portfolio. "Moral obligation" bonds. The fund does not currently intend to invest in so-called "moral obligation" bonds, where repayment is backed by a moral commitment of an entity other than the issuer, unless the credit of the issuer itself, without regard to the "moral obligation," meets the investment criteria established for investments by the fund. Municipal leases. The fund may acquire participations in lease obligations or installment purchase contract obligations (collectively, "lease obligations") of municipal authorities or entities. Lease obligations do not constitute general obligations of the municipality for which the municipality's taxing power is pledged. Certain of these lease obligations contain "non-appropriation" clauses, which provide that the municipality has no obligation to make lease or installment purchase payments in future years unless money is appropriated for such purpose on a yearly basis. In the case of a "non-appropriation" lease, the fund's ability to recover under the lease in the event of non-appropriation or default will be limited solely to the repossession of the leased property, and in any event, foreclosure of that property might prove difficult. Inverse Floaters have variable interest rates that typically move in the opposite direction from movements in prevailing short-term interest rate levels - rising when prevailing short-term interest rate fall, and vice versa. The prices of inverse floaters can be considerably more volatile than the prices of bonds with comparable maturities. Additional risks. Securities in which the fund may invest, including Tax-exempt securities, are subject to the provisions of bankruptcy, insolvency and other laws affecting the rights and remedies of creditors, such as the federal Bankruptcy Code (including special provisions related to municipalities and other public entities), and laws, if any, that may be enacted by Congress or state legislatures extending the time for payment of principal or interest, or both, or imposing other constraints upon enforcement of such obligations. There is also the possibility that, as a result of litigation or other conditions, the power, ability or willingness of issuers to meet their obligations for the payment of interest and principal on their Tax-exempt securities may be materially affected. From time to time, proposals have been introduced before Congress for the purpose of restricting or eliminating the federal income tax exemption for interest on debt obligations issued by states and their political subdivisions. Federal tax laws limit the types and amounts of tax-exempt bonds issuable for certain purposes, especially industrial development bonds and private activity bonds. Such limits may affect the future supply and yields of these types of Tax-exempt securities. Further proposals limiting the issuance of Tax-exempt securities may well be introduced in the future. If it appeared that the availability of Tax-exempt securities for investment by the fund and the value of the fund's portfolio could be materially affected by such changes in law, the Trustees of the fund would reevaluate its investment objective and policies and consider changes in the structure of the fund or its dissolution. Convertible Securities Convertible securities include bonds, debentures, notes, preferred stocks and other securities that may be converted into or exchanged for, at a specific price or formula within a particular period of time, a prescribed amount of common stock or other equity securities of the same or a different issuer. Convertible securities entitle the holder to receive interest paid or accrued on debt or dividends paid or accrued on preferred stock until the security matures or is redeemed, converted or exchanged. The market value of a convertible security is a function of its "investment value" and its "conversion value." A security's "investment value" represents the value of the security without its conversion feature (i.e., a nonconvertible fixed income security). The investment value may be determined by reference to its credit quality and the current value of its yield to maturity or probable call date. At any given time, investment value is dependent upon such factors as the general level of interest rates, the yield of similar nonconvertible securities, the financial strength of the issuer and the seniority of the security in the issuer's capital structure. A security's "conversion value" is determined by multiplying the number of shares the holder is entitled to receive upon conversion or exchange by the current price of the underlying security. If the conversion value of a convertible security is significantly below its investment value, the convertible security will trade like nonconvertible debt or preferred stock and its market value will not be influenced greatly by fluctuations in the market price of the underlying security. Conversely, if the conversion value of a convertible security is near or above its investment value, the market value of the convertible security will be more heavily influenced by fluctuations in the market price of the underlying security. The fund's investments in convertible securities may at times include securities that have a mandatory conversion feature, pursuant to which the securities convert automatically into common stock or other equity securities at a specified date and a specified conversion ratio, or that are convertible at the option of the issuer. Because conversion of the security is not at the option of the holder, the fund may be required to convert the security into the underlying common stock even at times when the value of the underlying common stock or other equity security has declined substantially. The fund's investments in convertible securities, particularly securities that are convertible into securities of an issuer other than the issuer of the convertible security, may be illiquid. The fund may not be able to dispose of such securities in a timely fashion or for a fair price, which could result in losses to the fund. Alternative Investment Strategies Under normal market conditions, each fund seeks to remain fully invested and to minimize its cash holdings. However, at times Putnam Management may judge that market conditions make pursuing a fund's investment strategies inconsistent with the best interests of its shareholders. Putnam Management then may temporarily use alternative strategies that are mainly designed to limit the fund's losses. In implementing these strategies, the funds may invest primarily in debt securities, preferred stocks, U.S. Government and agency obligations, cash or money market instruments, or any other securities Putnam Management considers consistent with such defensive strategies. Money market instruments, or short-term debt instruments, consist of obligations such as commercial paper, bank obligations (i.e., certificates of deposit and bankers' acceptances), repurchase agreements and various government obligations, such as Treasury bills. These instruments have a remaining maturity of one year or less and are generally of high credit quality. Money market instruments may be structured to be, or may employ a trust or other form so that they are, eligible investments for money market funds. For example, put features can be used to modify the maturity of a security or interest rate adjustment features can be used to enhance price stability. If a structure fails to function as intended, adverse tax or investment consequences may result. Neither the Internal Revenue Service (IRS) nor any other regulatory authority has ruled definitively on certain legal issues presented by certain structured securities. Future tax or other regulatory determinations could adversely affect the value, liquidity, or tax treatment of the income received from these securities or the nature and timing of distributions made by the funds. Private Placements and Restricted Securities The fund may invest in securities that are purchased in private placements and, accordingly, are subject to restrictions on resale as a matter of contract or under federal securities laws. Because there may be relatively few potential purchasers for such investments, especially under adverse market or economic conditions or in the event of adverse changes in the financial condition of the issuer, the fund could find it more difficult to sell such securities when Putnam Management believes it advisable to do so or may be able to sell such securities only at prices lower than if such securities were more widely held. At times, it may also be more difficult to determine the fair value of such securities for purposes of computing the fund's net asset value. While such private placements may often offer attractive opportunities for investment not otherwise available on the open market, the securities so purchased are often "restricted securities," i.e., securities which cannot be sold to the public without registration under the Securities Act of 1933 or the availability of an exemption from registration (such as Rules 144 or 144A), or which are "not readily marketable" because they are subject to other legal or contractual delays in or restrictions on resale. The absence of a trading market can make it difficult to ascertain a market value for illiquid investments. Disposing of illiquid investments may involve time-consuming negotiation and legal expenses, and it may be difficult or impossible for the fund to sell them promptly at an acceptable price. The fund may have to bear the extra expense of registering such securities for resale and the risk of substantial delay in effecting such registration. Also market quotations are less readily available. The judgment of Putnam Management may at times play a greater role in valuing these securities than in the case of publicly traded securities. Generally speaking, restricted securities may be sold only to qualified institutional buyers, or in a privately negotiated transaction to a limited number of purchasers, or in limited quantities after they have been held for a specified period of time and other conditions are met pursuant to an exemption from registration, or in a public offering for which a registration statement is in effect under the Securities Act of 1933. The fund may be deemed to be an "underwriter" for purposes of the Securities Act of 1933 when selling restricted securities to the public, and in such event the fund may be liable to purchasers of such securities if the registration statement prepared by the issuer, or the prospectus forming a part of it, is materially inaccurate or misleading. The SEC Staff currently takes the view that any delegation by the Trustees of the authority to determine that a restricted security is readily marketable (as described in the investment restrictions of the funds) must be pursuant to written procedures established by the Trustees and the Trustees have delegated such authority to Putnam Management. Futures Contracts and Related Options Subject to applicable law the fund may invest without limit in futures contracts and related options for hedging and non-hedging purposes, such as to manage the effective duration of the fund's portfolio or as a substitute for direct investment. A financial futures contract sale creates an obligation by the seller to deliver the type of financial instrument called for in the contract in a specified delivery month for a stated price. A financial futures contract purchase creates an obligation by the purchaser to take delivery of the type of financial instrument called for in the contract in a specified delivery month at a stated price. The specific instruments delivered or taken, respectively, at settlement date are not determined until on or near that date. The determination is made in accordance with the rules of the exchange on which the futures contract sale or purchase was made. Futures contracts are traded in the United States only on commodity exchanges or boards of trade -- known as "contract markets" -- approved for such trading by the Commodity Futures Trading Commission (the "CFTC"), and must be executed through a futures commission merchant or brokerage firm which is a member of the relevant contract market. Although futures contracts (other than index futures) by their terms call for actual delivery or acceptance of commodities or securities, in most cases the contracts are closed out before the settlement date without the making or taking of delivery. Closing out a futures contract sale is effected by purchasing a futures contract for the same aggregate amount of the specific type of financial instrument or commodity with the same delivery date. If the price of the initial sale of the futures contract exceeds the price of the offsetting purchase, the seller is paid the difference and realizes a gain. Conversely, if the price of the offsetting purchase exceeds the price of the initial sale, the seller realizes a loss. If the fund is unable to enter into a closing transaction, the amount of the fund's potential loss is unlimited. The closing out of a futures contract purchase is effected by the purchaser's entering into a futures contract sale. If the offsetting sale price exceeds the purchase price, the purchaser realizes a gain, and if the purchase price exceeds the offsetting sale price, he realizes a loss. In general, 40% of the gain or loss arising from the closing out of a futures contract traded on an exchange approved by the CFTC is treated as short-term gain or loss, and 60% is treated as long-term gain or loss. Unlike when the fund purchases or sells a security, no price is paid or received by the fund upon the purchase or sale of a futures contract. Upon entering into a contract, the fund is required to deposit with its custodian in a segregated account in the name of the futures broker an amount of liquid assets. This amount is known as "initial margin." The nature of initial margin in futures transactions is different from that of margin in security transactions in that futures contract margin does not involve the borrowing of funds to finance the transactions. Rather, initial margin is similar to a performance bond or good faith deposit which is returned to the fund upon termination of the futures contract, assuming all contractual obligations have been satisfied. Futures contracts also involve brokerage costs. Subsequent payments, called "variation margin" or "maintenance margin," to and from the broker (or the custodian) are made on a daily basis as the price of the underlying security or commodity fluctuates, making the long and short positions in the futures contract more or less valuable, a process known as "marking to the market." For example, when the fund has purchased a futures contract on a security and the price of the underlying security has risen, that position will have increased in value and the fund will receive from the broker a variation margin payment based on that increase in value. Conversely, when the fund has purchased a security futures contract and the price of the underlying security has declined, the position would be less valuable and the fund would be required to make a variation margin payment to the broker. The fund may elect to close some or all of its futures positions at any time prior to their expiration in order to reduce or eliminate a hedge position then currently held by the fund. The fund may close its positions by taking opposite positions which will operate to terminate the fund's position in the futures contracts. Final determinations of variation margin are then made, additional cash is required to be paid by or released to the fund, and the fund realizes a loss or a gain. Such closing transactions involve additional commission costs. The fund does not intend to purchase or sell futures or related options for other than hedging purposes, if, as a result, the sum of the initial margin deposits on the fund's existing futures and related options positions and premiums paid for outstanding options on futures contracts would exceed 5% of the fund's net assets. The fund has claimed an exclusion from the definition of the term "commodity pool operator" under the Commodity Exchange Act (the "CEA"), and therefore, is not subject to registration or regulation as a pool operator under the CEA. Options on futures contracts. The fund may purchase and write call and put options on futures contracts it may buy or sell and enter into closing transactions with respect to such options to terminate existing positions. In return for the premium paid, options on futures contracts give the purchaser the right to assume a position in a futures contract at the specified option exercise price at any time during the period of the option. The fund may use options on futures contracts in lieu of writing or buying options directly on the underlying securities or purchasing and selling the underlying futures contracts. For example, to hedge against a possible decrease in the value of its portfolio securities, the fund may purchase put options or write call options on futures contracts rather than selling futures contracts. Similarly, the fund may purchase call options or write put options on futures contracts as a substitute for the purchase of futures contracts to hedge against a possible increase in the price of securities which the fund expects to purchase. Such options generally operate in the same manner as options purchased or written directly on the underlying investments. As with options on securities, the holder or writer of an option may terminate his position by selling or purchasing an offsetting option. There is no guarantee that such closing transactions can be effected. The fund will be required to deposit initial margin and maintenance margin with respect to put and call options on futures contracts written by it pursuant to brokers' requirements similar to those described above in connection with the discussion of futures contracts. Risks of transactions in futures contracts and related options. Successful use of futures contracts by the fund is subject to Putnam Management's ability to predict movements in various factors affecting securities markets, including interest rates. Compared to the purchase or sale of futures contracts, the purchase of call or put options on futures contracts involves less potential risk to the fund because the maximum amount at risk is the premium paid for the options (plus transaction costs). However, there may be circumstances when the purchase of a call or put option on a futures contract would result in a loss to the fund when the purchase or sale of a futures contract would not, such as when there is no movement in the prices of the hedged investments. The writing of an option on a futures contract involves risks similar to those risks relating to the sale of futures contracts. The use of options and futures strategies also involves the risk of imperfect correlation among movements in the prices of the securities underlying the futures and options purchased and sold by the fund, of the options and futures contracts themselves, and, in the case of hedging transactions, of the securities which are the subject of a hedge. The successful use of these strategies further depends on the ability of Putnam Management to forecast interest rates and market movements correctly. There is no assurance that higher than anticipated trading activity or other unforeseen events might not, at times, render certain market clearing facilities inadequate, and thereby result in the institution by exchanges of special procedures which may interfere with the timely execution of customer orders. To reduce or eliminate a position held by the fund, the fund may seek to close out such position. The ability to establish and close out positions will be subject to the development and maintenance of a liquid secondary market. It is not certain that this market will develop or continue to exist for a particular futures contract or option. Reasons for the absence of a liquid secondary market on an exchange include the following: (i) there may be insufficient trading interest in certain contracts or options; (ii) restrictions may be imposed by an exchange on opening transactions or closing transactions or both; (iii) trading halts, suspensions or other restrictions may be imposed with respect to particular classes or series of contracts or options, or underlying securities; (iv) unusual or unforeseen circumstances may interrupt normal operations on an exchange; (v) the facilities of an exchange or a clearing corporation may not at all times be adequate to handle current trading volume; or (vi) one or more exchanges could, for economic or other reasons, decide or be compelled at some future date to discontinue the trading of contracts or options (or a particular class or series of contracts or options), in which event the secondary market on that exchange for such contracts or options (or in the class or series of contracts or options) would cease to exist, although outstanding contracts or options on the exchange that had been issued by a clearing corporation as a result of trades on that exchange would continue to be exercisable in accordance with their terms. U.S. Treasury security futures contracts and options. U.S. Treasury security futures contracts require the seller to deliver, or the purchaser to take delivery of, the type of U.S. Treasury security called for in the contract at a specified date and price. Options on U.S. Treasury security futures contracts give the purchaser the right in return for the premium paid to assume a position in a U.S. Treasury security futures contract at the specified option exercise price at any time during the period of the option. Successful use of U.S. Treasury security futures contracts by the fund is subject to Putnam Management's ability to predict movements in the direction of interest rates and other factors affecting markets for debt securities. For example, if the fund has sold U.S. Treasury security futures contracts in order to hedge against the possibility of an increase in interest rates which would adversely affect securities held in its portfolio, and the prices of the fund's securities increase instead as a result of a decline in interest rates, the fund will lose part or all of the benefit of the increased value of its securities which it has hedged because it will have offsetting losses in its futures positions. In addition, in such situations, if the fund has insufficient cash, it may have to sell securities to meet daily maintenance margin requirements at a time when it may be disadvantageous to do so. There is also a risk that price movements in U.S. Treasury security futures contracts and related options will not correlate closely with price movements in markets for particular securities. For example, if the fund has hedged against a decline in the values of tax-exempt securities held by it by selling Treasury security futures and the values of Treasury securities subsequently increase while the values of its tax-exempt securities decrease, the fund would incur losses on both the Treasury security futures contracts written by it and the tax-exempt securities held in its portfolio. Index futures contracts. An index futures contract is a contract to buy or sell units of an index at a specified future date at a price agreed upon when the contract is made. Entering into a contract to buy units of an index is commonly referred to as buying or purchasing a contract or holding a long position in the index. Entering into a contract to sell units of an index is commonly referred to as selling a contract or holding a short position. A unit is the current value of the index. The fund may enter into stock index futures contracts, debt index futures contracts, or other index futures contracts appropriate to its objective(s). The fund may also purchase and sell options on index futures contracts. For example, the Standard & Poor's 500 Composite Stock Price Index ("S&P 500") is composed of 500 selected common stocks, most of which are listed on the New York Stock Exchange. The S&P 500 assigns relative weightings to the common stocks included in the Index, and the value fluctuates with changes in the market values of those common stocks. In the case of the S&P 500, contracts are to buy or sell 500 units. Thus, if the value of the S&P 500 were $150, one contract would be worth $75,000 (500 units x $150). The stock index futures contract specifies that no delivery of the actual stocks making up the index will take place. Instead, settlement in cash must occur upon the termination of the contract, with the settlement being the difference between the contract price and the actual level of the stock index at the expiration of the contract. For example, if the fund enters into a futures contract to buy 500 units of the S&P 500 at a specified future date at a contract price of $150 and the S&P 500 is at $154 on that future date, the fund will gain $2,000 (500 units x gain of $4). If the fund enters into a futures contract to sell 500 units of the stock index at a specified future date at a contract price of $150 and the S&P 500 is at $152 on that future date, the fund will lose $1,000 (500 units x loss of $2). There are several risks in connection with the use by the fund of index futures. One risk arises because of the imperfect correlation between movements in the prices of the index futures and movements in the prices of securities which are the subject of the hedge. Putnam Management will, however, attempt to reduce this risk by buying or selling, to the extent possible, futures on indices the movements of which will, in its judgment, have a significant correlation with movements in the prices of the securities sought to be hedged. Successful use of index futures by the fund is also subject to Putnam Management's ability to predict movements in the direction of the market. For example, it is possible that, where the fund has sold futures to hedge its portfolio against a decline in the market, the index on which the futures are written may advance and the value of securities held in the fund's portfolio may decline. If this occurred, the fund would lose money on the futures and also experience a decline in value in its portfolio securities. It is also possible that, if the fund has hedged against the possibility of a decline in the market adversely affecting securities held in its portfolio and securities prices increase instead, the fund will lose part or all of the benefit of the increased value of those securities it has hedged because it will have offsetting losses in its futures positions. In addition, in such situations, if the fund has insufficient cash, it may have to sell securities to meet daily variation margin requirements at a time when it is disadvantageous to do so. In addition to the possibility that there may be an imperfect correlation, or no correlation at all, between movements in the index futures and the portion of the portfolio being hedged, the prices of index futures may not correlate perfectly with movements in the underlying index due to certain market distortions. First, all participants in the futures market are subject to margin deposit and maintenance requirements. Rather than meeting additional margin deposit requirements, investors may close futures contracts through offsetting transactions which could distort the normal relationship between the index and futures markets. Second, margin requirements in the futures market are less onerous than margin requirements in the securities market, and as a result the futures market may attract more speculators than the securities market does. Increased participation by speculators in the futures market may also cause temporary price distortions. Due to the possibility of price distortions in the futures market and also because of the imperfect correlation between movements in the index and movements in the prices of index futures, even a correct forecast of general market trends by Putnam Management may still not result in a profitable position over a short time period. Options on stock index futures. Options on index futures are similar to options on securities except that options on index futures give the purchaser the right, in return for the premium paid, to assume a position in an index futures contract (a long position if the option is a call and a short position if the option is a put) at a specified exercise price at any time during the period of the option. Upon exercise of the option, the delivery of the futures position by the writer of the option to the holder of the option will be accompanied by delivery of the accumulated balance in the writer's futures margin account which represents the amount by which the market price of the index futures contract, at exercise, exceeds (in the case of a call) or is less than (in the case of a put) the exercise price of the option on the index future. If an option is exercised on the last trading day prior to its expiration date, the settlement will be made entirely in cash equal to the difference between the exercise price of the option and the closing level of the index on which the future is based on the expiration date. Purchasers of options who fail to exercise their options prior to the exercise date suffer a loss of the premium paid. Options on Indices As an alternative to purchasing call and put options on index futures, the fund may purchase and sell call and put options on the underlying indices themselves. Such options would be used in a manner identical to the use of options on index futures. Index Warrants The fund may purchase put warrants and call warrants whose values vary depending on the change in the value of one or more specified securities indices ("index warrants"). Index warrants are generally issued by banks or other financial institutions and give the holder the right, at any time during the term of the warrant, to receive upon exercise of the warrant a cash payment from the issuer based on the value of the underlying index at the time of exercise. In general, if the value of the underlying index rises above the exercise price of the index warrant, the holder of a call warrant will be entitled to receive a cash payment from the issuer upon exercise based on the difference between the value of the index and the exercise price of the warrant; if the value of the underlying index falls, the holder of a put warrant will be entitled to receive a cash payment from the issuer upon exercise based on the difference between the exercise price of the warrant and the value of the index. The holder of a warrant would not be entitled to any payments from the issuer at any time when, in the case of a call warrant, the exercise price is greater than the value of the underlying index, or, in the case of a put warrant, the exercise price is less than the value of the underlying index. If the fund were not to exercise an index warrant prior to its expiration, then the fund would lose the amount of the purchase price paid by it for the warrant. The fund will normally use index warrants in a manner similar to its use of options on securities indices. The risks of the fund's use of index warrants are generally similar to those relating to its use of index options. Unlike most index options, however, index warrants are issued in limited amounts and are not obligations of a regulated clearing agency, but are backed only by the credit of the bank or other institution which issues the warrant. Also, index warrants generally have longer terms than index options. Although the fund will normally invest only in exchange-listed warrants, index warrants are not likely to be as liquid as certain index options backed by a recognized clearing agency. In addition, the terms of index warrants may limit the fund's ability to exercise the warrants at such time, or in such quantities, as the fund would otherwise wish to do. Short-term Trading In seeking the fund's objective(s), Putnam Management will buy or sell portfolio securities whenever Putnam Management believes it appropriate to do so. From time to time the fund will buy securities intending to seek short-term trading profits. A change in the securities held by the fund is known as "portfolio turnover" and generally involves some expense to the fund. This expense may include brokerage commissions or dealer markups and other transaction costs on both the sale of securities and the reinvestment of the proceeds in other securities. If sales of portfolio securities cause the fund to realize net short-term capital gains, such gains will be taxable as ordinary income. As a result of the fund's investment policies, under certain market conditions the fund's portfolio turnover rate may be higher than that of other mutual funds. Portfolio turnover rate for a fiscal year is the ratio of the lesser of purchases or sales of portfolio securities to the monthly average of the value of portfolio securities -- excluding securities whose maturities at acquisition were one year or less. The fund's portfolio turnover rate is not a limiting factor when Putnam Management considers a change in the fund's portfolio. Securities Loans The fund may make secured loans of its portfolio securities, on either a short-term or long-term basis, amounting to not more than 25% of its total assets, thereby realizing additional income. The risks in lending portfolio securities, as with other extensions of credit, consist of possible delay in recovery of the securities or possible loss of rights in the collateral should the borrower fail financially. As a matter of policy, securities loans are made to broker-dealers pursuant to agreements requiring that the loans be continuously secured by collateral consisting of cash or short-term debt obligations at least equal at all times to the value of the securities on loan, "marked-to-market" daily. The borrower pays to the fund an amount equal to any dividends or interest received on securities lent. The fund retains all or a portion of the interest received on investment of the cash collateral or receives a fee from the borrower. Although voting rights, or rights to consent, with respect to the loaned securities may pass to the borrower, the fund retains the right to call the loans at any time on reasonable notice, and it will do so to enable the fund to exercise voting rights on any matters materially affecting the investment. The fund may also call such loans in order to sell the securities. Repurchase Agreements The fund, unless it is a money market fund, may enter into repurchase agreements, amounting to not more than 25% of its total assets. Money market funds may invest without limit in repurchase agreements. A repurchase agreement is a contract under which the fund acquires a security for a relatively short period (usually not more than one week) subject to the obligation of the seller to repurchase and the fund to resell such security at a fixed time and price (representing the fund's cost plus interest). It is the fund's present intention to enter into repurchase agreements only with commercial banks and registered broker-dealers and only with respect to obligations of the U.S. government or its agencies or instrumentalities. Repurchase agreements may also be viewed as loans made by the fund which are collateralized by the securities subject to repurchase. Putnam Management will monitor such transactions to ensure that the value of the underlying securities will be at least equal at all times to the total amount of the repurchase obligation, including the interest factor. If the seller defaults, the fund could realize a loss on the sale of the underlying security to the extent that the proceeds of the sale including accrued interest are less than the resale price provided in the agreement including interest. In addition, if the seller should be involved in bankruptcy or insolvency proceedings, the fund may incur delay and costs in selling the underlying security or may suffer a loss of principal and interest if the fund is treated as an unsecured creditor and required to return the underlying collateral to the seller's estate. Pursuant to an exemptive order issued by the Securities and Exchange Commission, the fund may transfer uninvested cash balances into a joint account, along with cash of other Putnam funds and certain other accounts. These balances may be invested in one or more repurchase agreements and/or short-term money market instruments. Forward Commitments The fund may enter into contracts to purchase securities for a fixed price at a future date beyond customary settlement time ("forward commitments") if the fund sets aside, on the books and records of its custodian, liquid assets in an amount sufficient to meet the purchase price, or if the fund enters into offsetting contracts for the forward sale of other securities it owns. In the case of to-be-announced ("TBA") purchase commitments, the unit price and the estimated principal amount are established when the fund enters into a contract, with the actual principal amount being within a specified range of the estimate. Forward commitments may be considered securities in themselves, and involve a risk of loss if the value of the security to be purchased declines prior to the settlement date, which risk is in addition to the risk of decline in the value of the fund's other assets. Where such purchases are made through dealers, the fund relies on the dealer to consummate the sale. The dealer's failure to do so may result in the loss to the fund of an advantageous yield or price. Although the fund will generally enter into forward commitments with the intention of acquiring securities for its portfolio or for delivery pursuant to options contracts it has entered into, the fund may dispose of a commitment prior to settlement if Putnam Management deems it appropriate to do so. The fund may realize short-term profits or losses upon the sale of forward commitments. The fund may enter into TBA sale commitments to hedge its portfolio positions or to sell securities it owns under delayed delivery arrangements. Proceeds of TBA sale commitments are not received until the contractual settlement date. During the time a TBA sale commitment is outstanding, equivalent deliverable securities, or an offsetting TBA purchase commitment deliverable on or before the sale commitment date, are held as "cover" for the transaction. Unsettled TBA sale commitments are valued at current market value of the underlying securities. If the TBA sale commitment is closed through the acquisition of an offsetting purchase commitment, the fund realizes a gain or loss on the commitment without regard to any unrealized gain or loss on the underlying security. If the fund delivers securities under the commitment, the fund realizes a gain or loss from the sale of the securities based upon the unit price established at the date the commitment was entered into. Swap Agreements The fund may enter into swap agreements and other types of over-the-counter transactions with broker-dealers or other financial institutions. Depending on their structures, swap agreements may increase or decrease the fund's exposure to long-or short-term interest rates (in the United States or abroad), foreign currency values, mortgage securities, corporate borrowing rates, or other factors such as security prices or inflation rates. The value of the fund's swap positions would increase or decrease depending on the changes in value of the underlying rates, currency values, or other indices or measures. The fund's ability to engage in certain swap transactions may be limited by tax considerations. The fund's ability to realize a profit from such transactions will depend on the ability of the financial institutions with which it enters into the transactions to meet their obligations to the fund. Under certain circumstances, suitable transactions may not be available to the fund, or the fund may be unable to close out its position under such transactions at the same time, or at the same price, as if it had purchased comparable publicly traded securities. 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 the prospectus or in this SAI. The fund's use of derivatives may cause the fund to recognize higher amounts of short-term capital gains, generally taxed to shareholders at ordinary income tax rates. Investments in derivatives may be applied toward meeting a requirement to invest in a particular kind of investment if the derivatives have economic characteristics similar to that investment. Industry and sector groups Putnam uses a customized set of industry and sector groups for classifying securities ("Putnam Investment Codes"). The Putnam Investment Codes are based on an expanded Standard & Poor's industry classification model, modified to be more representative of global investing and more applicable to both large and small capitalization securities. TAXES The following discussion of U.S. Federal income tax consequences is based on the Internal Revenue Code of 1986, as amended (the "Code"), existing U.S. Treasury regulations, and other applicable authority, as of the date of this SAI. These authorities are subject to change by legislative or administrative action, possibly with retroactive effect. The following discussion is only a summary of some of the important U.S. Federal tax considerations generally applicable to investments in the fund. There may be other tax considerations applicable to particular shareholders. Shareholders should consult their own tax advisers regarding their particular situation and the possible application of foreign, state and local tax laws. Taxation of the fund. The fund intends to qualify each year as a regulated investment company under Subchapter M of the Code. In order to qualify for the special tax treatment accorded regulated investment companies and their shareholders, the fund must, among other things: (a) derive at least 90% of its gross income from dividends, interest, payments with respect to certain securities loans, and gains from the sale of stock, securities and foreign currencies, or other income (including but not limited to gains from options, futures, or forward contracts) derived with respect to its business of investing in such stock, securities, or currencies; (b) distribute with respect to each taxable year at least 90% of the sum of its taxable net investment income, its net tax-exempt income, and the excess, if any, of net short-term capital gains over net long-term capital losses for such year; and (c) diversify its holdings so that, at the end of each fiscal quarter, (i) at least 50% of the market value of the fund's assets is represented by cash and cash items, U.S. government securities, securities of other regulated investment companies, and other securities limited in respect of any one issuer to a value not greater than 5% of the value of the fund's total assets and to not more than 10% of the outstanding voting securities of such issuer, and (ii) not more than 25% of the value of its assets is invested in the securities (other than those of the U.S. Government or other regulated investment companies) of any one issuer or of two or more issuers which the fund controls and which are engaged in the same, similar, or related trades or businesses. If the fund qualifies as a regulated investment company that is accorded special tax treatment, the fund will not be subject to federal income tax on income distributed in a timely manner, to its shareholders in the form of dividends (including capital gain dividends). If the fund failed to qualify as a regulated investment company accorded special tax treatment in any taxable year, the fund would be subject to tax on its taxable income at corporate rates, and all distributions from earnings and profits, including any distributions of net tax-exempt income and net long-term capital gains, would be taxable to shareholders as ordinary income. In addition, the fund could be required to recognize unrealized gains, pay substantial taxes and interest and make substantial distributions before requalifying as a regulated investment company that is accorded special tax treatment. If the fund fails to distribute in a calendar year substantially all of its ordinary income for such year and substantially all of its capital gain net income for the one-year period ending October 31 (or later if the fund is permitted so to elect and so elects), plus any retained amount from the prior year, the fund will be subject to a 4% excise tax on the undistributed amounts. A dividend paid to shareholders by the fund in January of a year generally is deemed to have been paid by the fund on December 31 of the preceding year, if the dividend was declared and payable to shareholders of record on a date in October, November or December of that preceding year. The fund intends generally to make distributions sufficient to avoid imposition of the 4% excise tax. Fund distributions. Distributions from the fund (other than exempt-interest dividends, as discussed below) will be taxable to shareholders as ordinary income to the extent derived from the fund's investment income and net short-term capital gains. Distributions of net capital gains (that is, the excess of net gains from the sale of capital assets held more than one year over net losses from the sale of capital assets held for not more than one year) will be taxable to shareholders as such, regardless of how long a shareholder has held the shares in the fund. For taxable years beginning on or before December 31, 2008, "qualified dividend income" received by an individual will be taxed at the rates applicable to long-term capital gain. In order for some portion of the dividends received by a fund shareholder to be qualified dividend income, the fund must meet holding period and other requirements with respect to some portion of the dividend paying stocks in its portfolio and the shareholder must meet holding period and other requirements with respect to the fund's shares. A dividend will not be treated as qualified dividend income (at either the fund or shareholder level) (1) if the dividend is received with respect to any share of stock held for fewer than 61 days during the 120-day period beginning on the date which is 60 days before the date on which such share becomes ex-dividend with respect to such dividend (or, in the case of certain preferred stock, 91 days during the 180-day period beginning 90 days before such date), (2) to the extent that the recipient is under an obligation (whether pursuant to a short sale or otherwise) to make related payments with respect to positions in substantially similar or related property, (3) if the recipient elects to have the dividend income treated as investment income for purposes of the limitation on deductibility of investment interest, or (4) if the dividend is received from a foreign corporation that is (a) not eligible for the benefits of a comprehensive income tax treaty with the United States (with the exception of dividends paid on stock of such a foreign corporation readily tradable on an established securities market in the United States) or (b) treated as a foreign personal holding company, foreign investment company, or passive foreign investment company. In general, distributions of investment income designated by the fund as derived from qualified dividend income will be treated as qualified dividend income by a shareholder taxed as an individual provided the shareholder meets the holding period and other requirements described above with respect to the fund's shares. Only qualified dividend income received by the fund after December 31, 2002 is eligible for pass-through treatment. If the aggregate qualified dividends received by a fund during any taxable year are 95% or more of its gross income, then 100% of the fund's dividends (other than properly designated capital gain dividends) will be eligible to be treated as qualified dividend income. For this purpose, the only gain included in the term "gross income" is the excess of net short-term capital gain over net long-term capital loss. Long-term capital gain rates applicable to individuals have been temporarily reduced--in general, to 15% with lower rates applying to taxpayers in the 10% and 15% rate brackets-- for taxable years beginning on or before December 31, 2008. Exempt-interest dividends. The fund will be qualified to pay exempt-interest dividends to its shareholders only if, at the close of each quarter of the fund's taxable year, at least 50% of the total value of the fund's assets consists of obligations the interest on which is exempt from federal income tax. Distributions that the fund properly designates as exempt-interest dividends are treated as interest excludable from shareholders' gross income for federal income tax purposes but may be taxable for federal alternative minimum tax purposes and for state and local purposes. If the fund intends to be qualified to pay exempt-interest dividends, the fund may be limited in its ability to enter into taxable transactions involving forward commitments, repurchase agreements, financial futures and options contracts on financial futures, tax-exempt bond indices and other assets. Part or all of the interest on indebtedness, if any, incurred or continued by a shareholder to purchase or carry shares of the fund paying exempt-interest dividends is not deductible. The portion of interest that is not deductible is equal to the total interest paid or accrued on the indebtedness, multiplied by the percentage of the fund's total distributions (not including distributions from net long-term capital gains) paid to the shareholder that are exempt-interest dividends. Under rules used by the Internal Revenue Service to determine when borrowed funds are considered used for the purpose of purchasing or carrying particular assets, the purchase of shares may be considered to have been made with borrowed funds even though such funds are not directly traceable to the purchase of shares. In general, exempt-interest dividends, if any, attributable to interest received on certain private activity obligations and certain industrial development bonds will not be tax-exempt to any shareholders who are "substantial users" of the facilities financed by such obligations or bonds or who are "related persons" of such substantial users. A fund that is qualified to pay exempt-interest dividends will inform investors within 60 days of the fund's fiscal year-end of the percentage of its income distributions designated as tax-exempt. The percentage is applied uniformly to all distributions made during the year. The percentage of income designated as tax-exempt for any particular distribution may be substantially different from the percentage of the fund's income that was tax-exempt during the period covered by the distribution. Hedging transactions. If the fund engages in hedging transactions, including hedging transactions in options, futures contracts, and straddles, or other similar transactions, it will be subject to special tax rules (including constructive sale, mark-to-market, straddle, wash sale, and short sale rules), the effect of which may be to accelerate income to the fund, defer losses to the fund, cause adjustments in the holding periods of the fund's securities, convert long-term capital gains into short-term capital gains or convert short-term capital losses into long-term capital losses. These rules could therefore affect the amount, timing and character of distributions to shareholders. The fund will endeavor to make any available elections pertaining to such transactions in a manner believed to be in the best interests of the fund. Certain of the fund's hedging activities (including its transactions, if any, in foreign currencies or foreign currency-denominated instruments) are likely to produce a difference between its book income and its taxable income. If the fund's book income exceeds its taxable income, the distribution (if any) of such excess will be treated as (i) a dividend to the extent of the fund's remaining earnings and profits (including earnings and profits arising from tax-exempt income), (ii) thereafter as a return of capital to the extent of the recipient's basis in the shares, and (iii) thereafter as gain from the sale or exchange of a capital asset. If the fund's book income is less than its taxable income, (or, for tax-exempt funds, the sum of its net tax-exempt and taxable income), the fund could be required to make distributions exceeding book income to qualify as a regulated investment company that is accorded special tax treatment. Return of capital distributions. If the fund makes a distribution to you in excess of its current and accumulated "earnings and profits" in any taxable year, the excess distribution will be treated as a return of capital to the extent of your tax basis in your shares, and thereafter as capital gain. A return of capital is not taxable, but it reduces your tax basis in your shares, thus reducing any loss or increasing any gain on a subsequent taxable disposition by you of your shares. Dividends and distributions on the fund's shares are generally subject to federal income tax as described herein to the extent they do not exceed the fund's realized income and gains, even though such dividends and distributions may economically represent a return of a particular shareholder's investment. Such distributions are likely to occur in respect of shares purchased at a time when the fund's net asset value reflects gains that are either unrealized, or realized but not distributed. Distributions are taxable to a shareholder even if they are paid from income or gains earned by the fund prior to the shareholder's investment (and thus included in the price paid by the shareholder). Securities issued or purchased at a discount. The fund's investment in securities issued at a discount and certain other obligations will (and investments in securities purchased at a discount may) require the fund to accrue and distribute income not yet received. In order to generate sufficient cash to make the requisite distributions, the fund may be required to sell securities in its portfolio that it otherwise would have continued to hold. Capital loss carryover. Distributions from capital gains are generally made after applying any available capital loss carryovers. The amounts and expiration dates of any capital loss carryovers available to the fund are shown in Note 1 (Federal income taxes) to the financial statements included in Part I of this SAI or incorporated by reference into this SAI. Foreign currency-denominated securities and related hedging transactions. The fund's transactions in foreign currencies, foreign currency-denominated debt securities and certain foreign currency options, futures contracts and forward contracts (and similar instruments) may give rise to ordinary income or loss to the extent such income or loss results from fluctuations in the value of the foreign currency concerned. If more than 50% of the fund's assets at year end consists of the securities of foreign corporations, the fund may elect to permit shareholders to claim a credit or deduction on their income tax returns for their pro rata portion of qualified taxes paid by the fund to foreign countries in respect of foreign securities the fund has held for at least the minimum period specified in the Code. In such a case, shareholders will include in gross income from foreign sources their pro rata shares of such taxes. A shareholder's ability to claim a foreign tax credit or deduction in respect of foreign taxes paid by the fund may be subject to certain limitations imposed by the Code, as a result of which a shareholder may not get a full credit or deduction for the amount of such taxes. In particular, shareholders must hold their fund shares (without protection from risk of loss) on the ex-dividend date and for at least 15 additional days during the 30-day period surrounding the ex-dividend date to be eligible to claim a foreign tax credit with respect to a given dividend. Shareholders who do not itemize on their federal income tax returns may claim a credit (but no deduction) for such foreign taxes. Investment by the fund in "passive foreign investment companies" could subject the fund to a U.S. federal income tax or other charge on the proceeds from the sale of its investment in such a company; however, this tax can be avoided by making an election to mark such investments to market annually or to treat the passive foreign investment company as a "qualified electing fund." A "passive foreign investment company" is any foreign corporation: (i) 75 percent or more of the income of which for the taxable year is passive income, or (ii) the average percentage of the assets of which (generally by value, but by adjusted tax basis in certain cases) that produce or are held for the production of passive income is at least 50 percent. Generally, passive income for this purpose means dividends, interest (including income equivalent to interest), royalties, rents, annuities, the excess of gains over losses from certain property transactions and commodities transactions, and foreign currency gains. Passive income for this purpose does not include rents and royalties received by the foreign corporation from active business and certain income received from related persons. Sale or redemption of shares. The sale, exchange or redemption of fund shares may give rise to a gain or loss. In general, any gain or loss realized upon a taxable disposition of shares will be treated as long-term capital gain or loss if the shares have been held for more than 12 months. Otherwise the gain or loss on the sale, exchange or redemption of fund shares will be treated as short-term capital gain or loss. However, if a shareholder sells shares at a loss within six months of purchase, any loss will be disallowed for Federal income tax purposes to the extent of any exempt-interest dividends received on such shares. In addition, any loss (not already disallowed as provided in the preceding sentence) realized upon a taxable disposition of shares held for six months or less will be treated as long-term, rather than short-term, to the extent of any long-term capital gain distributions received by the shareholder with respect to the shares. All or a portion of any loss realized upon a taxable disposition of fund shares will be disallowed if other shares of the same fund are purchased within 30 days before or after the disposition. In such a case, the basis of the newly purchased shares will be adjusted to reflect the disallowed loss. Shares purchased through tax-qualified plans. Special tax rules apply to investments though defined contribution plans and other tax-qualified plans. Shareholders should consult their tax advisers to determine the suitability of shares of a fund as an investment through such plans and the precise effect of an investment on their particular tax situation. Backup withholding. The fund generally is required to withhold and remit to the U.S. Treasury a percentage of the taxable dividends and other distributions paid to any individual shareholder who fails to furnish the fund with a correct taxpayer identification number (TIN), who has under-reported dividends or interest income, or who fails to certify to the fund that he or she is not subject to such withholding. The back-up withholding tax rate is 28% for amounts paid through 2010. This legislation will expire and the back-up withholding rate will be 31% for amounts paid after December 31, 2010, unless Congress enacts tax legislation providing otherwise. In order for a foreign investor to qualify for exemption from the back-up withholding tax rates and for reduced withholding tax rates under income tax treaties, the foreign investor must comply with special certification and filing requirements. Foreign investors in a fund should consult their tax advisers in this regard. Tax shelter reporting regulations. Under U.S. Treasury regulations issued on February 28, 2003, if a shareholder realizes a loss on disposition of fund shares of $2 million or more for an individual shareholder or $10 million or more for a corporate shareholder, the shareholder must file with the Internal Revenue Service a disclosure statement on Form 8886. Direct shareholders of portfolio securities are in many cases excepted from this reporting requirement, but under current guidance, shareholders of a regulated investment company are not excepted. Future guidance may extend the current exception from this reporting requirement to shareholders of most or all regulated investment companies.
MANAGEMENT Trustees - ----------------------------------------------------------------------------------------------------------- Name, Address 1, Date of Birth, Position(s) Held with Fund and Length of Principal Service as a Putnam Fund Occupation(s) During Other Directorships Trustee 2 Past 5 Years Held by Trustee - ----------------------------------------------------------------------------------------------------------- Jameson A. Baxter President of Baxter Director of ASHTA Chemicals, Inc., Banta (9/6/43), Trustee since 1994 Associates, Inc., Corporation (a printing and digital a private investment firm imaging firm), Ryerson Tull, Inc. that she founded in 1986. (a steel service corporation), Advocate Health Care and BoardSource (formerly the National Center for Nonprofit Boards). She is Chairman Emeritus of the Board of Trustees, Mount Holyoke College, having served as Chairman for five years and as a board member for thirteen years. Until 2002, Ms. Baxter was a Director of Intermatic Corporation (a manufacturer of energy control products). - ----------------------------------------------------------------------------------------------------------- Charles B. Curtis President and Chief Member of the Council on Foreign (4/27/40), Trustee since 2001 Operating Officer, Relations and the Trustee Advisory Council Nuclear Threat Initiative of the Applied Physics Laboratory, Johns (a private foundation Hopkins University. Until 2003, Mr. Curtis was dealing with national a Member of the Electric Power Research security issues) and Institute Advisory Council and the University serves as Senior Advisor of Chicago Board of Governors for Argonne to the Untited Nations National Laboratory. Prior to 2002, Mr. Curtis Foundaton. From August was a Member of the Board of Directors of the 1997 to December 1999, Gas Technology Institute and the Board of Mr. Curtis was a partner Directors of the Environment and Natural at Hogan & Hartson Resources Program Steering Committee, John F. L.L.P., a Washington, DC Kennedy School of Government, Harvard law firm. University. Until 2001, Mr. Curtis was a Member of the Department of Defense Policy Board and Director of EG&G Technical Services, Inc. (a fossil energy research and development support company). - ----------------------------------------------------------------------------------------------------------- John A. Hill Vice Chairman, First Director of Devon Energy Corporation, (1/31/42), Reserve Corporation (a TransMontaigne Oil Company, Continuum Trustee since 1985 and private equity buyout Health Partners of New York and various Chairman since 2000 firm that specializes private companies controlled by First in energy investments Reserve Corporation, as well as a Trustee in the diversified of TH Lee Putnam Investment Trust (a world-wide energy closed-end investment company advised by an industry). affiliate of Putnam Management). He is also a Trustee of Sarah Lawrence College. - ----------------------------------------------------------------------------------------------------------- Ronald J. Jackson Private investor. President of the Kathleen and Ronald J. Jackson (12/17/43), Foundation (a charitable trust). He is also Trustee since 1996 a Member of the Board of Overseers of WGBH (a public television and radio station) as well as a Member of the Board of Overseers of the Peabody Essex Museum. - ----------------------------------------------------------------------------------------------------------- Paul L. Joskow (6/30/47), Elizabeth and James Director of National Grid Transco (a UK-based Trustee since 1997 Killian Professor of holding company with interests in electric and Economics and Management, gas transmission and distribution and and Director of the telecommunications infrastructure) and Center for Energy and TransCanada Corporation (an energy company Environmental Policy focused on natural gas transmission and power Research at the services). He also serves on the board of the Massachusetts Institute Whitehead Institute for Biomedical Research of Technology. (a non-profit research institution) and has been President of the Yale University Council since 1993. Prior to February 2002, he was a Director of State Farm Indemnity Company (an automobile insurance company), and prior to March 2000, he was a Director of New England Electric System (a public utility holding company). - ----------------------------------------------------------------------------------------------------------- Elizabeth T. Kennan Partner in Cambus-Kenneth Lead Director of Northeast Utilities and is a (2/25/38), Trustee Farm (thoroughbred horse Director of Talbots, Inc. (a distributor of since 1992 and catlle breeding). women's apparel). She is a Trustee of National She is President Emeritus Trust for Historic Preservation, of Centre of Mount Holyoke College. College and of Midway College (in Midway, Kentucky).She is also a Member of The Trustees of Reservations. Prior to 2001, Dr. Kennan served on the oversight committee of the Folger Shakespeare Library. Prior to September 2000, she was a Director of Chastain Real Estate; prior to June 2000, she was a Director of Bell Atlantic Corp.; and prior to November 1999, she was a Director of Kentucky Home Life Insurance Co. - ----------------------------------------------------------------------------------------------------------- John H. Mullin, III Chairman and CEO of Director of The Liberty Corporation (a (6/15/41), Trustee Ridgeway Farm (a limited broadcasting company), Progress Energy, Inc. (a since 1997 liability company engaged utility company, formerly known as Carolina in timber and farming). Power & Light) and Sonoco Products, Inc. (a packaging company). Mr. Mullin is Trustee Emeritus of The National Humanitites Center and Washington & Lee University, where he served as Chairman of the Investment Committee. Until February 2004 and May 2001, he was a Director of Alex Brown Realty, Inc. and Graphic Packaging International Corp., respectively. - ----------------------------------------------------------------------------------------------------------- Robert E. Patterson Senior Partner of Cabot Chairman of the Joslin Diabetes Center and a (3/15/45), Trustee Properties, L.P. and Director of Brandywine Trust Company. Prior to since 1984 Chairman of Cabot December 2001 and June 2003, Mr. Patterson Properties, Inc. (a served as a Trustee of Cabot Industrial Trust private equity firm and Sea Education Association, respectively. investing in commercial real estate). Prior to December 2001, he was President of Cabot Industrial Trust (a publicly traded real estate investment trust). - ----------------------------------------------------------------------------------------------------------- W. Thomas Stephens Serves on a number Director of Xcel Energy Incorporated (a public (9/2/42), Trustee of corporate boards. utility company) and TransCanada Pipelines since 1997 Limited. Until 2004, Mr. Stephens was a Director of Qwest Communications and Norske Canada, Inc. (a paper manufacturer). Until 2003, Mr. Stephens was a Director of Mail-Well, Inc. (a diversified printing company). Prior to July 2001, Mr. Stephens was Chairman of Mail-Well; and prior to October 1999, he was CEO of MacMillan-Bloedel, Ltd. (a forest products company). - ----------------------------------------------------------------------------------------------------------- Interested Trustees - ----------------------------------------------------------------------------------------------------------- *George Putnam III President of New Director of The Boston Family Office, L.L.C. (8/10/51), Trustee Generation Research, Inc. (a registered investment advisor), and a Trustee since 1984 and (a publisher of financial of St. Mark's School and Shore Country Day School. President since advisory and other Until 2002, Mr. Putnam was a Trustee of the Sea 2000 research services) and Education Association. of New Generation Advisers, Inc. (a registered investment adviser to private funds). Both firms he founded in 1986. - ----------------------------------------------------------------------------------------------------------- *A.J.C. Smith Chairman of Putnam Director of Trident Corp. (a limited partnership (4/13/34), Trustee Investments and Director with over thirty institutional investors). He since 1986 of and Consultant to is also a Trustee of the Carnegie Hall Society, Marsh & McLennan the Educational Broadcasting Corporation and the Companies, Inc. Prior National Museums of Scotland. He is Chairman of to May 2000 and November the Central Park Conservancy and a Member of the 1999, Mr. Smith was Board of Overseers of the Joan and Sanford I. Chairman and CEO, Weill Graduate School of Medical Sciences of respectively, of Marsh Cornell University. & McLennan Companies, Inc. - ----------------------------------------------------------------------------------------------------------- 1 The address of each Trustee is One Post Office Square, Boston, MA 02109. As of December 31, 2003, there were 101 Putnam Funds. 2 Each Trustee serves for an indefinite term, until his or her resignation, retirement at age 72, death or removal. * Trustees who are or may be deemed to be "interested persons" (as defined in the Investment Company Act of 1940) of the fund, Putnam Management, Putnam Retail Management or Marsh & McLennan Companies, Inc., the parent company of Putnam Investments and its affiliated companies. Messrs. Putnam, III, and Smith are deemed "interested persons" by virtue of their positions as officers of the fund or Putnam Management, Putnam Retail Management or Marsh & McLennan Companies, Inc. and as shareholders of Marsh & McLennan Companies, Inc. George Putnam, III is the President of your Fund and each of the other Putnam Funds. A.J.C. Smith is Chairman of Putnam Investments and serves as Director of and Consultant to Marsh & McLennan Companies, Inc.
Officers In addition to George Putnam III, the other officers of the fund are shown below: - ----------------------------------------------------------------------------------------------------------- Name, Address 1, Date of Birth, Position(s) Held Length of Service with Principal Occupation(s) with Fund the Putnam Funds During Past 5 Years - ----------------------------------------------------------------------------------------------------------- Charles E. Porter Since 1989 Managing Director, Putnam Investments, Putnam (7/26/38), Executive Advisory Company, Putnam Investor Services and Vice President, Associate Putnam Management. Treasurer and Principal Executive Officer - ----------------------------------------------------------------------------------------------------------- Jonathan S. Horwitz Since 2004 Managing Director, Putnam Investments. (6/4/55), Senior Vice President and Treasurer - ----------------------------------------------------------------------------------------------------------- Steven D. Krichmar Since 2002 Managing Director, Putnam Investments and Putnam (6/27/58), Vice President Investor Services. Prior to 2001, Partner, and Principal Financial PricewaterhouseCoopers LLP. Officer - ----------------------------------------------------------------------------------------------------------- Michael T. Healy Since 2000 Managing Director, Putnam Investments and Putnam (1/24/58), Assistant Investor Services. Treasurer and Principal Accounting Officer - ----------------------------------------------------------------------------------------------------------- Beth S. Mazor Since 2002 Senior Vice President, Putnam Investments and (4/6/58), Vice President Putnam Investor Services. - ----------------------------------------------------------------------------------------------------------- Daniel T. Gallagher Since 2004 Vice President, Putnam Investments. Prior to 2004, (2/27/62), Vice President Mr. Gallagher was an attorney for Ropes & Gray and Legal and Compliance LLP; prior to 2000, he was a law clerk for the Liaison Officer Massachusetts Supreme Judicial Court. - ----------------------------------------------------------------------------------------------------------- Mark C. Trenchard Since 2002 Senior Vice President, Putnam Investments. (6/5/62), Vice President and BSA Compliance Officer - ----------------------------------------------------------------------------------------------------------- Francis J. McNamara, III Since 2004 Senior Managing Director, Putnam Investments, (8/19/55), Vice President Putnam Management and Putnam Retail Management. and Chief Legal Officer Prior to 2004, Mr. McNamara was General Counsel of State Street Research & Management Company. - ----------------------------------------------------------------------------------------------------------- Charles A. Ruys de Perez Since 2004 Managing Director, Putnam Investments, Putnam (10/17/57), Vice President Advisory Company, Putnam Investor Services, and Chief Compliance Officer Putnam Management and Putnam Retail Management. - ----------------------------------------------------------------------------------------------------------- James P. Pappas Since 2004 Managing Director, Putnam Investments and Putnam (2/24/53), Vice President Management. During 2002, Mr. Pappas was Chief Operating Officer of Atalanta/Sosnoff Management Corporation. Prior to 2001, he was President and Chief Executive Officer of UAM Investment Services, Inc. - ----------------------------------------------------------------------------------------------------------- Richard S. Robie, III Since 2004 Senior Managing Director, Putnam Investments, (3/30/60), Vice President Putnam Management and Putnam Advisory Company. Prior to 2003, Mr. Robie was Senior Vice President of United Asset Management Corporation. - ----------------------------------------------------------------------------------------------------------- Judith Cohen Since 1993 Clerk and Assistant Treasurer, The Putnam Funds. (6/7/45), Clerk and Assistant Treasurer - ----------------------------------------------------------------------------------------------------------- 1 The address of each Officer is One Post Office Square, Boston, MA 02109.
Except as stated above, the principal occupations of the officers and Trustees for the last five years have been with the employers as shown above, although in some cases they have held different positions with such employers. Committees of the Board of Trustees Audit and Pricing Committee. The Audit and Pricing Committee provides oversight on matters relating to the preparation of the funds' financial statements, compliance matters and Code of Ethics issues. This oversight is discharged by regularly meeting with management and the funds' independent auditors and keeping current on industry developments. Duties of this Committee also include the review and evaluation of all matters and relationships pertaining to the funds' independent auditors, including their independence. The members of the Committee include only Trustees who are not "interested persons" of the fund or Putnam Management. Each member of the Committee is "independent" as defined in Sections 303.01(B)(2)(a) and (3) of the listing standards of the New York Stock Exchange and as defined in Section 121(A) of the listing standards of the American Stock Exchange. The Trustees have adopted a written charter for the Committee. The Committee also reviews the funds' policies and procedures for achieving accurate and timely pricing of the funds' shares, including oversight of fair value determinations of individual securities made by Putnam Management or other designated agents of the funds. The Committee oversees compliance by money market funds with Rule 2a-7, interfund transactions pursuant to Rule 17a-7, and the correction of occasional pricing errors. The Committee also receives reports regarding the liquidity of portfolio securities. The Audit and Pricing Committee currently consists of Drs. Joskow (Chairperson) and Kennan, and Messrs. Patterson and Stephens. Board Policy and Nominating Committee. The Board Policy and Nominating Committee reviews matters pertaining to the operations of the Board of Trustees and its Committees, the compensation of the Trustees and their staff, and the conduct of legal affairs for the funds. The Committee evaluates and recommends all candidates for election as Trustees and recommends the appointment of members and chairs of each board committee. The Committee also reviews policy matters affecting the operation of the Board and its independent staff and makes recommendations to the Board as appropriate. The Committee consists only of Trustees who are not "interested persons" of your fund or Putnam Management. The Committee also oversees the voting of proxies associated with portfolio investments of The Putnam Funds with the goal of ensuring that these proxies are voted in the best interest of the Funds' shareholders. The Board Policy and Nominating Committee currently consists of Dr. Kennan (Chairperson), Ms. Baxter and Messrs. Hill, Mullin and Patterson. The Board Policy and Nominating Committee will consider nominees for trustee recommended by shareholders of a fund provided shareholders submit their recommendations by the date disclosed in the fund's proxy statement and provided the shareholders' recommendations otherwise comply with applicable securities laws, including Rule 14a-8 under the Securities Exchange Act of 1934. Brokerage and Custody Committee. The Brokerage and Custody Committee reviews the policies and procedures of the Funds regarding the execution of portfolio transactions for the Funds, including policies regarding the allocation of brokerage commissions and soft dollar credits. The Committee reviews periodic reports regarding the Funds' activities involving derivative securities. The Committee also reviews and evaluates matters relating to the Funds' custody arrangements. The Committee currently consists of Messrs. Jackson (Chairperson), Curtis and Mullin, Ms. Baxter and Dr. Kennan. Communication, Service, and Marketing Committee. This Committee examines the quality, cost and levels of services provided to the shareholders of The Putnam Funds. The Committee also reviews communications sent from the Funds to their shareholders, including shareholder reports, prospectuses, newsletters and other materials. In addition, this Committee oversees marketing and sales communications of the Funds' distributor. The Committee currently consists of Messrs. Putnam (Chairperson), Smith and Stephens and Dr. Joskow. Contract Committee. The Contract Committee reviews and evaluates at least annually all arrangements pertaining to (i) the engagement of Putnam Investment Management and its affiliates to provide services to the Funds, (ii) the expenditure of the Funds' assets for distribution purposes pursuant to the Distribution Plans of the Funds, and (iii) the engagement of other persons to provide material services to the Funds, including in particular those instances where the cost of services is shared between the Funds and Putnam Investment Management and its affiliates or where Putnam Investment Management or its affiliates have a material interest. The Committee recommends to the Trustees such changes in arrangements that it deems appropriate. The Committee also reviews the conversion of Class B shares into Class A shares of the Funds in accordance with procedures approved by the Trustees. After review and evaluation, the Committee recommends to the Trustees the proposed organization of new Fund products, and proposed structural changes to existing Funds. The Committee is comprised exclusively of Independent Trustees. The Committee currently consists of Ms. Baxter (Chairperson), Messrs. Curtis, Jackson, and Mullin and Dr. Kennan. Distributions Committee. This Committee oversees all Fund distributions and the management of the Closed-End Funds. In regard to distributions, the Committee approves the amount and timing of distributions paid by all the Funds to the shareholders when the Trustees are not in session. This Committee also meets regularly with representatives of Putnam Investments to review distribution levels and the Funds' distribution policies. Its oversight of the Closed-End Funds includes (i) investment performance, (ii) trading activity, (iii) determinations with respect to sunroof provisions, (iv) disclosure practices, and (v) the use of leverage. The Committee currently consists of Messrs. Patterson (Chairperson) and Jackson and Dr. Joskow. Executive Committee. The functions of the Executive Committee are twofold. The first is to ensure that the Funds' business may be conducted at times when it is not feasible to convene a meeting of the Trustees or for the Trustees to act by written consent. The Committee may exercise any or all of the power and authority of the Trustees when the Trustees are not in session. The second is to establish annual and ongoing goals, objectives and priorities for the Board of Trustees and to insure coordination of all efforts between the Trustees and Putnam Investments on behalf of the shareholders of the Putnam Funds. The Committee currently consists of Messrs. Hill (Chairman), Jackson, and Putnam, Dr. Joskow and Ms. Baxter. Investment Oversight Committees. These Committees regularly meet with investment personnel of Putnam Investment Management to review the investment performance and strategies of the Putnam Funds in light of their stated investment objectives and policies. Investment Oversight Committee A currently consists of Ms. Baxter (Acting Chairperson), and Mr. Smith. Investment Oversight Committee B currently consists of Messrs. Curtis (Chairperson), Hill and Stephens. Investment Committee C currently consists of Messrs. Mullin (Chairperson) and Putnam, and Dr. Kennan. Investment Oversight Committee D currently consists of Messrs. Patterson (Chairperson) and Jackson and Dr. Joskow. Each Trustee of the fund receives an annual retainer fee and an additional meeting fee for each Trustees' meeting attended. Trustees who are not "interested persons" of Putnam Management and who serve on committees of the Trustees receive additional fees for attendance at certain committee meetings and for special services rendered in that connection. All of the Trustees who are not "interested persons" of Putnam Management are Trustees of all the Putnam funds and each receives fees for their services. For details of Trustees' fees paid by the fund and information concerning retirement guidelines for the Trustees, see "Charges and expenses" in Part I of this SAI. The Agreement and Declaration of Trust of the fund provides that the fund will indemnify its Trustees and officers against liabilities and expenses incurred in connection with litigation in which they may be involved because of their offices with the fund, except if it is determined in the manner specified in the Agreement and Declaration of Trust that they have not acted in good faith in the reasonable belief that their actions were in the best interests of the fund or that such indemnification would relieve any officer or Trustee of any liability to the fund or its shareholders by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of his or her duties. The fund, at its expense, provides liability insurance for the benefit of its Trustees and officers. Putnam Management and its affiliates Putnam Management is one of America's oldest and largest money management firms. Putnam Management's staff of experienced portfolio managers and research analysts selects securities and constantly supervises the fund's portfolio. By pooling an investor's money with that of other investors, a greater variety of securities can be purchased than would be the case individually; the resulting diversification helps reduce investment risk. Putnam Management has been managing mutual funds since 1937. Putnam Management is a subsidiary of Putnam Investment Management Trust, a Massachusetts business trust owned by Putnam LLC, which is also the parent company of Putnam Retail Management, Putnam Advisory Company, LLC (a wholly-owned subsidiary of The Putnam Advisory Company Trust), Putnam Investments Limited (a wholly-owned subsidiary of The Putnam Advisory Company Trust) and Putnam Fiduciary Trust Company. Putnam LLC, which generally conducts business under the name Putnam Investments, is a wholly-owned subsidiary of Putnam Investments Trust, a holding company that, except for a minority stake owned by employees, is 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. Trustees and officers of the fund who are also officers of Putnam Management or its affiliates or who are stockholders of Marsh & McLennan Companies, Inc. will benefit from the advisory fees, sales commissions, distribution fees, custodian fees and transfer agency fees paid or allowed by the fund. The Management Contract Under a Management Contract between the fund and Putnam Management, subject to such policies as the Trustees may determine, Putnam Management, at its expense, furnishes continuously an investment program for the fund and makes investment decisions on behalf of the fund. Subject to the control of the Trustees, Putnam Management also manages, supervises and conducts the other affairs and business of the fund, furnishes office space and equipment, provides bookkeeping and clerical services (including determination of the fund's net asset value, but excluding shareholder accounting services) and places all orders for the purchase and sale of the fund's portfolio securities. Putnam Management may place fund portfolio transactions with broker-dealers that furnish Putnam Management, without cost to it, certain research, statistical and quotation services of value to Putnam Management and its affiliates in advising the fund and other clients. In so doing, Putnam Management may cause the fund to pay greater brokerage commissions than it might otherwise pay. For details of Putnam Management's compensation under the Management Contract, see "Charges and expenses" in Part I of this SAI. Putnam Management's compensation under the Management Contract may be reduced in any year if the fund's expenses exceed the limits on investment company expenses imposed by any statute or regulatory authority of any jurisdiction in which shares of the fund are qualified for offer or sale. The term "expenses" is defined in the statutes or regulations of such jurisdictions, and generally excludes brokerage commissions, taxes, interest, extraordinary expenses and, if the fund has a distribution plan, payments made under such plan. Under the Management Contract, Putnam Management may reduce its compensation to the extent that the fund's expenses exceed such lower expense limitation as Putnam Management may, by notice to the fund, declare to be effective. For the purpose of determining any such limitation on Putnam Management's compensation, expenses of the fund shall not reflect the application of commissions or cash management credits that may reduce designated fund expenses. The terms of any expense limitation from time to time in effect are described in the prospectus and/or Part I of this SAI. In addition, through December 31, 2004, Putnam Management has agreed to waive fees and reimburse expenses of the fund to the extent necessary to ensure that the fund's class A shares pay total fund operating expenses at an annual rate that does not exceed the average expenses of the front-end load funds viewed by Lipper Inc. as having the same investment classification or objective as the fund (expressed in each case as a percentage of average net assets). Putnam Management has also agreed to a corresponding waiver/reimbursement with respect to each other class of shares of the fund (adjusting the Lipper category average to reflect the 12b-1 fee, if any, applicable to each such class). For these purposes, the Lipper category average will be calculated by Lipper each calendar quarter based on expense information for the most recent fiscal year of each fund included in that category, and the expense limitation will be updated as of the first business day after Lipper publishes the category average (generally shortly after the end of each calendar quarter). In addition to the fee paid to Putnam Management, the fund reimburses Putnam Management for the compensation and related expenses of certain officers of the fund and their assistants who provide certain administrative services for the fund and the other Putnam funds, each of which bears an allocated share of the foregoing costs. The aggregate amount of all such payments and reimbursements is determined annually by the Trustees. The amount of this reimbursement for the fund's most recent fiscal year is included in "Charges and Expenses" in Part I of this SAI. Putnam Management pays all other salaries of officers of the fund. The fund pays all expenses not assumed by Putnam Management including, without limitation, auditing, legal, custodial, investor servicing and shareholder reporting expenses. The fund pays the cost of typesetting for its prospectuses and the cost of printing and mailing any prospectuses sent to its shareholders. Putnam Retail Management pays the cost of printing and distributing all other prospectuses. The Management Contract provides that Putnam Management shall not be subject to any liability to the fund or to any shareholder of the fund for any act or omission in the course of or connected with rendering services to the fund in the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of its duties on the part of Putnam Management. The Management Contract may be terminated without penalty by vote of the Trustees or the shareholders of the fund, or by Putnam Management, on 30 days' written notice. It may be amended only by a vote of the shareholders of the fund. The Management Contract also terminates without payment of any penalty in the event of its assignment. The Management Contract provides that it will continue in effect only so long as such continuance is approved at least annually by vote of either the Trustees or the shareholders, and, in either case, by a majority of the Trustees who are not "interested persons" of Putnam Management or the fund. In each of the foregoing cases, the vote of the shareholders is the affirmative vote of a "majority of the outstanding voting securities" as defined in the Investment Company Act of 1940. In considering the Management Contract, the Trustees consider numerous factors they believe to be relevant, including the advisor's research and decision-making processes, the methods adopted to assure compliance with the fund's investment objectives, policies and restrictions; the level of research required to select the securities appropriate for investment by the fund; the education, experience and number of advisory personnel; the level of skill and effort required to manage the fund; the value of services provided by the advisor; the economies and diseconomies of scale reflected in the management fee; the advisor's profitability; the financial condition and stability of the advisor; the advisor's trade allocation methods; the standards and performance in seeking best execution; allocation for brokerage and research and use of soft dollars; the fund's total return performance compared with its peers. Putnam has established several management fee categories to fit the particular characteristics of different types of funds. The nature and complexity of international and global funds generally makes these funds more research intensive than funds that invest mainly in U.S. companies, due to the greater difficulty of obtaining information regarding the companies in which the fund invests, and the governmental, economic and market conditions of the various countries outside of the U.S. In addition, trade execution and settlement may be more costly than in the U.S. Conversely, the research intensity for a U.S. money market or bond fund is typically less than for a international or global fund or a U.S. equity fund due to the more ready availability of information regarding the issuer, the security, the accessibility of the trading market and the typically lower trading and execution costs. See "Portfolio Transactions - Brokerage and Research Services." The Sub-Manager Putnam Investments Limited ("PIL"), a wholly-owned subsidiary of The Putnam Advisory Company, LLC and an affiliate of Putnam Management, has been retained as the sub-manager for a portion of the assets of certain funds as determined by Putnam Management from time to time. PIL is currently authorized to serve as the sub-manager, to the extent determined by Putnam Management from time to time, for the following funds: Putnam Diversified Income Trust, Putnam Global Income Trust, Putnam High Yield Advantage Fund, Putnam High Yield Trust, Putnam Global Equity Fund, Putnam Europe Equity Fund and Putnam International Equity Fund. PIL may serve as sub-manager pursuant to the terms of a sub-management agreement between Putnam Management and PIL. PIL's address is Cassini House, 57-59 St James's Street, London, England, SW1A 1LD. Under the terms of the sub-management contract, PIL, at its own expense, furnishes continuously an investment program for that portion of each such fund that is allocated to PIL from time to time by Putnam Management and makes investment decisions on behalf of such portion of the fund, subject to the supervision of Putnam Management. Putnam Management may also, at its discretion, request PIL to provide assistance with purchasing and selling securities for the fund, including placement of orders with certain broker-dealers. PIL, at its expense, furnishes all necessary investment and management facilities, including salaries of personnel, required for it to execute its duties. The sub-management contract provides that PIL shall not be subject to any liability to Putnam Management, the fund or any shareholder of the fund for any act or omission in the course of or connected with rendering services to the fund in the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of its obligations and duties on the part of PIL. The sub-management contract may be terminated with respect to a fund without penalty by vote of the Trustees or the shareholders of the fund, or by PIL or Putnam Management, on 30 days' written notice. The sub-management contract also terminates without payment of any penalty in the event of its assignment. Subject to applicable law, it may be amended by a majority of the Trustees who are not "interested persons" of Putnam Management or the fund. The sub-management contract provides that it will continue in effect only so long as such continuance is approved at least annually by vote of either the Trustees or the shareholders, and, in either case, by a majority of the Trustees who are not "interested persons" of Putnam Management or the fund. In each of the foregoing cases, the vote of the shareholders is the affirmative vote of a "majority of the outstanding voting securities" as defined in the Investment Company Act of 1940. Portfolio Transactions Investment decisions. Investment decisions for the fund and for the other investment advisory clients of Putnam Management and its affiliates are made with a view to achieving their respective investment objectives. Investment decisions are the product of many factors in addition to basic suitability for the particular client involved. Thus, a particular security may be bought or sold for certain clients even though it could have been bought or sold for other clients at the same time. Likewise, a particular security may be bought for one or more clients when one or more other clients are selling the security. In some instances, one client may sell a particular security to another client. It also sometimes happens that two or more clients simultaneously purchase or sell the same security, in which event each day's transactions in such security are, insofar as possible, averaged as to price and allocated between such clients in a manner which in Putnam Management's opinion is equitable to each and in accordance with the amount being purchased or sold by each. There may be circumstances when purchases or sales of portfolio securities for one or more clients will have an adverse effect on other clients. Brokerage and research services. Transactions on stock exchanges, commodities markets and futures markets and other agency transactions involve the payment by the fund of negotiated brokerage commissions. Such commissions vary among different brokers. A particular broker may charge different commissions according to such factors as the difficulty and size of the transaction. Transactions in foreign investments often involve the payment of fixed brokerage commissions, which may be higher than those in the United States. The fund pays commissions on certain securities traded in the over-the-counter markets. In underwritten offerings, the price paid by the fund includes a disclosed, fixed commission or discount retained by the underwriter or dealer. It is anticipated that most purchases and sales of securities by funds investing primarily in tax-exempt securities and certain other fixed-income securities will be with the issuer or with underwriters of or dealers in those securities, acting as principal. Accordingly, those funds would not ordinarily pay significant brokerage commissions with respect to securities transactions. See "Charges and expenses" in Part I of this SAI for information concerning commissions paid by the fund. It has for many years been a common practice in the investment advisory business for advisers of investment companies and other institutional investors to receive brokerage and research services (as defined in the Securities Exchange Act of 1934, as amended (the "1934 Act")) from broker-dealers that execute portfolio transactions for the clients of such advisers and from third parties with which such broker-dealers have arrangements. Consistent with this practice, Putnam Management receives brokerage and research services and other similar services from many broker-dealers with which Putnam Management places the fund's portfolio transactions and from third parties with which these broker-dealers have arrangements. These services include such matters as economic analysis, investment research and database services, industry and company reviews, evaluations of investments, recommendations as to the purchase and sale of investments, performance measurement services, subscriptions, pricing services, quotation services, news services and computer equipment (investment-related hardware and software) utilized by Putnam Management's managers and analysts. Where the services referred to above are used by Putnam Management not exclusively for research purposes, Putnam Management, based upon its own allocations of expected use, bears that portion of the cost of these services which directly relates to their non-research use. Some of these services are of value to Putnam Management and its affiliates in advising various of their clients (including the fund), although not all of these services are necessarily useful and of value in managing the fund. The management fee paid by the fund is not reduced because Putnam Management and its affiliates receive these services even though Putnam Management might otherwise be required to purchase some of these services for cash. Putnam Management places all orders for the purchase and sale of portfolio investments for the fund and buys and sells investments for the fund through a substantial number of brokers and dealers. In so doing, Putnam Management uses its best efforts to obtain for the fund the most favorable price and execution available, except to the extent it may be permitted to pay higher brokerage commissions as described below. In seeking the most favorable price and execution, Putnam Management, having in mind the fund's best interests, considers all factors it deems relevant, including, by way of illustration, price, the size of the transaction, the nature of the market for the security or other investment, the amount of the commission, the timing of the transaction taking into account market prices and trends, the reputation, experience and financial stability of the broker-dealer involved and the quality of service rendered by the broker-dealer in other transactions. As permitted by Section 28(e) of the 1934 Act, and by the Management Contract, Putnam Management may cause the fund to pay a broker-dealer which provides "brokerage and research services" (as defined in the 1934 Act) to Putnam Management an amount of disclosed commission for effecting securities transactions on stock exchanges and other transactions for the fund on an agency basis in excess of the commission which another broker-dealer would have charged for effecting that transaction. Putnam Management's authority to cause the fund to pay any such greater commissions is subject to such policies as the Trustees may adopt from time to time. Putnam Management does not currently intend to cause the fund to make such payments. It is the position of the staff of the Securities and Exchange Commission that Section 28(e) does not apply to the payment of such greater commissions in "principal" transactions. Accordingly Putnam Management will use its best effort to obtain the most favorable price and execution available with respect to such transactions, as described above. The Management Contract provides that commissions, fees, brokerage or similar payments received by Putnam Management or an affiliate in connection with the purchase and sale of portfolio investments of the fund, less any direct expenses approved by the Trustees, shall be recaptured by the fund through a reduction of the fee payable by the fund under the Management Contract. Putnam Management seeks to recapture for the fund soliciting dealer fees on the tender of the fund's portfolio securities in tender or exchange offers. Any such fees which may be recaptured are likely to be minor in amount. Principal Underwriter Putnam Retail Management is the principal underwriter of shares of the fund and the other continuously offered Putnam funds. Putnam Retail Management is not obligated to sell any specific amount of shares of the fund and will purchase shares for resale only against orders for shares. See "Charges and expenses" in Part I of this SAI for information on sales charges and other payments received by Putnam Retail Management. Personal Investments by Employees of Putnam Management and Putnam Retail Management and Officers and Trustees of the Fund Employees of Putnam Management and Putnam Retail Management and officers and Trustees of the fund are subject to significant restrictions on engaging in personal securities transactions. These restrictions are set forth in the Codes of Ethics adopted by Putnam Management and Putnam Retail Management (The Putnam Investments' Code of Ethics) and by the fund (the Putnam Funds' Code of Ethics). The Putnam Investments' Code of Ethics and the Putnam Funds' Code of Ethics, in accordance with Rule 17j-1 of the Investment Company Act of 1940, as amended, contain provisions and requirements designed to identify and address certain conflicts of interest between personal investment activities and the interests of the fund. The Putnam Investments' Code of Ethics does not prohibit personnel from investing in securities that may be purchased or held by the fund. However, the Putnam Investments' Code, consistent with standards recommended by the Investment Company Institute's Advisory Group on Personal Investing and requirements established by Rule 17j-1, among other things, prohibits personal securities investments without pre-clearance, imposes time periods during which personal transactions may not be made in certain securities by employees with access to investment information, and requires the timely submission of broker confirmations and quarterly reporting of personal securities transactions. Additional restrictions apply to portfolio managers, traders, research analysts and others involved in the investment advisory process. The Putnam Funds' Code of Ethics incorporates and applies the restrictions of Putnam Investments' Code of Ethics to officers and Trustees of the fund who are affiliated with Putnam Investments. The Putnam Funds' Code does not prohibit unaffiliated officers and Trustees from investing in securities that may be held by the fund; however, the Putnam Funds' Code regulates the personal securities transactions of unaffiliated Trustees of the fund, including limiting the time periods during which they may personally buy and sell certain securities and requiring them to submit reports of personal securities transactions under certain circumstances. The fund's Trustees, in compliance with Rule 17j-1, approved Putnam Investments' and the Putnam Funds' Codes of Ethics and are required to approve any material changes to these Codes. The Trustees also provide continued oversight of personal investment policies and annually evaluate the implementation and effectiveness of the Codes of Ethics. Investor Servicing Agent and Custodian Putnam Investor Services, a division of Putnam Fiduciary Trust Company ("PFTC"), is the fund's investor servicing agent (transfer, plan and dividend disbursing agent), for which it receives fees that are paid monthly by the fund as an expense of all its shareholders. The fee paid to Putnam Investor Services is determined on the basis of the number of shareholder accounts and the assets of the fund. For Putnam Prime Money Market Fund the fee paid to Putnam Investor Services is 0.01% per annum. PFTC is the custodian of the fund's assets. In carrying out its duties under its custodian contract, PFTC may employ one or more subcustodians whose responsibilities include safeguarding and controlling the fund's cash and securities, handling the receipt and delivery of securities and collecting interest and dividends on the fund's investments. PFTC and any subcustodians employed by it have a lien on the securities of the fund (to the extent permitted by the fund's investment restrictions) to secure charges and any advances made by such subcustodians at the end of any day for the purpose of paying for securities purchased by the fund. The fund expects that such advances will exist only in unusual circumstances. Neither PFTC nor any subcustodian determines the investment policies of the fund or decides which securities the fund will buy or sell. PFTC pays the fees and other charges of any subcustodians employed by it. The fund pays PFTC an annual fee based on the fund's assets, securities transactions and securities holdings and reimburses PFTC for certain out-of-pocket expenses incurred by it or any subcustodian employed by it in performing custodial services. The fund may from time to time pay custodial or investor servicing agent expenses in full or in part through the placement by Putnam Management of the fund's portfolio transactions with the subcustodians or with a third party broker having an agreement with the subcustodians. See "Charges and expenses" in Part I of this SAI for information on fees and reimbursements for investor servicing and custody received by PFTC. The fees may be reduced by credits allowed by PFTC. Counsel to the Fund and the Independent Trustees Ropes & Gray LLP serves as counsel to the fund and the independent Trustees, and is located at One International Place, Boston, Massachusetts 02110. DETERMINATION OF NET ASSET VALUE The fund determines the net asset value per share of each class of shares once each day the New York Stock Exchange (the "Exchange") is open. Currently, the Exchange is closed Saturdays, Sundays and the following holidays: New Year's Day, Rev. Dr. Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, the Fourth of July, Labor Day, Thanksgiving and Christmas. The fund determines net asset value as of the close of regular trading on the Exchange, normally 4:00 p.m except that Putnam Prime Money Market Fund normally determines net asset value as of 5:00 p.m. Eastern time. However, equity options held by the fund are priced as of the close of trading at 4:10 p.m., and futures contracts on U.S. government and other fixed-income securities and index options held by the fund are priced as of their close of trading at 4:15 p.m. Securities for which market quotations are readily available are valued at prices which, in the opinion of Putnam Management, most nearly represent the market values of such securities. Currently, such prices are determined using the last reported sale price (or official closing price for certain markets) or, if no sales are reported (as in the case of some securities traded over-the-counter), the last reported bid price, except that certain securities are valued at the mean between the last reported bid and ask prices. Short-term investments having remaining maturities of 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. Liabilities are deducted from the total, and the resulting amount is divided by the number of shares of the class outstanding. Reliable market quotations are not considered to be readily available for long-term corporate bonds and notes, certain preferred stocks, tax-exempt securities, and certain foreign securities. These investments are valued at fair value on the basis of valuations furnished by pricing services, which determine valuations for normal, institutional-size trading units of such securities using methods based on market transactions for comparable securities and various relationships between securities which are generally recognized by institutional traders. If any securities held by the fund are restricted as to resale, Putnam Management determines their fair value following procedures approved by the Trustees. The fair value of such securities is generally determined as the amount which the fund could reasonably expect to realize from an orderly disposition of such securities over a reasonable period of time. The valuation procedures applied in any specific instance are likely to vary from case to case. However, consideration is generally given to the financial position of the issuer and other fundamental analytical data relating to the investment and to the nature of the restrictions on disposition of the securities (including any registration expenses that might be borne by the fund in connection with such disposition). In addition, specific factors are also generally considered, such as the cost of the investment, the market value of any unrestricted securities of the same class, the size of the holding, the prices of any recent transactions or offers with respect to such securities and any available analysts' reports regarding the issuer. Generally, trading in certain securities (such as foreign securities) is substantially completed each day at various times prior to the close of the Exchange. Currency exchange rates are normally determined at the close of trading in London, England (11:00 a.m., New York time). The closing prices for securities in markets or on exchanges outside the U.S. that close prior to the close of the Exchange may not fully reflect events that occur after such close but before the close of the Exchange. As a result, the fund has adopted fair value pricing procedures, which, among other things, require the fund to fair value such securities if there has been a movement in the U.S. market that exceeds a specified threshold. Although the threshold may be revised from time to time and the number of days on which fair value prices will be used will depend on market activity, it is possible that fair value prices will be used by the fund to a significant extent. In addition, securities held by some of the funds may be traded in foreign markets that are open for business on days that the fund is not, and the trading of such securities on those days may have an impact on the value of a shareholder's investment at a time when the shareholder cannot buy and sell shares of the fund. In addition, because of the amount of time required to collect and process trading information as to large numbers of securities issues, the values of certain securities (such as convertible bonds, U.S. government securities and tax-exempt securities) are determined based on market quotations collected prior to the close of the Exchange. Occasionally, events affecting the value of such securities may occur between the time of the determination of value and the close of the Exchange which will not be reflected in the computation of the fund's net asset value. If events materially affecting the value of such securities occur during such period, then these securities will be valued at their fair value following procedures approved by the Trustees. The funds may also value their assets at fair value under other circumstances pursuant to procedures approved by the Trustees. Money Market Funds Money market funds generally value their portfolio securities at amortized cost according to Rule 2a-7 under the Investment Company Act of 1940. Since the net income of a money market fund is declared as a dividend each time it is determined, the net asset value per share of a money market fund remains at $1.00 per share immediately after such determination and dividend declaration. Any increase in the value of a shareholder's investment in a money market fund representing the reinvestment of dividend income is reflected by an increase in the number of shares of that fund in the shareholder's account on the last business day of each month. It is expected that a money market fund's net income will normally be positive each time it is determined. However, if because of realized losses on sales of portfolio investments, a sudden rise in interest rates, or for any other reason the net income of a fund determined at any time is a negative amount, a money market fund may offset such amount allocable to each then shareholder's account from dividends accrued during the month with respect to such account. If, at the time of payment of a dividend, such negative amount exceeds a shareholder's accrued dividends, a money market fund may reduce the number of outstanding shares by treating the shareholder as having contributed to the capital of the fund that number of full and fractional shares which represent the amount of the excess. Each shareholder is deemed to have agreed to such contribution in these circumstances by his or her investment in a money market fund. HOW TO BUY SHARES Each prospectus describes briefly how investors may buy shares of the fund and identifies the share classes offered by that prospectus. Because of these different sales charges and expenses, the investment performance of the classes will vary. For more information, including your eligibility to purchase certain classes of shares, contact your investment dealer or Putnam Investor Services (at 1-800-225-1581). This section of the SAI contains more information on how to buy shares and the features of all share classes offered by Putnam funds. These features include the sales charges and contingent deferred sales charges (CDSCs) payable by investors, the conditions under which those charges may be reduced, and the sales charges, commissions and other amounts payable by Putnam Retail Management to investment dealers. As set forth under the following sub-headings of this section, some features apply to all classes, while others apply only to certain classes: * General Information describes how to buy shares, identifies the classes, describes ways of reducing sales charges that apply to all classes and describes certain payments to investment dealers. * Additional Information about Class A and Class M Shares describes the allocation of initial sales charges between Putnam Retail Management and investment dealers, ways of reducing those sales charges, the CDSC payable by purchasers of $1 million or more of class A shares and the commissions on those purchases payable by Putnam Retail Management to investment dealers. * Additional Information about Class B, Class C and Class R Shares describes the commissions payable by Putnam Retail Management to investment dealers. * Putnam Prime Money Market Fund describes the special procedures applicable to that fund. Information in the other sections listed above is not applicable to that fund. General Information The fund is currently making a continuous offering of its shares. The fund receives the entire net asset value of shares sold. The fund will accept unconditional orders for shares to be executed at the public offering price based on the net asset value per share next determined after the order is placed. In the case of class A shares and class M shares, the public offering price is the net asset value plus the applicable sales charge, if any. (The public offering price is thus calculable by dividing the net asset value by 100% minus the sales charge, expressed as a percentage.) No sales charge is included in the public offering price of other classes of shares. In the case of orders for purchase of shares placed through dealers, the public offering price will be based on the net asset value determined on the day the order is placed, but only if the dealer or a registered transfer agent or registered clearing agent receives the order, together with all required identifying information, before the close of regular trading on the Exchange. If the dealer or registered transfer agent or registered clearing agent receives the order after the close of the Exchange, the price will be based on the net asset value next determined. If funds for the purchase of shares are sent directly to Putnam Investor Services, they will be invested at the public offering price based on the net asset value next determined after all required identifying information has been collected. Payment for shares of the fund must be in U.S. dollars; if made by check, the check must be drawn on a U.S. bank. Initial and subsequent purchases must satisfy the minimums stated in the prospectus, except that (i) individual investments under certain employee benefit plans or Tax Qualified Retirement Plans may be lower, (ii) persons who are already shareholders may make additional purchases of $50 or more by sending funds directly to Putnam Investor Services (see "Your investing account" below), and (iii) for investors participating in systematic investment plans and military allotment plans, the initial and subsequent purchases must be $25 or more. Information about these plans is available from investment dealers or from Putnam Investor Services. As a convenience to investors, shares may be purchased through a systematic investment plan. Pre-authorized monthly, semimonthly or weekly bank drafts for a fixed amount (at least $25) are used to purchase fund shares at the applicable public offering price next determined after Putnam Retail Management receives the proceeds from the draft. A shareholder may choose any day of the month or week for these drafts, but if the date falls on a weekend or holiday, the draft will be processed on the next business day. Further information and application forms are available from investment dealers or from Putnam Retail Management. Distributions to be reinvested are reinvested without a sales charge in shares of the same class as of the ex-dividend date using the net asset value determined on that date, and are credited to a shareholder's account on the payment date. Dividends for Putnam money market funds are credited to a shareholder's account on the payment date. Distributions for all other funds that declare a distribution daily are reinvested without a sales charge as of the last day of the period for which distributions are paid using the net asset value determined on that date, and are credited to a shareholder's account on the payment date. Payment in securities. In addition to cash, the fund may accept securities as payment for fund shares at the applicable net asset value. Generally, the fund will only consider accepting securities to increase its holdings in a portfolio security, or if Putnam Management determines that the offered securities are a suitable investment for the fund and in a sufficient amount for efficient management. While no minimum has been established, it is expected that the fund would not accept securities with a value of less than $100,000 per issue as payment for shares. The fund may reject in whole or in part any or all offers to pay for purchases of fund shares with securities, may require partial payment in cash for such purchases to provide funds for applicable sales charges, and may discontinue accepting securities as payment for fund shares at any time without notice. The fund will value accepted securities in the manner described in the section "Determination of Net Asset Value" for valuing shares of the fund. The fund will only accept securities which are delivered in proper form. The fund will not accept options or restricted securities as payment for shares. The acceptance of securities by certain funds in exchange for fund shares is subject to additional requirements. For federal income tax purposes, a purchase of fund shares with securities will be treated as a sale or exchange of such securities on which the investor will generally realize a taxable gain or loss. The processing of a purchase of fund shares with securities involves certain delays while the fund considers the suitability of such securities and while other requirements are satisfied. For information regarding procedures for payment in securities, contact Putnam Retail Management. Investors should not send securities to the fund except when authorized to do so and in accordance with specific instructions received from Putnam Retail Management. Class A shares and class M shares are generally sold with a sales charge payable at the time of purchase (except for class A shares and class M shares of money market funds). As used in this SAI and unless the context requires otherwise, the term "class A shares" includes shares of funds that offer only one class of shares. The prospectus contains a table of applicable sales charges. Class B shares and class C shares are generally sold subject to a CDSC payable upon redemption within a specified period after purchase. The prospectus contains a table of applicable CDSCs. CDSCs on shares sold outside the United States may differ. Class B shares will automatically convert into class A shares at the end of the month eight years after the purchase date. Class B shares acquired by exchanging class B shares of another Putnam fund will convert into class A shares based on the time of the initial purchase. Class B shares acquired through reinvestment of distributions will convert into Class A shares based on the date of the initial purchase to which such shares relate. For this purpose, class B shares acquired through reinvestment of distributions will be attributed to particular purchases of class B shares in accordance with such procedures as the Trustees may determine from time to time. The conversion of class B shares to class A shares is subject to the condition that such conversions will not constitute taxable events for Federal tax purposes. Class T shares are sold at net asset value without a sales charge or CDSC. See the prospectus that offers class T shares for more information. Class R shares, which are not subject to sales charges or a CDSC, are available only to certain defined contribution plans. Class Y shares, which are not subject to sales charges or a CDSC, are available only to certain defined contribution plans, college savings plans, bank trust departments and trust companies. See the prospectus that offers class Y shares for more information. Sales without sales charges, contingent deferred sales charges or short-term trading fees. The fund may sell shares without a sales charge or CDSC to: (i) current and former Trustees of the fund, their family members, business and personal associates; current and former employees of Putnam Management and certain corporate affiliates, their family members, business and personal associates; employee benefit plans for the foregoing; and partnerships, trusts or other entities in which any of the foregoing has a substantial interest; (ii) employer-sponsored retirement plans, for the repurchase of shares in connection with repayment of plan loans made to plan participants (if the sum loaned was obtained by redeeming shares of a Putnam fund sold with a sales charge) (not offered by tax-exempt funds); (iii) clients of administrators of tax-qualified employer-sponsored retirement plans which have entered into agreements with Putnam Retail Management (not offered by tax-exempt funds); (iv) registered representatives and other employees of broker-dealers having sales agreements with Putnam Retail Management; employees of financial institutions having sales agreements with Putnam Retail Management or otherwise having an arrangement with any such broker-dealer or financial institution with respect to sales of fund shares; and their family members (Putnam Retail Management is regarded as the dealer of record for all such accounts); (v) investors meeting certain requirements who sold shares of certain Putnam closed-end funds pursuant to a tender offer by such closed-end fund; (vi) a trust department of any financial institution purchasing shares of the fund in its capacity as trustee of any trust (other than a tax-qualified retirement plan trust), through an arrangement approved by Putnam Retail Management, if the value of the shares of the fund and other Putnam funds purchased or held by all such trusts exceeds $1 million in the aggregate; and (vii) "wrap accounts" maintained for clients of broker-dealers, financial institutions or financial intermediaries who have entered into agreements with Putnam Retail Management with respect to such accounts, which in all cases shall be subject to a wrap fee economically comparable to a sales charge. Fund shares offered pursuant to this waiver may not be advertised as "no load," or otherwise offered for sale at NAV without a wrap fee. The fund may issue its shares at net asset value without an initial sales charge or a CDSC in connection with the acquisition of substantially all of the securities owned by other investment companies or personal holding companies. The CDSC will be waived on redemptions to pay premiums for insurance under Putnam's insured investor program. Investors who set up an Systematic Withdrawal Plan ("SWP") for a share account (see "Plans available to shareholders -- Systematic Withdrawal Plan") may withdraw through the SWP up to 12% of the net asset value of the account (calculated as set forth below) each year without incurring any CDSC. Shares not subject to a CDSC (such as shares representing reinvestment of distributions) will be redeemed first and will count toward the 12% limitation. If there are insufficient shares not subject to a CDSC, shares subject to the lowest CDSC liability will be redeemed next until the 12% limit is reached. The 12% figure is calculated on a pro rata basis at the time of the first payment made pursuant to an SWP and recalculated thereafter on a pro rata basis at the time of each SWP payment. Therefore, shareholders who have chosen an SWP based on a percentage of the net asset value of their account of up to 12% will be able to receive SWP payments without incurring a CDSC. However, shareholders who have chosen a specific dollar amount (for example, $100 per month from the fund that pays income distributions monthly) for their periodic SWP payment should be aware that the amount of that payment not subject to a CDSC may vary over time depending on the net asset value of their account. For example, if the net asset value of the account is $10,000 at the time of payment, the shareholder will receive $100 free of the CDSC (12% of $10,000 divided by 12 monthly payments). However, if at the time of the next payment the net asset value of the account has fallen to $9,400, the shareholder will receive $94 free of any CDSC (12% of $9,400 divided by 12 monthly payments) and $6 subject to the lowest applicable CDSC. This SWP privilege may be revised or terminated at any time. No CDSC is imposed on the redemption of shares of any class subject to a CDSC to the extent that the shares redeemed (i) are no longer subject to the holding period therefor, (ii) resulted from reinvestment of distributions, or (iii) were exchanged for shares of another Putnam fund, provided that the shares acquired in such exchange or subsequent exchanges (including shares of a Putnam money market fund) will continue to remain subject to the CDSC, if applicable, until the applicable holding period expires. In determining whether the CDSC applies to each redemption, shares not subject to a CDSC are redeemed first. The fund will waive any CDSC on redemptions, in the case of individual, joint or Uniform Transfers to Minors Act accounts, in the event of death or post-purchase disability of a shareholder, for the purpose of paying benefits pursuant to tax-qualified retirement plans ("Benefit Payments"), or, in the case of living trust accounts, in the event of the death or post-purchase disability of the settlor of the trust. Benefit Payments currently include, without limitation, (1) distributions from an IRA due to death or post-purchase disability, (2) a return of excess contributions to an IRA or 401(k) plan, and (3) distributions from retirement plans qualified under Section 401(a) of the Code or from a 403(b) plan due to death, disability, retirement or separation from service. These waivers may be changed at any time. The short-term trading fee may not apply in certain circumstances, such as redemptions on certain omnibus accounts, including accounts established as part of a Section 529 college savings plan, transactions in connection with periodic portfolio rebalancings of certain wrap accounts, automatic rebalancing arrangements entered into by Putnam Retail Management and dealers, and Systematic Withdrawal Plan redemptions. A short-term trading fee will also not be imposed in cases of shareholder death or post-purchase disability or other circumstances in which a CDSC would be waived as stated above. Additional Information About Class A and Class M Shares The underwriter's commission is the sales charge shown in the prospectus less any applicable dealer discount. Putnam Retail Management will give dealers ten days' notice of any changes in the dealer discount. Putnam Retail Management retains the entire sales charge on any retail sales made by it. Putnam Retail Management offers several plans by which an investor may obtain reduced sales charges on purchases of class A shares and class M shares. The variations in sales charges reflect the varying efforts required to sell shares to separate categories of purchasers. These plans may be altered or discontinued at any time. The public offering price of class A and class M shares is the net asset value plus a sales charge that varies depending on the size of your purchase (calculable as described above). The fund receives the net asset value. The sales charge is allocated between your investment dealer and Putnam Retail Management as shown in the following table, except when Putnam Retail Management, in its discretion, allocates the entire amount to your investment dealer. For Growth Funds, Blend Funds, Value Funds and Asset Allocation Funds only:
CLASS A CLASS M Amount of Amount of Sales charge sales charge Sales charge sales charge as a reallowed to as a reallowed to percentage dealers as a percentage dealers as a Amount of transaction of offering percentage of of offering percentage of at offering price ($) price offering price price offering price - ------------------------------------------------------------------------------------- Under 50,000 5.25% 5.00% 3.50% 3.00% 50,000 but under 100,000 4.00 2.75 2.50 2.00 100,000 but under 250,000 3.00 2.75 1.50 1.00 250,000 but under 500,000 2.25 2.00 1.00 1.00 500,000 but under 1,000,000 2.00 1.75 NONE NONE 1,000,000 and above NONE NONE NONE NONE - -------------------------------------------------------------------------------------
For Income Funds only (except for Putnam Floating Rate Income Fund and Putnam Intermediate U.S. Government Income Fund): CLASS A CLASS M Amount of Amount of Sales charge sales charge Sales charge sales charge as a reallowed to as a reallowed to percentage dealers as a percentage dealers as a Amount of transaction of offering percentage of of offering percentage of at offering price ($) price offering price price offering price - ------------------------------------------------------------------------------------- Under 50,000 4.50% 4.25% 3.25% 3.00% 50,000 but under 100,000 4.25 4.00 2.25 2.00 100,000 but under 250,000 3.25 3.00 1.50 1.25 250,000 but under 500,000 2.50 2.25 1.00 1.00 500,000 but under 1,000,000 2.00 1.75 NONE NONE 1,000,000 and above NONE NONE NONE NONE - -------------------------------------------------------------------------------------
For Putnam Floating Rate Income Fund and Putnam Intermediate U.S. Government Income Fund only: CLASS A CLASS M Amount of Amount of Sales charge sales charge Sales charge sales charge as a reallowed to as a reallowed to percentage dealers as a percentage dealers as a Amount of transaction of offering percentage of of offering percentage of at offering price ($) price offering price price offering price - ------------------------------------------------------------------------------------- Under 100,000 3.25% 3.00% 2.00% 1.80% 100,000 but under 250,000 2.50 2.25 1.50 1.30 250,000 but under 500,000 2.00 1.75 1.00 1.00 500,000 but under 1,000,000 1.50 1.25 NONE NONE 1,000,000 and above NONE NONE NONE NONE - -------------------------------------------------------------------------------------
For Tax Free Funds only: CLASS A CLASS M Amount of Amount of Sales charge sales charge Sales charge sales charge as a reallowed to as a reallowed to percentage dealers as a percentage dealers as a Amount of transaction of offering percentage of of offering percentage of at offering price ($) price offering price price offering price - ------------------------------------------------------------------------------------- Under 25,000 4.50% 4.50% 3.25% 3.00% 25,000 but under 50,000 4.25 4.25 3.25 3.00 50,000 but under 100,000 4.25 4.25 2.25 2.00 100,000 but under 250,000 3.50 3.50 1.50 1.25 250,000 but under 500,000 2.75 2.75 1.00 1.00 500,000 but under 1,000,000 2.00 1.85 NONE NONE 1,000,000 and above NONE NONE NONE NONE - -------------------------------------------------------------------------------------
Combined purchase privilege. The following persons may qualify for the sales charge reductions or eliminations shown in the prospectus by combining into a single transaction the purchase of class A shares or class M shares with other purchases of any class of shares by such persons: (i) an individual, or a "company" as defined in Section 2(a)(8) of the Investment Company Act of 1940 (which includes corporations which are corporate affiliates of each other); (ii) an individual, his or her spouse and their children under twenty-one, purchasing for his, her or their own account; (iii) a trustee or other fiduciary purchasing for a single trust estate or single fiduciary account (including a pension, profit-sharing, or other employee benefit trust created pursuant to a plan qualified under Section 401 of the Internal Revenue Code of 1986, as amended (the "Code"); (iv) tax-exempt organizations qualifying under Section 501(c)(3) of the Internal Revenue Code (not including tax-exempt organizations qualifying under Section 403(b)(7) (a "403(b) plan") of the Code; and (v) employee benefit plans of a single employer or of affiliated employers, other than 403(b) plans. A combined purchase currently may also include shares of any class of other continuously offered Putnam funds (other than money market funds) purchased at the same time, if the dealer places the order for such shares directly with Putnam Retail Management. Right of accumulation. A purchaser of class A shares or class M shares may qualify for a right of accumulation discount by combining all current purchases by such person with the value of certain other shares of any class of Putnam funds already owned. In the case of an individual purchaser, all current purchases made or already owned by the individual's spouse and children under the age of 21 may be combined with the individual's current purchases. The applicable sales charge is based on the total of: (i) the investor's current purchase(s); and (ii) the maximum public offering price (at the close of business on the previous day) of: (a) all shares held in accounts registered to the investor and other accounts eligible to be linked to the investor's accounts (as described below) in all of the Putnam funds (except closed-end and money market funds, unless acquired as described in (b) below); and (b) any shares of money market funds acquired by exchange from other Putnam funds Account types eligible to be linked for the purpose of qualifying for a right of accumulation discount include the following (in each case as registered to the investor, his or her spouse and his or her children under the age of 21): (i) individual accounts; (ii) joint accounts; (iii) accounts established as part of a plan established pursuant to Section 403(b) of the Internal Revenue Code of 1986, as amended ("403(b) plans") or an IRA other than a Simple IRA, SARSEP or SEP IRA; (iv) shares owned through accounts in the name of the investor's (or spouse's or minor child's) dealer or other financial intermediary (with documentation identifying to the satisfaction of Putnam Investor Services the beneficial ownership of such shares); and (v) accounts established as part of a Section 529 college savings plan managed by Putnam Management Putnam Investor Services automatically links accounts the registrations of which are under the same last name and address. Shares owned as part of an employee benefit plan of a single employer or of affiliated employers (other than 403(b) plans) or a single fiduciary account opened by a trustee or other fiduciary (including a pension, profit-sharing, or other employee benefit trust created pursuant to a plan qualified under Section 401 of the Internal Revenue Code) are not eligible for linking to qualify for the right of accumulation discount, although all current purchases made by each such plan may be combined for purposes of determining the sales charge applicable to shares purchased at such time by the plan. To obtain the right of accumulation discount on a purchase through an investment dealer, when each purchase is made the investor or dealer must provide Putnam Retail Management with sufficient information to verify that the purchase qualifies for the privilege or discount. The shareholder must furnish this information to Putnam Investor Services when making direct cash investments. Sales charge discounts under a right of accumulation apply only to current purchases. No credit is given for any higher sales charge paid with respect to previous purchases for the investor's account or any linked accounts. Statement of Intention. Investors may also obtain the reduced sales charges for class A shares or class M shares shown in the prospectus for investments of a particular amount by means of a written Statement of Intention, which expresses the investor's intention to invest that amount (including certain "credits," as described below) within a period of 13 months in shares of any class of the fund or any other continuously offered Putnam fund (excluding money market funds). Each purchase of class A shares or class M shares under a Statement of Intention will be made at the public offering price applicable at the time of such purchase to a single transaction of the total dollar amount indicated in the Statement of Intention. A Statement of Intention may include purchases of shares made not more than 90 days prior to the date that an investor signs a Statement; however, the 13-month period during which the Statement of Intention is in effect will begin on the date of the earliest purchase to be included. An investor may receive a credit toward the amount indicated in the Statement of Intention equal to the maximum public offering price as of the close of business on the previous day of all shares he or she owns on the date of the Statement of Intention which are eligible for purchase under a Statement of Intention (plus any shares of money market funds acquired by exchange of such eligible shares). Investors do not receive credit for shares purchased by the reinvestment of distributions. Investors qualifying for the "combined purchase privilege" (see above) may purchase shares under a single Statement of Intention. The Statement of Intention is not a binding obligation upon the investor to purchase the full amount indicated. The minimum initial investment under a Statement of Intention is 5% of such amount, and must be invested immediately. Class A shares or class M shares purchased with the first 5% of such amount will be held in escrow to secure payment of the higher sales charge applicable to the shares actually purchased if the full amount indicated is not purchased. When the full amount indicated has been purchased, the escrow will be released. If an investor desires to redeem escrowed shares before the full amount has been purchased, the shares will be released from escrow only if the investor pays the sales charge that, without regard to the Statement of Intention, would apply to the total investment made to date. To the extent that an investor purchases more than the dollar amount indicated on the Statement of Intention and qualifies for a further reduced sales charge, the sales charge will be adjusted for the entire amount purchased at the end of the 13-month period, upon recovery from the investor's dealer of its portion of the sales charge adjustment. Once received from the dealer, which may take a period of time or may never occur, the sales charge adjustment will be used to purchase additional shares at the then current offering price applicable to the actual amount of the aggregate purchases. These additional shares will not be considered as part of the total investment for the purpose of determining the applicable sales charge pursuant to the Statement of Intention. No sales charge adjustment will be made unless and until the investor's dealer returns any excess commissions previously received. To the extent that an investor purchases less than the dollar amount indicated on the Statement of Intention within the 13-month period, the sales charge will be adjusted upward for the entire amount purchased at the end of the 13-month period. This adjustment will be made by redeeming shares from the account to cover the additional sales charge, the proceeds of which will be paid to the investor's dealer and Putnam Retail Management in accordance with the prospectus. Putnam Retail Management will make a corresponding downward adjustment to the amount of the reallowance payable to the dealer with respect to purchases made prior to the investor's failure to fulfill the conditions of the Statement of Intention. If the account exceeds an amount that would otherwise qualify for a reduced sales charge, that reduced sales charge will be applied. Adjustments to sales charges and dealer reallowances will not be made in the case of the shareholder's death prior to the expiration of the 13-month period. Statements of Intention are not available for certain employee benefit plans. Statement of Intention forms may be obtained from Putnam Retail Management or from investment dealers. In addition, shareholders may complete the applicable portion of the fund's standard account application. Interested investors should read the Statement of Intention carefully. Group purchases of class A and class M shares. Members of qualified groups may purchase class A shares of the fund at a group sales charge rate of 4.50% of the public offering price (4.71% of the net amount invested). The dealer discount on such sales is 3.75% of the offering price. Members of qualified groups may also purchase class M shares at net asset value. To receive the class A or class M group rate, group members must purchase shares through a single investment dealer designated by the group. The designated dealer must transmit each member's initial purchase to Putnam Retail Management, together with payment and completed application forms. After the initial purchase, a member may send funds for the purchase of shares directly to Putnam Investor Services. Purchases of shares are made at the public offering price based on the net asset value next determined after Putnam Retail Management or Putnam Investor Services receives payment for the shares. The minimum investment requirements described above apply to purchases by any group member. Only shares purchased under the class A group discount are included in calculating the purchased amount for the purposes of these requirements. Qualified groups include the employees of a corporation or a sole proprietorship, members and employees of a partnership or association, or other organized groups of persons (the members of which may include other qualified groups) provided that: (i) the group has at least 25 members of which, with respect to the class A discount only, at least 10 members participate in the initial purchase; (ii) the group has been in existence for at least six months; (iii) the group has some purpose in addition to the purchase of investment company shares at a reduced sales charge; (iv) the group's sole organizational nexus or connection is not that the members are credit card holders of a company, policy holders of an insurance company, customers of a bank or broker-dealer, clients of an investment adviser or security holders of a company; (v) with respect to the class A discount only, the group agrees to provide its designated investment dealer access to the group's membership by means of written communication or direct presentation to the membership at a meeting on not less frequently than an annual basis; (vi) the group or its investment dealer will provide annual certification in form satisfactory to Putnam Investor Services that the group then has at least 25 members and, with respect to the class A discount only, that at least ten members participated in group purchases during the immediately preceding 12 calendar months; and (vii) the group or its investment dealer will provide periodic certification in form satisfactory to Putnam Investor Services as to the eligibility of the purchasing members of the group. Members of a qualified group include: (i) any group which meets the requirements stated above and which is a constituent member of a qualified group; (ii) any individual purchasing for his or her own account who is carried on the records of the group or on the records of any constituent member of the group as being a good standing employee, partner, member or person of like status of the group or constituent member; or (iii) any fiduciary purchasing shares for the account of a member of a qualified group or a member's beneficiary. For example, a qualified group could consist of a trade association which would have as its members individuals, sole proprietors, partnerships and corporations. The members of the group would then consist of the individuals, the sole proprietors and their employees, the members of the partnerships and their employees, and the corporations and their employees, as well as the trustees of employee benefit trusts acquiring class A shares for the benefit of any of the foregoing. A member of a qualified group may, depending upon the value of class A shares of the fund owned or proposed to be purchased by the member, be entitled to purchase class A shares of the fund at non-group sales charge rates shown in the prospectus which may be lower than the group sales charge rate, if the member qualifies as a person entitled to reduced non-group sales charges. Such a group member will be entitled to purchase at the lower rate if, at the time of purchase, the member or his or her investment dealer furnishes sufficient information for Putnam Retail Management or Putnam Investor Services to verify that the purchase qualifies for the lower rate. Interested groups should contact their investment dealer or Putnam Retail Management. The fund reserves the right to revise the terms of or to suspend or discontinue group sales at any time. Purchases of $1 million or more of Class A shares. Purchases of class A shares of $1 million or more are not subject to an initial sales charge, but shares purchased by investors other than qualified benefit plans are subject to a CDSC of 1.00% or 0.50% if redeemed before the first or second anniversary, respectively, of purchase, unless the dealer of record has, with Putnam Retail Management's approval, waived its commission or agreed to refund its commission to Putnam Retail Management if a CDSC would otherwise apply. On sales at net asset value to a class A qualified benefit plan, Putnam Retail Management pays commissions to the dealer of record at the time of the sale on net monthly purchases up to the following rates: 1.00% of the first $1 million, 0.75% of the next $1 million and 0.50% thereafter. On sales at net asset value to other investors, Putnam Retail Management pays commissions on sales during the one-year period beginning with the date of the initial purchase at net asset value. Each subsequent one-year measuring period for these purposes begins with the first net asset value purchase following the end of the prior period. These commissions are paid at the rate of 1.00% of the amount under $3 million, 0.50% of the next $47 million and 0.25% thereafter. Purchases of less than $1 million of Class A shares for rollover IRAs. Purchases of class A shares for a Putnam Rollover IRA that is not part of a Class A qualified benefit plan addressed above, including Putnam Rollover IRAs for which Putnam Retail Management or an affiliate is the dealer of record, with less than $1 million in proceeds from a retirement plan for which a Putnam fund is an investment option are not subject to an initial sales charge or CDSC. Putnam Retail Management or Putnam Investor services may pay commissions or finders' fees of up to 1.00% of the proceeds for such Putnam Rollover IRA purchases to the dealer of record. Purchases of Class M shares for rollover IRAs. Purchases of class M shares for a Putnam Rollover IRA with proceeds in any amount from a retirement plan for which a Putnam fund is an investment option are not subject to an initial sales charge but may be subject to a CDSC on shares redeemed within one year of purchase at the rates set forth below, which are equal to commissions Putnam Retail Management pays to the dealer of record at the time of the sale of class M shares. These purchases will not be subject to a CDSC if the dealer of record has, with Putnam Retail Management's approval, waived its commission or agreed to refund its commission to Putnam Retail Management if a CDSC would otherwise apply. Class M CDSC and dealer commission ---------------------------------- All growth, blend, value and asset allocation funds: 0.65% All income funds (except Putnam Money Market Fund): 0.40% Putnam Money Market Fund 0.15% Additional Information About Class B, Class C and Class R Shares Except as noted below, Putnam Retail Management will pay a 4% commission on sales of class B shares of the fund only to those financial intermediaries who have entered into service agreements with Putnam Retail Management. For tax-exempt funds, this commission includes a 0.20% pre-paid service fee (except for Putnam Municipal Income Fund, Putnam Tax-Free High Yield Fund and Putnam Tax-Free Insured Fund, each of which has a 0.25% pre-paid service fee). For Putnam Floating Rate Income Fund and Putnam Intermediate U.S. Government Income Fund, Putnam Retail Management will pay a 2.75% commission to financial intermediaries selling class B shares of the fund. Putnam Retail Management pays financial intermediaries a 1.00% commission on sales of class C shares of a fund, and may, at its discretion, pay financial intermediaries up to a 1.00% commission on sales of class R shares of a fund. Putnam Retail Management will retain any CDSC imposed on redemptions of class B and class C shares to compensate it for the cost of paying the up-front commissions paid to financial intermediaries for class B or class C share sales. Purchases of class C shares may be made without a CDSC if the dealer of record has, with Putnam Retail Management's approval, waived its commission or agreed to refund its commission to Putnam Retail Management. Commissions may vary on sales outside the United States. Putnam Prime Money Market Fund The fund makes a continuous offering of its shares. Shares of the fund are sold at the net asset value per share next determined after confirmation of a completed purchase order by Putnam Investor Services. As the fund is designed for institutional investors, the share classes offered and the terms and conditions of buying them vary from other Putnam funds. The fund's prospectus contains detailed information on these terms and conditions. Payment for shares must be in federal funds or other immediately available funds. No initial or contingent deferred sales charges apply to shares of the fund. DISTRIBUTION PLANS If the fund or a class of shares of the fund has adopted a distribution plan, the prospectus describes the principal features of the plan. This SAI contains additional information which may be of interest to investors. Continuance of a plan is subject to annual approval by a vote of the Trustees, including a majority of the Trustees who are not interested persons of the fund and who have no direct or indirect interest in the plan or related arrangements (the "Qualified Trustees"), cast in person at a meeting called for that purpose. All material amendments to a plan must be likewise approved by the Trustees and the Qualified Trustees. No plan may be amended in order to increase materially the costs which the fund may bear for distribution pursuant to such plan without also being approved by a majority of the outstanding voting securities of the fund or the relevant class of the fund, as the case may be. A plan terminates automatically in the event of its assignment and may be terminated without penalty, at any time, by a vote of a majority of the Qualified Trustees or by a vote of a majority of the outstanding voting securities of the fund or the relevant class of the fund, as the case may be. Putnam Retail Management compensates qualifying dealers (including, for this purpose, certain financial institutions) for sales of shares and the maintenance of shareholder accounts. Putnam Retail Management may suspend or modify its payments to dealers. The payments are also subject to the continuation of the relevant distribution plan, the terms of the service agreements between the dealers and Putnam Retail Management and any applicable limits imposed by the National Association of Securities Dealers, Inc. Financial institutions receiving payments from Putnam Retail Management as described above may be required to comply with various state and federal regulatory requirements, including among others those regulating the activities of securities brokers or dealers. Except as otherwise agreed between Putnam Retail Management and a dealer, for purposes of determining the amounts payable to dealers for shareholder accounts for which such dealers are designated as the dealer of record, "average net asset value" means the product of (i) the average daily share balance in such account(s) and (ii) the average daily net asset value of the relevant class of shares over the quarter. Class A shares: Putnam Retail Management makes quarterly (or in certain cases monthly) payments to dealers at the annual rates set forth below (as a percentage of the average net asset value of class A shares for which such dealers are designated the dealer of record) except as described below. No payments are made during the first year after purchase on shares purchased at net asset value by shareholders that invest at least $1 million or that are class A qualified benefit plans, unless the shareholder has made arrangements with Putnam Retail Management and the dealer of record has waived the sales commission.
Rate Fund - ---- ---- 0.25% All funds currently making payments under a class A distribution plan, except for those listed below 0.20% Putnam Tax-Free High Yield Fund Putnam Tax-Free Insured Fund 0.20% for shares purchased on or before 12/31/89; Putnam Convertible Income-Growth Trust 0.25% for shares purchased after 12/31/89 The George Putnam Fund of Boston Putnam Global Equity Fund (formerly Putnam Global Growth Fund) Putnam Global Natural Resources Fund Putnam Health Sciences Trust The Putnam Fund for Growth and Income Putnam Investors Fund Putnam Vista Fund Putnam Voyager Fund 0.20% for shares purchased on or before 3/31/90; Putnam High Yield Trust 0.25% for shares purchased after 3/31/90 Putnam U.S. Government Income Trust 0.20% for shares purchased on or before 1/1/90; Putnam Equity Income Fund 0.25% for shares purchased after 1/1/90 0.20% for shares purchased on or before 3/31/91; Putnam Income Fund 0.25% for shares purchased after 3/31/91 0.20% for shares purchased on or before 5/7/92; Putnam Municipal Income Fund 0.25% for shares purchased after 5/7/92 0.15% for shares purchased on or before 3/6/92; Putnam Michigan Tax Exempt Income Fund 0.20% for shares purchased after 3/6/92 Putnam Minnesota Tax Exempt Income Fund Putnam Ohio Tax Exempt Income Fund 0.15% for shares purchased on or before 5/11/92; Putnam Massachusetts Tax Exempt Income Fund 0.20% for shares purchased after 5/11/92 0.15% for shares purchased on or before 7/12/92; Putnam New York Tax Exempt Opportunities Fund 0.20% for shares purchased after 7/12/92 0.15% for shares purchased on or before 12/31/92; Putnam California Tax Exempt Income Fund 0.20% for shares purchased after 12/31/92 Putnam New Jersey Tax Exempt Income Fund Putnam New York Tax Exempt Income Fund Putnam Tax Exempt Income Fund 0.15% for shares purchased on or before 3/5/93; Putnam Arizona Tax Exempt Income Fund 0.20% for shares purchased after 3/5/93 0.15% for shares purchased on or before 7/8/93; Putnam Florida Tax Exempt Income Fund 0.20% for shares purchased after 7/8/93 Putnam Pennsylvania Tax Exempt Income Fund 0.00% Putnam Money Market Fund Putnam Tax Exempt Money Market Fund
Class B shares: Putnam Retail Management makes quarterly (or in certain cases monthly) payments to dealers at the annual rates set forth below (as a percentage of the average net asset value of class B shares for which such dealers are designated the dealer of record).
Rate Fund - ---- ---- 0.25% All funds currently making payments under a class B distribution plan, except for those listed below 0.25%, except that the first Putnam Municipal Income Fund year's service fees of 0.25% Putnam Tax-Free Insured Fund are prepaid at time of sale Putnam Tax-Free High Yield 0.20% , except that the first Putnam Arizona Tax Exempt Income Fund year's service fees of 0.20% Putnam California Tax Exempt Income Fund are prepaid at time of sale Putnam Florida Tax Exempt Income Fund Putnam Massachusetts Tax Exempt Income Fund Putnam Michigan Tax Exempt Income Fund Putnam Minnesota Tax Exempt Income Fund Putnam New Jersey Tax Exempt Income Fund Putnam New York Tax Exempt Income Fund Putnam New York Tax Exempt Opportunities Fund Putnam Ohio Tax Exempt Income Fund Putnam Pennsylvania Tax Exempt Income Fund Putnam Tax Exempt Income Fund 0.00% Putnam Money Market Fund
Class C shares: Putnam Retail Management makes quarterly (or in certain cases monthly) payments to dealers at the annual rates set forth below (as a percentage of the average net asset value of class C shares for which such dealers are designated the dealer of record). No payments are made during the first year after purchase unless the shareholder has made arrangements with Putnam Retail Management and the dealer of record has waived the sales commission.
Rate Fund - ---- ---- 1.00% All funds currently making payments under a class C distribution plan, except the fund listed below 0.50% Putnam Money Market Fund Different rates may apply to shares sold outside the United States.
Class M shares: Putnam Retail Management makes quarterly (or in certain cases monthly) payments to dealers at the annual rates set forth below (as a percentage of the average net asset value of class M shares for which such dealers are designated the dealer of record), except as follows. No payments are made during the first year after purchase on shares purchased at net asset value for Putnam Rollover IRAs, unless the dealer of record has waived the sales commission.
Rate Fund - ---- ---- 0.65% All growth, blend, value and asset allocation funds currently making payments under a class M distribution plan 0.40% All income funds currently making payments under a class M distribution plan (except for Putnam Money Market Fund) 0.15% Putnam Money Market Fund
Class R shares: Putnam Retail Management makes quarterly (or in certain cases monthly) payments to dealers at the annual rates set forth below (as a percentage of the average net asset value of class R shares for which such dealers are designated the dealer of record).
Rate Fund - ---- ---- 0.50% All funds currently making payments under a class R distribution plan A portion of the Class R distribution fee payable to dealers may be paid to third parties who provide services to plans investing in Class R shares and participants in such plans.
Class T shares: Putnam Retail Management makes quarterly (or in certain cases monthly) payments to dealers at the annual rates set forth below (as a percentage of the average net asset value of class T shares for which such dealers are designated the dealer of record). Rate Fund - ---- ---- 0.25% Putnam Money Market Fund Class S Shares Putnam Retail Management makes quarterly (or in certain cases monthly) payments to dealers at the annual rates set forth below (as a percentage of the average net asset value of class S shares for which such dealers are designated the dealer of record). Rate Fund - ---- ---- 0.10% Putnam Prime Money Market Fund INVESTOR SERVICES Shareholder Information Each time shareholders buy or sell shares, they will receive a statement confirming the transaction and listing their current share balance. (Under certain investment plans, a statement may only be sent quarterly.) Shareholders will receive a statement confirming reinvestment of distributions in additional fund shares (or in shares of other Putnam funds for Dividends Plus accounts) promptly following the quarter in which the reinvestment occurs. To help shareholders take full advantage of their Putnam investment, they will receive a Welcome Kit and a periodic publication covering many topics of interest to investors. The fund also sends annual and semiannual reports that keep shareholders informed about its portfolio and performance, and year-end tax information to simplify their recordkeeping. Easy-to-read, free booklets on special subjects such as the Exchange Privilege and IRAs are available from Putnam Investor Services. Shareholders may call Putnam Investor Services toll-free weekdays at 1-800-225-1581 between 8:30 a.m. and 8:00 p.m., and Saturdays from 9:00 a.m. to 5:00 p.m., Boston time for more information, including account balances. Shareholders can also visit the Putnam web site at http://www.putnaminvestments.com. Your Investing Account The following information provides more detail concerning the operation of a Putnam Investing Account. For further information or assistance, investors should consult Putnam Investor Services. Shareholders who purchase shares through a defined contribution plan should note that not all of the services or features described below may be available to them, and they should contact their employer for details. A shareholder may reinvest a cash distribution without a front-end sales charge or without the reinvested shares being subject to a CDSC, as the case may be, by delivering to Putnam Investor Services the uncashed distribution check, endorsed to the order of the fund. Putnam Investor Services must receive the properly endorsed check within 1 year after the date of the check. The Investing Account also provides a way to accumulate shares of the fund. In most cases, after an initial investment of $500, a shareholder may send checks to Putnam Investor Services for $50 or more, made payable to the fund, to purchase additional shares at the applicable public offering price next determined after Putnam Investor Services receives the check. Checks must be drawn on a U.S. bank and must be payable in U.S. dollars. Putnam Investor Services acts as the shareholder's agent whenever it receives instructions to carry out a transaction on the shareholder's account. Upon receipt of instructions that shares are to be purchased for a shareholder's account, shares will be purchased through the investment dealer designated by the shareholder. Shareholders may change investment dealers at any time by written notice to Putnam Investor Services, provided the new dealer has a sales agreement with Putnam Retail Management. Shares credited to an account are transferable upon written instructions in good order to Putnam Investor Services and may be sold to the fund as described under "How do I sell fund shares?" in the prospectus. Money market funds and certain other funds will not issue share certificates. A shareholder may send to Putnam Investor Services any certificates which have been previously issued for safekeeping at no charge to the shareholder. Putnam Retail Management, at its expense, may provide certain additional reports and administrative material to qualifying institutional investors with fiduciary responsibilities to assist these investors in discharging their responsibilities. Institutions seeking further information about this service should contact Putnam Retail Management, which may modify or terminate this service at any time. Putnam Investor Services may make special services available to shareholders with investments exceeding $1,000,000. Contact Putnam Investor Services for details. The fund pays Putnam Investor Services' fees for maintaining Investing Accounts. Reinstatement Privilege An investor who has redeemed shares of the fund may reinvest (within 1 year) the proceeds of such sale in shares of the same class of the fund, or may be able to reinvest (within 1 year) the proceeds in shares of the same class of one of the other continuously offered Putnam funds (through the exchange privilege described in the prospectus), including, in the case of shares subject to a CDSC, the amount of CDSC charged on the redemption. Any such reinvestment would be at the net asset value of the shares of the fund(s) the investor selects, next determined after Putnam Retail Management receives a Reinstatement Authorization. The time that the previous investment was held will be included in determining any applicable CDSC due upon redemptions and, in the case of class B shares, the eight-year period for conversion to class A shares. Shareholders will receive from Putnam Retail Management the amount of any CDSC paid at the time of redemption as part of the reinstated investment, which may be treated as capital gains to the shareholder for tax purposes. Exercise of the Reinstatement Privilege does not alter the federal income tax treatment of any capital gains realized on a sale of fund shares, but to the extent that any shares are sold at a loss and the proceeds are reinvested in shares of the fund, some or all of the loss may be disallowed as a deduction. Consult your tax adviser. Investors who desire to exercise the Reinstatement Privilege should contact their investment dealer or Putnam Investor Services. Exchange Privilege Except as otherwise set forth in this section, by calling Putnam Investor Services, investors may exchange shares valued up to $500,000 between accounts with identical registrations, provided that no certificates are outstanding for such shares and no address change has been made within the preceding 15 days. During periods of unusual market changes and shareholder activity, shareholders may experience delays in contacting Putnam Investor Services by telephone to exercise the telephone exchange privilege. No exchanges are permitted into or out of Putnam Prime Money Market Fund. Putnam Investor Services also makes exchanges promptly after receiving a properly completed Exchange Authorization Form and, if issued, share certificates. If the shareholder is a corporation, partnership, agent, or surviving joint owner, Putnam Investor Services will require additional documentation of a customary nature. Because an exchange of shares involves the redemption of fund shares and reinvestment of the proceeds in shares of another Putnam fund, completion of an exchange may be delayed under unusual circumstances if the fund were to suspend redemptions or postpone payment for the fund shares being exchanged, in accordance with federal securities laws. Exchange Authorization Forms and prospectuses of the other Putnam funds are available from Putnam Retail Management or investment dealers having sales contracts with Putnam Retail Management. The prospectus of each fund describes its investment objective(s) and policies, and shareholders should obtain a prospectus and consider these objectives and policies carefully before requesting an exchange. Shares of certain Putnam funds are not available to residents of all states. The fund reserves the right to change or suspend the exchange privilege at any time. Shareholders would be notified of any change or suspension. Additional information is available from Putnam Investor Services. Shareholders of other Putnam funds may also exchange their shares at net asset value for shares of the fund, as set forth in the current prospectus of each fund. For federal income tax purposes, an exchange is a sale on which the investor generally will realize a capital gain or loss depending on whether the net asset value at the time of the exchange is more or less than the investor's basis. All exchanges are subject to applicable short-term trading fees and Putnam's policies on short-term trading, as set forth in the Fund's Prospectus. In addition, trustees, sponsors and administrators of qualified plans that invest in the Fund may impose short-term trading fees whose terms may differ from those described in the Prospectus. Dividends PLUS Shareholders may invest the fund's distributions of net investment income or distributions combining net investment income and short-term capital gains in shares of the same class of another continuously offered Putnam fund (the "receiving fund") using the net asset value per share of the receiving fund determined on the date the fund's distribution is payable. No sales charge or CDSC will apply to the purchased shares unless the fund paying the distribution is a money market fund. The prospectus of each fund describes its investment objective(s) and policies, and shareholders should obtain a prospectus and consider these objective(s) and policies carefully before investing their distributions in the receiving fund. Shares of certain Putnam funds are not available to residents of all states. The minimum account size requirement for the receiving fund will not apply if the current value of your account in the fund paying the distribution is more than $5,000. Shareholders of other Putnam funds (except for money market funds, whose shareholders must pay a sales charge or become subject to a CDSC) may also use their distributions to purchase shares of the fund at net asset value. For federal tax purposes, distributions from the fund which are reinvested in another fund are treated as paid by the fund to the shareholder and invested by the shareholder in the receiving fund and thus, to the extent comprised of taxable income and deemed paid to a taxable shareholder, are taxable. The Dividends PLUS program may be revised or terminated at any time and is not available for dividends paid by Putnam Prime Money Market Fund. Shareholders in other Putnam funds cannot cross fund reinvest into the Putnam Prime Money Market Fund. Plans Available To Shareholders The plans described below are fully voluntary and may be terminated at any time without the imposition by the fund or Putnam Investor Services of any penalty. All plans provide for automatic reinvestment of all distributions in additional shares of the fund at net asset value. The fund, Putnam Retail Management or Putnam Investor Services may modify or cease offering these plans at any time. Systematic Withdrawal Plan ("SWP"). An investor who owns or buys shares of the fund valued at $5,000 or more at the current public offering price may open a SWP plan and have a designated sum of money ($50 or more) paid monthly, quarterly, semi-annually or annually to the investor or another person. (Payments from the fund can be combined with payments from other Putnam funds into a single check through a designated payment plan.) Shares are deposited in a plan account, and all distributions are reinvested in additional shares of the fund at net asset value (except where the plan is utilized in connection with a charitable remainder trust). Shares in a plan account are then redeemed at net asset value to make each withdrawal payment. Payment will be made to any person the investor designates; however, if shares are registered in the name of a trustee or other fiduciary, payment will be made only to the fiduciary, except in the case of a profit-sharing or pension plan where payment will be made to a designee. As withdrawal payments may include a return of principal, they cannot be considered a guaranteed annuity or actual yield of income to the investor. The redemption of shares in connection with a plan generally will result in a gain or loss for tax purposes. Some or all of the losses realized upon redemption may be disallowed pursuant to the so-called wash sale rules if shares of the same fund from which shares were redeemed are purchased (including through the reinvestment of fund distributions) within a period beginning 30 days before, and ending 30 days after, such redemption. In such a case, the basis of the replacement shares will be increased to reflect the disallowed loss. Continued withdrawals in excess of income will reduce and possibly exhaust invested principal, especially in the event of a market decline. The maintenance of a plan concurrently with purchases of additional shares of the fund would be disadvantageous to the investor because of the sales charge payable on such purchases. For this reason, the minimum investment accepted while a plan is in effect is $1,000, and an investor may not maintain a plan for the accumulation of shares of the fund (other than through reinvestment of distributions) and a plan at the same time. The cost of administering these plans for the benefit of those shareholders participating in them is borne by the fund as an expense of all shareholders. The fund, Putnam Retail Management or Putnam Investor Services may terminate or change the terms of the plan at any time. A plan will be terminated if communications mailed to the shareholder are returned as undeliverable. Investors should consider carefully with their own financial advisers whether the plan and the specified amounts to be withdrawn are appropriate in their circumstances. The fund and Putnam Investor Services make no recommendations or representations in this regard. Tax Qualified Retirement Plans; 403(b) and SEP Plans. (Not offered by funds investing primarily in tax-exempt securities.) Investors may purchase shares of the fund through the following Tax Qualified Retirement Plans, available to qualified individuals or organizations: Standard and variable profit-sharing (including 401(k)) and money purchase pension plans; and Individual Retirement Account Plans (IRAs). Each of these Plans has been qualified as a prototype plan by the Internal Revenue Service. Putnam Investor Services will furnish services under each plan at a specified annual cost. Putnam Fiduciary Trust Company serves as trustee under each of these Plans. Forms and further information on these Plans are available from investment dealers or from Putnam Retail Management. In addition, specialized professional plan administration services are available on an optional basis; contact Putnam Defined Contribution Plan Services at 1-800-225-2465, extension 8600. A 403(b) Retirement Plan is available for employees of public school systems and organizations which meet the requirements of Section 501(c)(3) of the Internal Revenue Code. Forms and further information on the 403(b) Plan are also available from investment dealers or from Putnam Retail Management. Shares of the fund may also be used in simplified employee pension (SEP) plans. For further information on the Putnam prototype SEP plan, contact an investment dealer or Putnam Retail Management. Consultation with a competent financial and tax adviser regarding these Plans and consideration of the suitability of fund shares as an investment under the Employee Retirement Income Security Act of 1974, or otherwise, is recommended. In addition to the plans described above, Putnam Retail Management or Putnam Investor Services may enter into arrangements with certain dealers which provide for automatic periodic rebalancing of shareholders' accounts in Putnam funds. For more information about these arrangements, please contact Putnam Retail Management or Putnam Investor Services. SIGNATURE GUARANTEES Requests to redeem shares having a net asset value of $100,000 or more, or to transfer shares or make redemption proceeds payable to anyone other than the registered account owners, must be signed by all registered owners or their legal representatives and must be guaranteed by a bank, broker/dealer, municipal securities dealer or broker, credit union, national securities exchange, registered securities association, clearing agency, savings association or trust company, provided such institution is authorized and acceptable under and conforms with Putnam Fiduciary Trust Company's signature guarantee procedures. A copy of such procedures is available upon request. In certain situations, for example, if you want your redemption proceeds sent to an address other than your address as it appears on Putnam's records, you may also need to provide a signature guarantee. Putnam Investor Services usually requires additional documentation for the sale of shares by a corporation, partnership, agent or fiduciary, or a surviving joint owner. Contact Putnam Investor Services for more information on Putnam's signature guarantee and documentation requirements. SUSPENSION OF REDEMPTIONS The fund may not suspend shareholders' right of redemption, or postpone payment for more than seven days, unless the Exchange is closed for other than customary weekends or holidays, or if permitted by the rules of the Securities and Exchange Commission during periods when trading on the Exchange is restricted or during any emergency which makes it impracticable for the fund to dispose of its securities or to determine fairly the value of its net assets, or during any other period permitted by order of the Commission for protection of investors. SHAREHOLDER LIABILITY Under Massachusetts law, shareholders could, under certain circumstances, be held personally liable for the obligations of the fund. However, the Agreement and Declaration of Trust disclaims shareholder liability for acts or obligations of the fund and requires that notice of such disclaimer be given in each agreement, obligation, or instrument entered into or executed by the fund or the Trustees. The Agreement and Declaration of Trust provides for indemnification out of fund property for all loss and expense of any shareholder held personally liable for the obligations of the fund. Thus, the risk of a shareholder incurring financial loss on account of shareholder liability is limited to circumstances in which the fund would be unable to meet its obligations. The likelihood of such circumstances is remote. PROXY VOTING GUIDELINES AND PROCEDURES The Trustees of the Putnam funds have established proxy voting guidelines and procedures that govern the voting of proxies for the securities held in the funds' portfolios. The proxy voting guidelines summarize the funds' positions on various issues of concern to investors, and provide direction to the proxy voting service used by the funds as to how fund portfolio securities should be voted on proposals dealing with particular issues. The proxy voting procedures explain the role of the Trustees, Putnam Management, the proxy voting service and the funds' proxy coordinator in the proxy voting process, describe the procedures for referring matters involving investment considerations to the investment personnel of Putnam Management and describe the procedures for handling potential conflicts of interest. The Putnam funds' proxy voting guidelines and procedures are included in this SAI as Appendix A. Information regarding how the funds voted proxies relating to portfolio securities during the 12-month period ended June 30, 2004 is available on the Putnam Individual Investor Web site, www.putnam.com/individual, and on the SEC's Web site at www.sec.gov. If you have questions about finding forms on the SEC's Web site, you may call the SEC at 1-800-SEC-0330. You may also obtain the Putnam funds' proxy voting guidelines and procedures by calling Putnam's Shareholder Services at 1-800-225-1581. SECURITIES RATINGS The ratings of securities in which the fund may invest will be measured at the time of purchase and, to the extent a security is assigned a different rating by one or more of the various rating agencies, Putnam Management will use the highest rating assigned by any agency. Putnam Management will not necessarily sell an investment if its rating is reduced. The following rating services describe rated securities as follows: Moody's Investors Service, Inc. Bonds Aaa -- Bonds which are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edged." Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. Aa -- Bonds which are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risk appear somewhat larger than the Aaa securities. A -- Bonds which are rated A possess many favorable investment attributes and are to be considered as upper-medium-grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment sometime in the future. Baa -- Bonds which are rated Baa are considered as medium grade obligations, (i.e., they are neither highly protected nor poorly secured). Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. Ba -- Bonds which are rated Ba are judged to have speculative elements; their future cannot be considered as well-assured. Often the protection of interest and principal payments may be very moderate, and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class. B -- Bonds which are rated B generally lack characteristics of the desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small. Caa -- Bonds which are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest. Ca -- Bonds which are rated Ca represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings. C -- Bonds which are rated C are the lowest rated class of bonds, and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing. Notes MIG 1/VMIG 1 -- This designation denotes best quality. There is present strong protection by established cash flows, superior liquidity support or demonstrated broad-based access to the market for refinancing. MIG 2/VMIG 2 -- This designation denotes high quality. Margins of protection are ample although not so large as in the preceding group. Commercial paper Issuers rated Prime-1 (or supporting institutions) have a superior ability for repayment of senior short-term debt obligations. Prime-1 repayment ability will often be evidenced by the following characteristics: - -- Leading market positions in well established industries. - -- High rates of return on funds employed. - -- Conservative capitalization structure with moderate reliance on debt and ample asset protection. - -- Broad margins in earnings coverage of fixed financial charges and high internal cash generation. - -- Well established access to a range of financial markets and assured sources of alternate liquidity. Issuers rated Prime-2 (or supporting institutions) have a strong ability for repayment of senior short-term debt obligations. This will normally be evidenced by many of the characteristics cited above to a lesser degree. Earnings trends and coverage ratios, while sound, may be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained. Standard & Poor's Bonds AAA -- An obligation rated AAA has the highest rating assigned by Standard & Poor's. The obligor's capacity to meet its financial commitment on the obligation is extremely strong. AA -- An obligation rated AA differs from the highest-rated obligations only in small degree. The obligor's capacity to meet its financial commitment on the obligation is very strong. A -- An obligation rated A is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. However, the obligor's capacity to meet its financial commitment on the obligation is still strong. BBB -- An obligation rated BBB exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation. Obligations rated BB, B, CCC, CC and C are regarded as having significant speculative characteristics. BB indicates the lowest degree of speculation and C the highest. While such obligations will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major exposures to adverse conditions. BB -- An obligation rated BB is less vulnerable to nonpayment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to the obligor's inadequate capacity to meet its financial commitment on the obligation. B -- An obligation rated B is more vulnerable to nonpayment than obligations rated BB, but the obligor currently has the capacity to meet its financial commitment on the obligations. Adverse business, financial, or economic conditions will likely impair the obligor's capacity or willingness to meet its financial commitment on the obligation. CCC -- An obligation rated CCC is currently vulnerable to nonpayment, and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation. CC -- An obligation rated CC is currently highly vulnerable to nonpayment. C -- The C rating may be used to cover a situation where a bankruptcy petition has been filed, or similar action has been taken, but payments on this obligation are being continued. D -- An obligation rated D is in payment default. The D rating category is used when interest payments or principal payments are not made on the date due even if the applicable grace period has not expired, unless Standard & Poor's believes that such payments will be made during such grace period. The D rating also will be used upon the filing of a bankruptcy petition, or the taking of a similar action if payments on an obligation are jeopardized. Notes SP-1 -- Strong capacity to pay principal and interest. Those issues determined to possess overwhelming safety characteristics are given a plus (+) designation. SP-2 -- Satisfactory capacity to pay principal and interest. SP-3 -- Speculative capacity to pay principal and interest. Commercial paper A-1 -- This highest category indicates that the degree of safety regarding timely payment is strong. Those issues determined to possess extremely strong safety characteristics are denoted with a plus sign (+) designation. A-2 -- Capacity for timely payment on issues with this designation is satisfactory. However, the relative degree of safety is not as high as for issues designated 'A-1'. A-3 -- Issues carrying this designation have adequate capacity for timely payment. They are, however, more vulnerable to the adverse effects of changes in circumstances than obligations carrying the higher designations. Duff & Phelps Corporation Long-Term Debt AAA -- Highest credit quality. The risk factors are negligible, being only slightly more than for risk-free U.S. Treasury debt. AA+, AA, AA- -- High credit quality. Protection factors are strong. Risk is modest but may vary slightly from time to time because of economic conditions. A+, A, A- -- Protection factors are average but adequate. However, risk factors are more variable and greater in periods of economic stress. BBB+, BBB, BBB- -- Below-average protection factors but still considered sufficient for prudent investment. Considerable variability in risk during economic cycles. BB+, BB, BB- -- Below investment grade but deemed likely to meet obligations when due. Present or prospective financial protection factors fluctuate according to industry conditions or company fortunes. Overall quality may move up or down frequently within this category. B+, B, B- -- Below investment grade and possessing risk that obligations will not be met when due. Financial protection factors will fluctuate widely according to economic cycles, industry conditions and/or company fortunes. Potential exists for frequent changes in the rating within this category or into a higher or lower rating grade. CCC -- Well below investment-grade securities. Considerable uncertainty exists as to timely payment of principal, interest or preferred dividends. Protection factors are narrow and risk can be substantial with unfavorable economic/industry conditions, and/or with unfavorable company developments. DD -- Defaulted debt obligations. Issuer failed to meet scheduled principal and/or interest payments. Fitch Investors Service, Inc. AAA -- Bonds considered to be investment grade and of the highest credit quality. The obligor has an exceptionally strong ability to pay interest and repay principal, which is unlikely to be affected by reasonably foreseeable events. AA -- Bonds considered to be investment grade and of very high credit quality. The obligor's ability to pay interest and repay principal is very strong, although not quite as strong as bonds rated AAA. A -- Bonds considered to be investment grade and of high credit quality. The obligor's ability to pay interest and repay principal is considered to be strong, but may be more vulnerable to adverse changes in economic conditions and circumstances than bonds with higher ratings. BBB -- Bonds considered to be investment grade and of satisfactory credit quality. The obligor's ability to pay interest and repay principal is considered to be adequate. Adverse changes in economic conditions and circumstances, however, are more likely to have adverse impact on these bonds, and therefore impair timely payment. The likelihood that the ratings of these bonds will fall below investment grade is higher than for bonds with higher ratings. BB -- Bonds considered to be speculative. The obligor's ability to pay interest and repay principal may be affected over time by adverse economic changes. However, business and financial alternatives can be identified which could assist the obligor in satisfying its debt service requirements. B -- Bonds are considered highly speculative. Bonds in this class are lightly protected as to the obligor's ability to pay interest over the life of the issue and repay principal when due. CCC -- Bonds have certain characteristics which, with passing of time, could lead to the possibility of default on either principal or interest payments. CC -- Bonds are minimally protected. Default in payment of interest and/ or principal seems probable. C -- Bonds are in actual or imminent default in payment of interest or principal. DDD -- Bonds are in default and in arrears in interest and/or principal payments. Such bonds are extremely speculative and should be valued only on the basis of their value in liquidation or reorganization of the obligor. DEFINITIONS "Putnam Management" -- Putnam Investment Management, LLC, the fund's investment manager. "Putnam Retail Management" -- Putnam Retail Management Limited Partnership, the fund's principal underwriter. "Putnam Fiduciary Trust -- Putnam Fiduciary Trust Company, Company" the fund's custodian. "Putnam Investor Services" -- Putnam Investor Services, a division of Putnam Fiduciary Trust Company, the fund's investor servicing agent. "Putnam Investments" -- The name under which Putnam LLC, the parent company of Putnam Management and its affiliates, generally conducts business. Appendix A Proxy voting guidelines of the Putnam funds The proxy voting guidelines below summarize the funds' positions on various issues of concern to investors, and give a general indication of how fund portfolio securities will be voted on proposals dealing with particular issues. The funds' proxy voting service is instructed to vote all proxies relating to fund portfolio securities in accordance with these guidelines, except as otherwise instructed by the Proxy Coordinator, a member of the Office of the Trustees who is appointed to assist in the coordination and voting of the funds' proxies. The proxy voting guidelines are just that - guidelines. The guidelines are not exhaustive and do not include all potential voting issues. Because proxy issues and the circumstances of individual companies are so varied, there may be instances when the funds may not vote in strict adherence to these guidelines. For example, the proxy voting service is expected to bring to the Proxy Coordinator's attention proxy questions that are company-specific and of a non-routine nature and that, even if covered by the guidelines, may be more appropriately handled on a case-by-case basis. Similarly, Putnam Management's investment professionals, as part of their ongoing review and analysis of all fund portfolio holdings, are responsible for monitoring significant corporate developments, including proxy proposals submitted to shareholders, and notifying the Proxy Coordinator of circumstances where the interests of fund shareholders may warrant a vote contrary to these guidelines. In such instances, the investment professionals will submit a written recommendation to the Proxy Coordinator and the person or persons designated by Putnam Management's Legal and Compliance Department to assist in processing referral items pursuant to the funds' "Proxy Voting Procedures." The Proxy Coordinator, in consultation with the funds' Senior Vice President, Executive Vice President, and/or the Chair of the Board Policy and Nominating Committee, as appropriate, will determine how the funds' proxies will be voted. When indicated, the Chair of the Board Policy and Nominating Committee may consult with other members of the Committee or the full Board of Trustees. The following guidelines are grouped according to the types of proposals generally presented to shareholders. Part I deals with proposals that have been put forth by management and approved and recommended by a company's board of directors. Part II deals with proposals submitted by shareholders for inclusion in proxy statements. Part III addresses unique considerations pertaining to non-U.S. issuers. The Putnam funds will disclose their proxy votes in accordance with the timetable established by SEC rules (i.e., not later than August 31 of each year for the most recent 12-month period ended June 30). I. BOARD-APPROVED PROPOSALS The vast majority of matters presented to shareholders for a vote involve proposals made by a company itself (sometimes referred to as "management proposals"), which have been approved and recommended by its board of directors. In view of the enhanced corporate governance practices currently being implemented in public companies and of the funds' intent to hold corporate boards accountable for their actions in promoting shareholder interests, the funds' proxies generally will be voted for the decisions reached by majority independent boards of directors, except as otherwise indicated in these guidelines. Accordingly, the funds' proxies will be voted for board-approved proposals, except as follows: Matters relating to the Board of Directors - ------------------------------------------ Uncontested Election of Directors The funds' proxies will be voted for the election of a company's nominees for the board of directors, except as follows: * The funds will withhold votes for the entire board of directors if * the board does not have a majority of independent directors, * the board has not established independent nominating, audit, and compensation committees, or * the board has more than 19 members or fewer than five members, absent special circumstances. * The funds will withhold votes for any nominee for director who: * is considered an independent director by the company and who has received compensation from the company other than for service as a director (e.g., investment banking, consulting, legal, or financial advisory fees), * attends less than 75% of board and committee meetings without valid reasons for the absences (e.g., illness, personal emergency, etc.), or * as a director of a public company (Company A), is employed as a senior executive of another public company (Company B) if a director of Company B serves as a senior executive of Company A (commonly referred to as an "interlocking directorate"). Commentary: Board independence: Unless otherwise indicated, for the purposes of determining whether a board has a majority of independent directors and independent nominating, audit, and compensation committees, an "independent director" is a director who (1) meets all requirements to serve as an independent director of a company under the final NYSE Corporate Governance Rules (e.g., no material business relationships with the company and no present or recent employment relationship with the company (including employment of an immediate family member as an executive officer)), and (2) has not accepted directly or indirectly any consulting, advisory, or other compensatory fee from the company other than in his or her capacity as a member of the board of directors or any board committee. The funds' Trustees believe that the receipt of compensation for services other than service as a director raises significant independence issues. Board size: The funds' Trustees believe that the size of the board of directors can have a direct impact on the ability of the board to govern effectively. Boards that have too many members can be unwieldy and ultimately inhibit their ability to oversee management performance. Boards that have too few members can stifle innovation and lead to excessive influence by management. Time commitment: Being a director of a company requires a significant time commitment to adequately prepare for and attend the company's board and committee meetings. Directors must be able to commit the time and attention necessary to perform their fiduciary duties in proper fashion, particularly in times of crisis. The funds' Trustees are concerned about over-committed directors. In some cases, directors may serve on too many boards to make a meaningful contribution. This may be particularly true for senior executives of public companies (or other directors with substantially full-time employment) who serve on more than a few outside boards. The funds may withhold votes from such directors on a case-by-case basis where it appears that they may be unable to discharge their duties properly because of excessive commitments. Interlocking directorships: The funds' Trustees believe that interlocking directorships are inconsistent with the degree of independence required for outside directors of public companies. Corporate governance practices: Board independence depends not only on its members' individual relationships, but also on the board's overall attitude toward management. Independent boards are committed to good corporate governance practices and, by providing objective independent judgment, enhancing shareholder value. The funds may withhold votes on a case-by-case basis from some or all directors who, through their lack of independence, have failed to observe good corporate governance practices or, through specific corporate action, have demonstrated a disregard for the interest of shareholders. Contested Elections of Directors * The funds will vote on a case-by-case basis in contested elections of directors. Classified Boards * The funds will vote against proposals to classify a board, absent special circumstances indicating that shareholder interests would be better served by this structure. Commentary: Under a typical classified board structure, the directors are divided into three classes, with each class serving a three-year term. The classified board structure results in directors serving staggered terms, with usually only a third of the directors up for re-election at any given annual meeting. The funds' Trustees generally believe that it is appropriate for directors to stand for election each year, but recognize that, in special circumstances, shareholder interests may be better served under a classified board structure. Other Board-Related Proposals The funds will generally vote for board-approved proposals that have been approved by a majority independent board, and on a case-by-case basis on board-approved proposals where the board fails to meet the guidelines' basic independence standards (i.e., majority of independent directors and independent nominating, audit, and compensation committees). Executive Compensation The funds generally favor compensation programs that relate executive compensation to a company's long-term performance. The funds will vote on a case-by-case basis on board-approved proposals relating to executive compensation, except as follows: * Except where the funds are otherwise withholding votes for the entire board of directors, the funds will vote for stock option plans that will result in an average annual dilution of 1.67% or less (based on a 10-year plan and including all equity-based plans). * The funds will vote against stock option plans that permit the replacing or repricing of underwater options (and against any proposal to authorize such replacement or repricing of underwater options). * The funds will vote against stock option plans that permit issuance of options with an exercise price below the stock's current market price. * Except where the funds are otherwise withholding votes for the entire board of directors, the funds will vote for an employee stock purchase plan that has the following features: (1) the shares purchased under the plan are acquired for no less than 85% of their market value; (2) the offering period under the plan is 27 months or less; and (3) dilution is 10% or less. Commentary: Companies should have compensation programs that are reasonable and that align shareholder and management interests over the longer term. Further, disclosure of compensation programs should provide absolute transparency to shareholders regarding the sources and amounts of, and the factors influencing, executive compensation. Appropriately designed equity-based compensation plans can be an effective way to align the interests of long-term shareholders with the interests of management. The funds may vote against executive compensation proposals on a case-by-case basis where compensation is excessive by reasonable corporate standards, or where a company fails to provide transparent disclosure of executive compensation. In voting on a proposal relating to executive compensation, the funds will consider whether the proposal has been approved by an independent compensation committee of the board. Capitalization Many proxy proposals involve changes in a company's capitalization, including the authorization of additional stock, the issuance of stock, the repurchase of outstanding stock, or the approval of a stock split. The management of a company's capital structure involves a number of important issues, including cash flow, financing needs, and market conditions that are unique to the circumstances of the company. As a result, the funds will vote on a case-by-case basis on board-approved proposals involving changes to a company's capitalization, except that where the funds are not otherwise withholding votes from the entire board of directors: * The funds will vote for proposals relating to the authorization and issuance of additional common stock (except where such proposals relate to a specific transaction). * The funds will vote for proposals to effect stock splits (excluding reverse stock splits). * The funds will vote for proposals authorizing share repurchase programs. Commentary: A company may decide to authorize additional shares of common stock for reasons relating to executive compensation or for routine business purposes. For the most part, these decisions are best left to the board of directors and senior management. The funds will vote on a case-by-case basis, however, on other proposals to change a company's capitalization, including the authorization of common stock with special voting rights, the authorization or issuance of common stock in connection with a specific transaction (e.g., an acquisition, merger or reorganization), or the authorization or issuance of preferred stock. Actions such as these involve a number of considerations that may affect a shareholder's investment and that warrant a case-by-case determination. Acquisitions, Mergers, Reincorporations, Reorganizations and Other Transactions Shareholders may be confronted with a number of different types of transactions, including acquisitions, mergers, reorganizations involving business combinations, liquidations, and the sale of all or substantially all of a company's assets, which may require their consent. Voting on such proposals involves considerations unique to each transaction. As a result, the funds will vote on a case-by-case basis on board-approved proposals to effect these types of transactions, except as follows: * The funds will vote for mergers and reorganizations involving business combinations designed solely to reincorporate a company in Delaware. Commentary: A company may reincorporate into another state through a merger or reorganization by setting up a "shell" company in a different state and then merging the company into the new company. While reincorporation into states with extensive and established corporate laws - notably Delaware - provides companies and shareholders with a more well-defined legal framework, shareholders must carefully consider the reasons for a reincorporation into another jurisdiction, including especially an offshore jurisdiction. Anti-Takeover Measures Some proxy proposals involve efforts by management to make it more difficult for an outside party to take control of the company without the approval of the company's board of directors. These include the adoption of a shareholder rights plan, requiring supermajority voting on particular issues, the adoption of fair price provisions, the issuance of blank check preferred stock, and the creation of a separate class of stock with disparate voting rights. Such proposals may adversely affect shareholder rights, lead to management entrenchment, or create conflicts of interest. As a result, the funds will vote against board-approved proposals to adopt such anti-takeover measures, except as follows: * The funds will vote on a case-by-case basis on proposals to ratify or approve shareholder rights plans (commonly referred to as "poison pills"); and * The funds will vote on a case-by-case basis on proposals to adopt fair price provisions. Commentary: The funds' Trustees recognize that poison pills and fair price provisions may enhance shareholder value under certain circumstances. As a result, the funds will consider proposals to approve such matters on a case-by-case basis. Other Business Matters Many proxies involve approval of routine business matters, such as changing a company's name, ratifying the appointment of auditors, and procedural matters relating to the shareholder meeting. For the most part, these routine matters do not materially affect shareholder interests and are best left to the board of directors and senior management of the company. The funds will vote for board-approved proposals approving such matters, except as follows: * The funds will vote on a case-by-case basis on proposals to amend a company's charter or bylaws (except for charter amendments necessary or to effect stock splits to change a company's name or to authorize additional shares of common stock). * The funds will vote against authorization to transact other unidentified, substantive business at the meeting. * The funds will vote on a case-by-case basis on other business matters where the funds are otherwise withholding votes for the entire board of directors. Commentary: Charter and bylaw amendments and the transaction of other unidentified, substantive business at a shareholder meeting may directly affect shareholder rights and have a significant impact on shareholder value. As a result, the funds do not view such items as routine business matters. Putnam Management's investment professionals and the funds' proxy voting service may also bring to the Proxy Coordinator's attention company-specific items that they believe to be non-routine and warranting special consideration. Under these circumstances, the funds will vote on a case-by-case basis. II. SHAREHOLDER PROPOSALS SEC regulations permit shareholders to submit proposals for inclusion in a company's proxy statement. These proposals generally seek to change some aspect of the company's corporate governance structure or to change some aspect of its business operations. The funds generally will vote in accordance with the recommendation of the company's board of directors on all shareholder proposals, except as follows: * The funds will vote for shareholder proposals to declassify a board, absent special circumstances which would indicate that shareholder interests are better served by a classified board structure. * The funds will vote for shareholder proposals to require shareholder approval of shareholder rights plans. * The funds will vote for shareholder proposals that are consistent with the funds' proxy voting guidelines for board-approved proposals. * The funds will vote on a case-by-case basis on other shareholder proposals where the funds are otherwise withholding votes for the entire board of directors. Commentary: In light of the substantial reforms in corporate governance that are currently underway, the funds' Trustees believe that effective corporate reforms should be promoted by holding boards of directors - and in particular their independent directors - accountable for their actions, rather than imposing additional legal restrictions on board governance through piecemeal proposals. Generally speaking, shareholder proposals relating to business operations are often motivated primarily by political or social concerns, rather than the interests of shareholders as investors in an economic enterprise. As stated above, the funds' Trustees believe that boards of directors and management are responsible for ensuring that their businesses are operating in accordance with high legal and ethical standards and should be held accountable for resulting corporate behavior. Accordingly, the funds will generally support the recommendations of boards that meet the basic independence and governance standards established in these guidelines. Where boards fail to meet these standards, the funds will generally evaluate shareholder proposals on a case-by-case basis. III. VOTING SHARES OF NON-U.S. ISSUERS Many of the Putnam funds invest on a global basis, and, as a result, they may be required to vote shares held in non-U.S. issuers - i.e., issuers that are incorporated under the laws of foreign jurisdictions and that are not listed on a U.S. securities exchange or the NASDAQ stock market. Because non-U.S. issuers are incorporated under the laws of countries and jurisdictions outside the U.S., protection for shareholders may vary significantly from jurisdiction to jurisdiction. Laws governing non-U.S. issuers may, in some cases, provide substantially less protection for shareholders. As a result, the foregoing guidelines, which are premised on the existence of a sound corporate governance and disclosure framework, may not be appropriate under some circumstances for non-U.S. issuers. In many non-U.S. markets, shareholders who vote proxies of a non-U.S. issuer are not able to trade in that company's stock on or around the shareholder meeting date. This practice is known as "share blocking." In countries where share blocking is practiced, the funds will vote proxies only with direction from Putnam Management's investment professionals. In addition, some non-U.S. markets require that a company's shares be re-registered out of the name of the local custodian or nominee into the name of the shareholder for the meeting. This practice is known as "share re-registration." As a result, shareholders, including the funds, are not able to trade in that company's stock until the shares are re-registered back in the name of the local custodian or nominee. In countries where share re-registration is practiced, the funds will generally not vote proxies. The funds will vote proxies of non-U.S. issuers in accordance with the foregoing guidelines where applicable, except as follows: Uncontested Election of Directors Japan * For companies that have established a U.S.-style corporate structure, the funds will withhold votes for the entire board of directors if * the board does not have a majority of outside directors, * the board has not established nominating and compensation committees composed of a majority of outside directors, or * the board has not established an audit committee composed of a majority of independent directors. * The funds will withhold votes for the appointment of members of a company's board of statutory auditors if a majority of the members of the board of statutory auditors is not independent. Commentary: Board structure: Recent amendments to the Japanese Commercial Code give companies the option to adopt a U.S.-style corporate structure (i.e., a board of directors and audit, nominating, and compensation committees). The funds will vote for proposals to amend a company's articles of incorporation to adopt the U.S.-style corporate structure. Definition of outside director and independent director: Corporate governance principles in Japan focus on the distinction between outside directors and independent directors. Under these principles, an outside director is a director who is not and has never been a director, executive, or employee of the company or its parent company, subsidiaries or affiliates. An outside director is "independent" if that person can make decisions completely independent from the managers of the company, its parent, subsidiaries, or affiliates and does not have a material relationship with the company (i.e., major client, trading partner, or other business relationship; familial relationship with current director or executive; etc.). The guidelines have incorporated these definitions in applying the board independence standards above. Korea * The funds will withhold votes for the entire board of directors if * the board does not have a majority of outside directors, * the board has not established a nominating committee composed of at least a majority of outside directors, or * the board has not established an audit committee composed of at least three members and in which at least two-thirds of its members are outside directors. Commentary: For purposes of these guideline, an "outside director" is a director that is independent from the management or controlling shareholders of the company, and holds no interests that might impair performing his or her duties impartially from the company, management or controlling shareholder. In determining whether a director is an outside director, the funds will also apply the standards included in Article 415-2(2) of the Korean Commercial Code (i.e., no employment relationship with the company for a period of two years before serving on the committee, no director or employment relationship with the company's largest shareholder, etc.) and may consider other business relationships that would affect the independence of an outside director. United Kingdom * The funds will withhold votes for the entire board of directors if * the board does not have at least a majority of independent non-executive directors, * the board has not established nomination committees composed of a majority of independent non-executive directors, or * the board has not established compensation and audit committees composed of (1) at least three directors (in the case of smaller companies, two directors) and (2) solely of independent non-executive directors. * The funds will withhold votes for any nominee for director who is considered an independent director by the company and who has received compensation from the company other than for service as a director (e.g., investment banking, consulting, legal, or financial advisory fees). Commentary: Application of guidelines: Although the U.K.'s Combined Code on Corporate Governance ("Combined Code") has adopted the "comply and explain" approach to corporate governance, the funds' Trustees believe that the guidelines discussed above with respect to board independence standards are integral to the protection of investors in U.K. companies. As a result, these guidelines will be applied in a prescriptive manner. Definition of independence: For the purposes of these guidelines, a non-executive director shall be considered independent if the director meets the independence standards in section A.3.1 of the Combined Code (i.e., no material business or employment relationships with the company, no remuneration from the company for non-board services, no close family ties with senior employees or directors of the company, etc.), except that the funds do not view service on the board for more than nine years as affecting a director's independence. Smaller companies: A smaller company is one that is below the FTSE 350 throughout the year immediately prior to the reporting year. Canada In January 2004, Canadian securities regulators issued proposed policies that would impose new corporate governance requirements on Canadian public companies. The recommended practices contained in these new corporate governance requirements mirror corporate governance reforms that have been adopted by the NYSE and other U.S. national securities exchanges and stock markets. As a result, the funds will vote on matters relating to the board of directors of Canadian issuers in accordance with the guidelines applicable to U.S. issuers. Commentary: Like the U.K.'s Combined Code, the proposed policies on corporate governance issued by Canadian securities regulators embody the "comply and explain" approach to corporate governance. Because the funds' Trustees believe that the board independence standards contained in the proxy voting guidelines are integral to the protection of investors in Canadian companies, these standards will be applied in a prescriptive manner. Other Matters * The funds will vote for shareholder proposals calling for a majority of a company's directors to be independent of management. * The funds will vote for shareholder proposals seeking to increase the independence of board nominating, audit, and compensation committees. * The funds will vote for shareholder proposals that implement corporate governance standards similar to those established under U.S. federal law and the listing requirements of U.S. stock exchanges, and that do not otherwise violate the laws of the jurisdiction under which the company is incorporated. * The funds will vote on a case-by-case basis on proposals relating to (1) the issuance of common stock in excess of 20% of the company's outstanding common stock where shareholders do not have preemptive rights, or (2) the issuance of common stock in excess of 100% of the company's outstanding common stock where shareholders have preemptive rights. As adopted May 14, 2004 Proxy voting procedures of the Putnam funds The proxy voting procedures below explain the role of the funds' Trustees, the proxy voting service and the Proxy Coordinator, as well as how the process will work when a proxy question needs to be handled on a case by case basis, or when there may be a conflict of interest. The role of the funds' Trustees The Trustees of the Putnam funds exercise control of the voting of proxies through their Board Policy and Nominating Committee, which is composed entirely of independent Trustees. The Board Policy and Nominating Committee oversees the proxy voting process and participates, as needed, in the resolution of issues that need to be handled on a case-by-case basis. The Committee annually reviews and recommends, for Trustee approval, guidelines governing the funds' proxy votes, including how the funds vote on specific proposals and which matters are to be considered on a case-by-case basis. The Trustees are assisted in this process by their independent administrative staff ("Fund Administration"), independent legal counsel, and an independent proxy voting service. The Trustees also receive assistance from Putnam Investment Management, LLC ("Putnam Management"), the funds' investment advisor, on matters involving investment judgments. In all cases, the ultimate decision on voting proxies rests with the Trustees, acting as fiduciaries on behalf of the shareholders of the funds. The role of the proxy voting service The funds have engaged an independent proxy voting service to assist in the voting of proxies. The proxy voting service is responsible for coordinating with the funds' custodians to ensure that all proxy materials received by the custodians relating to the funds' portfolio securities are processed in a timely fashion. To the extent applicable, the proxy voting service votes all proxies in accordance with the proxy voting guidelines established by the Trustees. The proxy voting service will refer proxy questions to the Proxy Coordinator (described below) for instructions under circumstances where: (1) the application of the proxy voting guidelines is unclear; (2) a particular proxy question is not covered by the guidelines; or (3) the guidelines call for specific instructions on a case-by-case basis. The proxy voting service is also requested to call to the Proxy Coordinator's attention specific proxy questions that, while governed by a guideline, appear to involve unusual or controversial issues. The funds also utilize research services relating to proxy questions provided by the proxy voting service and by other firms. The role of the Proxy Coordinator Each year, a member of Fund Administration is appointed Proxy Coordinator to assist in the coordination and voting of the funds' proxies. The Proxy Coordinator will deal directly with the proxy voting service and, in the case of proxy questions referred by the proxy voting service, will solicit voting recommendations and instructions from Fund Administration, the Chair of the Board Policy and Nominating Committee, and Putnam Management's investment professionals, as appropriate. The Proxy Coordinator is responsible for ensuring that these questions and referrals are responded to in a timely fashion and for transmitting appropriate voting instructions to the proxy voting service. Voting procedures for referral items As discussed above, the proxy voting service will refer proxy questions to the Proxy Coordinator under certain circumstances. When the application of the proxy voting guidelines is unclear or a particular proxy question is not covered by the guidelines (and does not involve investment considerations), the Proxy Coordinator will assist in interpreting the guidelines and, as appropriate, consult with the Senior Vice President of Fund Administration, the Executive Vice President of Fund Administration, and the Chair of the Board Policy and Nominating Committee on how the funds' shares will be voted. For proxy questions that require a case-by-case analysis pursuant to the guidelines or that are not covered by the guidelines but involve investment considerations, the Proxy Coordinator will refer such questions, through a written request, to Putnam Management's investment professionals for a voting recommendation. Such referrals will be made in cooperation with the person or persons designated by Putnam Management's Legal and Compliance Department to assist in processing such referral items. In connection with each such referral item, the Legal and Compliance Department will conduct a conflicts of interest review, as described below under "Conflicts of Interest," and provide a conflicts of interest report (the "Conflicts Report") to the Proxy Coordinator describing the results of such review. After receiving a referral item from the Proxy Coordinator, Putnam Management's investment professionals will provide a written recommendation to the Proxy Coordinator and the person or persons designated by the Legal and Compliance Department to assist in processing referral items. Such recommendation will set forth (1) how the proxies should be voted; (2) the basis and rationale for such recommendation; and (3) any contacts the investment professionals have had with respect to the referral item with non-investment personnel of Putnam Management or with outside parties (except for routine communications from proxy solicitors). The Proxy Coordinator will then review the investment professionals' recommendation and the Conflicts Report with the Senior Vice President and/or Executive Vice President in determining how to vote the funds' proxies. The Proxy Coordinator will maintain a record of all proxy questions that have been referred to Putnam Management's investment professionals, the voting recommendation, and the Conflicts Report. In some situations, the Proxy Coordinator, the Senior Vice President, and/or the Executive Vice President may determine that a particular proxy question raises policy issues requiring consultation with the Chair of the Board Policy and Nominating Committee, who, in turn, may decide to bring the particular proxy question to the Committee or the full Board of Trustees for consideration. Conflicts of interest Occasions may arise where a person or organization involved in the proxy voting process may have a conflict of interest. A conflict of interest may exist, for example, if Putnam Management has a business relationship with (or is actively soliciting business from) either the company soliciting the proxy or a third party that has a material interest in the outcome of a proxy vote or that is actively lobbying for a particular outcome of a proxy vote. Any individual with knowledge of a personal conflict of interest (e.g., familial relationship with company management) relating to a particular referral item shall disclose that conflict to the Proxy Coordinator and the Legal and Compliance Department and otherwise remove himself or herself from the proxy voting process. The Legal and Compliance Department will review each item referred to Putnam Management's investment professionals to determine if a conflict of interest exists and will provide the Proxy Coordinator with a Conflicts Report for each referral item that (1) describes any conflict of interest; (2) discusses the procedures used to address such conflict of interest; and (3) discloses any contacts from parties outside Putnam Management (other than routine communications from proxy solicitors) with respect to the referral item not otherwise reported in an investment professional's recommendation. The Conflicts Report will also include written confirmation that any recommendation from an investment professional provided under circumstances where a conflict of interest exists was made solely on the investment merits and without regard to any other consideration. As adopted March 14, 2003 PUTNAM NEW OPPORTUNITIES FUND FORM N-1A PART C OTHER INFORMATION Item 22. Exhibits (a) Agreement and Declaration of Trust -- Incorporated by reference to the Registrant's Initial Registration Statement. (b) By-Laws, as amended through July 21, 2000 -- Incorporated by reference to Post-Effective Amendment No.11 to the Registrant's Registration Statement. (c)(1) Portions of Agreement and Declaration of Trust Relating to Shareholders' Rights -- Incorporated by reference to Post-Effective Amendment No. 4 to the Registrant's Registration Statement. (c)(2) Portions of By-Laws Relating to Shareholders' Rights -- Incorporated by reference to Post-Effective Amendment No. 4 to the Registrant's Registration Statement. (d) Management Contract dated July 1, 2000 -- Incorporated by reference to Post-Effective Amendment No. 11 to the Registrant's Registration Statement. (e)(1) Distributor's Contract dated May 6, 1994 -- Incorporated by reference to Post-Effective Amendment No. 5 to the Registrant's Registration Statement. (e)(2) Form of Dealer Sales Contract -- Incorporated by reference to Post-Effective Amendment No. 6 to the Registrant's Registration Statement. (e)(3) Form of Financial Institution Sales Contract -- Incorporated by reference to Post-Effective Amendment No. 6 to the Registrant's Registration Statement. (f) Trustee Retirement Plan dated October 4, 1996 -- Incorporated by reference to Post-Effective Amendment No. 8 to the Registrant's Registration Statement. (g) Custodian Agreement with Putnam Fiduciary Trust Company dated May 3, 1991, as amended June 1, 2001. -- Incorporated by reference to Post-Effective Amendment No. 12 to the Registrant's Registration Statement. (h)(1) Investor Servicing Agreement dated June 3, 1991 with Putnam Fiduciary Trust Company -- Incorporated by reference to Post-Effective Amendment No. 2 to the Registrant's Registration Statement. (h)(2) Letter of Indemnity dated December 18, 2003 with Putnam Investment Management -- Exhibit 1 (h)(3) Liability Insurance Allocation Agreement dated December 18, 2003 -- Exhibit 2. (i) Opinion of Ropes & Gray, including consent -- Incorporated by reference to Post-Effective Amendment No. 1 to the Registrant's Registration Statement. (j) Consent of Independent Registered Public Accounting Firm. -- Exhibit 3. (k) Not applicable. (l) Investment Letter from Putnam Investments, LLC to the Registrant -- Incorporated by reference to Pre-Effective Amendment No. 1 to the Registrant's Registration Statement. (m)(1) Class A Distribution Plan and Agreement -- Incorporated by reference to Post-Effective Amendment No. 1 to the Registrant's Registration Statement. (m)(2) Class B Distribution Plan and Agreement -- Incorporated by reference to Post-Effective Amendment No. 4 to the Registrant's Registration Statement. (m)(3) Class C Distribution Plan and Agreement -- Incorporated by reference to Post-Effective Amendment No. 10 to the Registrant's Registration Statement. (m)(4) Class M Distribution Plan and Agreement -- Incorporated by reference to Post-Effective Amendment No. 6 to the Registrant's Registration Statement. (m)(5) Class R Distribution Plan and Agreement -- Incorporated by reference to Post-Effective Amendment No. 14 to the Registrant's Registration Statement. (m)(6) Form of Dealer Service Agreement -- Incorporated by reference to Post-Effective Amendment No. 8 to the Registrant's Registration Statement. (m)(6) Form of Financial Institution Service Agreement -- Incorporated by reference to Post-Effective Amendment No.6 to the Registrant's Registration Statement. (n) Rule 18f-3 Plan dated November 15, 2002 -- Incorporated by reference to Post-Effective Amendment No. 14 to the Registrant's Registration Statement. (p)(1) The Putnam Funds Code of Ethics -- Exhibit 4. (p)(2) Putnam Investments Code of Ethics -- Exhibit 5. Item 23. Persons Controlled by or under Common Control with the Fund None. Item 24. Indemnification The information required by this item is incorporated herein by reference from the Registrant's Initial Registration Statement on Form N-1A under the Investment Company Act of 1940 (File No. 811-6128). Items 25 and 26. Item 25. Business and Other Connections of Investment Adviser Except as set forth below, the directors and officers of the Registrant's investment adviser have been engaged during the past two fiscal years in no business, vocation or employment of a substantial nature other than as directors or officers of the investment adviser or certain of its corporate affiliates. Certain officers of the investment adviser serve as officers of some or all of the Putnam funds. The address of the investment adviser, its corporate affiliates and the Putnam Funds is One Post Office Square, Boston, Massachusetts 02109. Name Non-Putnam business and other connections - ---- ----------------------------------------- Navin Belani Prior to December 2002, Associate, Salomon Smith Vice President Barney, 388 Greenwich St., New York, NY 10013 Zhikai Chen Prior to May 2004, Equity Research Analyst, Vice President Citigroup Asset Management, 100 First Stamford Place, Stamford, CT 06902 Daniel S. Choquette Prior to September 2002, Fixed Income Senior Vice President Derivatives Trader, Lehman Brothers, 745 7th Avenue, New York, NY 10019 John W. Coffey Prior to April 2004, Managing Director, Managing Director Citigroup Asset Management, 399 Park Avenue, New York, NY 10022 Emily F. Cooper Prior to May 2004, Vice President, LNR Property Vice President Corporation, 1601 Washington Avenue, Suite 700, Miami Beach, FL 33139 John R.S. Cutler Member, Burst Media, L.L.C., 10 New England Vice President Executive Park, Burlington, MA 01803 Timothy F. Edmonstone Prior to December 2002, Vice President and Senior Vice President Equities Analyst, BT Funds Management, Chifley Tower, One Chifley Place, Sydney NSW 2000, Australia Gian D. Fabbri Partner, KF Style, LLC, 73 Charles St., Assistant Vice President Boston, MA 02114 Maria Garcia-Lomas Prior to July 2003, Research Analyst, J.P. Vice President Morgan Securities Ltd., 125 London Wall, London, England Haralabos E. Gakidis Prior to October 2003, Head of Consulting and Vice President Business Development, The RIS Consulting Group LLC, 420 Boylston Street, Suite 302, Boston, MA 02116 Charles E. Haldeman Prior to October 2002, Chief Executive Officer, President and Chief Delaware Management Holdings, Inc., 2005 Market Executive Officer Street, Philadelphia, PA 19103 David Morgan Prior to June 2004, Director, Equity Analyst, Senior Vice President Citigroup Asset Management. Citigroup Centre, Canada Square, Canary Wharf, London, England E14 5LB James P. Pappas Prior to October 2002, Chief Operating Officer, Managing Director Atalanta/Sosnoff Management Corporation, 101 Park Avenue, New York, N.Y. 10178 Walton D. Pearson Prior to February 2003, Senior Vice President Senior Vice President and Senior Portfolio Manager, Alliance Capital Management L.P., 1345 Avenue of the Americas, New York, NY 10105 Michael C. Petro Prior to October 2002, Senior Research Vice President Associate, RBC Dain Rauscher, 60 S. 6th St., Minneapolis, MN 55402 Jeffrey M. Stought Prior to March 2004, Vice President, Goldman Vice President Sachs International, 133 Fleet Street, London, England EC4A 2BB Masroor Taale Siddiqui Prior to February 2004, Managing Director, Senior Vice President Jefferies & Co., 520 Madison Avenue, New York, NY 10022 Julian Wellesley Prior to November 2002, Senior Vice President, Senior Vice President Schroder Investment Management Inc., 875 Third Avenue, New York, NY 10020 James Yu Prior to October 2002, Vice President and Vice President Portfolio Manager, John Hancock Funds, 101 Huntington Ave., Boston, MA 02199 Item 26. Principal Underwriter (a) Putnam Retail Management Limited Partnership is the principal underwriter for each of the following investment companies, including the Registrant: Putnam American Government Income Fund, Putnam Arizona Tax Exempt Income Fund, Putnam Asset Allocation Funds, Putnam California Tax Exempt Income Fund, Putnam Capital Appreciation Fund, Putnam Classic Equity Fund, Putnam Convertible Income-Growth Trust, Putnam Discovery Growth Fund (formerly Putnam Voyager Fund II), Putnam Diversified Income Trust, Putnam Equity Income Fund, Putnam Europe Equity Fund (formerly Putnam Europe Growth Fund), Putnam Florida Tax Exempt Income Fund, Putnam Funds Trust, The George Putnam Fund of Boston, Putnam Global Equity Fund, Putnam Global Income Trust, Putnam Global Natural Resources Fund, The Putnam Fund for Growth and Income, Putnam Health Sciences Trust, Putnam High Yield Trust, Putnam High Yield Advantage Fund, Putnam Income Fund, Putnam Intermediate U.S. Government Income Fund, Putnam International Equity Fund (formerly Putnam International Growth Fund), Putnam Investment Funds, Putnam Investors Fund, Putnam Massachusetts Tax Exempt Income Fund, Putnam Michigan Tax Exempt Income Fund, Putnam Minnesota Tax Exempt Income Fund, Putnam Money Market Fund, Putnam Municipal Income Fund, Putnam New Jersey Tax Exempt Income Fund, Putnam New Opportunities Fund, Putnam New York Tax Exempt Income Fund, Putnam Ohio Tax Exempt Income Fund, Putnam OTC & Emerging Growth Fund, Putnam Pennsylvania Tax Exempt Income Fund, Putnam Tax Exempt Income Fund, Putnam Tax Exempt Money Market Fund, Putnam Tax-Free Income Trust, Putnam Tax Smart Funds Trust, Putnam U.S. Government Income Trust, Putnam Utilities Growth and Income Fund, Putnam Variable Trust, Putnam Vista Fund, Putnam Voyager Fund. (b) The directors and officers of the Registrant's principal underwriter are listed below. None of the officers are officers of the Registrant. The principal business address of each person is One Post Office Square, Boston, MA 02109: Name Position and Office with the Underwriter - ------------------------------------------------------------------------------- Aaron III, Jefferson F. Senior Vice President Ahearn, Paul D. Assistant Vice President Ahonen, Jennifer D. Vice President Amisano, Paulette C. Vice President Arends, Michael K. Senior Vice President Ayala-Macey, Ann C. Assistant Vice President Babcock III, Warren W. Senior Vice President Baker, Christopher H. Vice President Baker, Erin L. Assistant Vice President Ballingall, Keith R. Assistant Vice President Barnett, William E. Vice President Barrett, Thomas Senior Vice President Bartony, Paul A. Vice President Beatty, Elizabeth A. Vice President Bergeron, Christopher E. Vice President Beringer, Thomas C. Senior Vice President Bernaldo, Bryan L. Assistant Vice President Borden, Richard S. Vice President Bosinger, Paul C. Vice President Bouchard, Keith R. Senior Vice President Bradford Jr., Linwood E. Managing Director Brady, Jeremy V. Assistant Vice President Brandt, Sarah J. Vice President Brennan, Sean M. Assistant Vice President Bromberger, Steven L. Assistant Vice President Brown, Michael D. Assistant Vice President Buckeridge Jr., Timothy Thomas Vice President Buckner, Gail D. Senior Vice President Bumpus, James F. Managing Director Bunker, Christopher M. Senior Vice President Burns, Robert J. Assistant Vice President Busenburg, Curt M. Assistant Vice President Bush, Jessica Scoon Assistant Vice President Cabana, Susan D. Senior Vice President Call, Timothy W. Senior Vice President Callinan, Richard E. Vice President Campbell, Christopher F. Assistant Vice President Caramazza, Pierre C. Senior Vice President Card, Victoria R. Assistant Vice President Carey, Christopher P. Vice President Casey, David M. Senior Vice President Cass, William D. Senior Vice President Caswell, Kendra L. Vice President Ceruolo, Christopher Vice President Chang, America J. Assistant Vice President Chapman, Frederick Vice President Ciesluk, James D. Assistant Vice President Clare, Michael J. Assistant Vice President Clark, James F. Assistant Vice President Colman, Donald M. Vice President Condon, Meagan L. Vice President Condron, Brett P. Senior Vice President Coneeny, Mark L. Managing Director Connelly, Donald A. Senior Vice President Connolly, William T. Managing Director Cooley, Jonathan A. Vice President Corbett, Dennis T. Senior Vice President Corvinus, F. Nicholas Managing Director Corwin, Kathleen K. Senior Vice President Cosentino, Joseph D. Assistant Vice President Coveney, Anne M. Senior Vice President Covington, Ryan R. Vice President Crean, Jeremy P. Assistant Vice President Cristo, Chad H. Senior Vice President Croft, Ariane D. Assistant Vice President Crotty, Kenneth Brian Assistant Vice President Curry, John D. Senior Vice President Dabney, Richard W. Senior Vice President Dahill, Jessica E. Vice President Damon, James G. Vice President Davidian, Raymond A. Vice President DeAngelis, Adam Vice President DeGregorio Jr., Richard A. Assistant Vice President DeNitto, James P. Vice President Dempsey, Thomas F. Vice President Dence, Mark A. Vice President Derbyshire, Ralph C. Managing Director Dewey Jr., Paul S. Senior Vice President DiBuono, Jeffrey P. Assistant Vice President Donadio, Joyce M. Vice President Dowie, Kevin T. Assistant Vice President Doyle, Kathleen Norton Assistant Vice President Doyle, Michelle Assistant Vice President Economou, Stefan G. Assistant Vice President Eidelberg, Kathleen E. Assistant Vice President Elder, Michael D. Managing Director Emhof, Joseph R. Senior Vice President Ethington, Robert H. Assistant Vice President Fanning, Virginia A. Senior Vice President Favaloro, Beth A. Senior Vice President Felan III, Catarino Vice President Feldman, Susan H. Senior Vice President Fiedler, Stephen J. Vice President Fishman, Mitchell B. Managing Director Fleming, Robert A. Assistant Vice President Flynn, Kevin M. Vice President Foley, Timothy P. Senior Vice President Foresyth, Charles W. Vice President Forrester, Gordon M. Managing Director Foster, Laura G. Vice President Fronc, Richard Joseph Assistant Vice President Fulton, Timothy W. Assistant Vice President Gambale, Kevin L. Vice President Gaudette, Marjorie B. Vice President Gebhard, Louis F. Assistant Vice President Giessler, Todd C. Vice President Gipson, Zachary A. Vice President Girald, Kristin M. Assistant Vice President Greenwood, Julie M. Assistant Vice President Greenwood, Todd M. Assistant Vice President Gundersen, Jan S. Senior Vice President Hagan IV, J. Addison Vice President Haines, James B. Vice President Hale, Ryan D. Assistant Vice President Halloran, James E. Senior Vice President Halloran, Thomas W. Managing Director Hartigan, Craig W. Senior Vice President Hartigan, Maureen A. Vice President Hassinger, Aaron D. Assistant Vice President Hazzard, Jessica L. Senior Vice President Herman, C. Christopher Senior Vice President Herold, Karen Assistant Vice President Hershenow, Andrew B. Assistant Vice President Hess Jr., William C. Vice President Holland, Jeffrey K. Vice President Holmes, Maureen A. Senior Vice President Hooley Jr., Daniel F. Vice President Howe, Denise M. Assistant Vice President Howley, Sean J. Senior Vice President Hoyt, Paula J. Vice President Hughes, Carolyn Senior Vice President Hyland, John P. Vice President Iglesias, Louis X. Senior Vice President Iris, Stefan K. Assistant Vice President Jean, Ellen F. Assistant Vice President Jeans, Kathleen A. Assistant Vice President Jones, Thomas A. Senior Vice President Jordan, Stephen R. Assistant Vice President Kapinos, Peter J. Senior Vice President Kay, Karen R. Senior Vice President Keith, Pamela J. Assistant Vice President Kelley, Brian J. Senior Vice President Kelly, A. Siobhan Senior Vice President Kelly, David Managing Director Kennedy, Daniel J. Vice President Kerivan, John R. Senior Vice President Kersten, Charles N. Vice President Kessler, David W. Assistant Vice President King, Brian F. Vice President Kinsman, Anne M. Senior Vice President Kirk Kahn, Deborah H. Senior Vice President Kline, Bonnie S. Vice President Knutzen, Erik L. Managing Director Kokos, Casey T. Assistant Vice President Komodromos, Costas G. Senior Vice President Kotsiras, Steven Vice President Kringdon, Joseph D. Managing Director LaGreca, Jennifer J. Assistant Vice President Lacascia, Charles M. Senior Vice President Lacour, Jayme J. Assistant Vice President Lampron, Michelle S. Assistant Vice President Larson, John R. Vice President Lawson, Louise A. Vice President Lecce, Vincent L. Vice President Leveille, Robert R. Vice President Levy, Eric S. Managing Director Levy, Norman S. Senior Vice President Lieberman, Samuel L. Senior Vice President Lighty, Brian C. Assistant Vice President Link, Christopher H. Senior Vice President Lohmeier, Andrew Vice President Loomis, Marcy R. Assistant Vice President Lukens, James W. Senior Vice President Maglio, Nancy T. Assistant Vice President Mahoney, Julie M. Vice President Mansfield, Scott D. Vice President Martin, David M. Vice President Martin, Kevin J. Vice President Massey, Shannon M. Assistant Vice President McCafferty, Karen A. Senior Vice President McCarran, Matthew P. Assistant Vice President McCarthy, Anne B. Assistant Vice President McCarthy, Conor W. Senior Vice President McCollough, Martha J. Assistant Vice President McConville, Paul D. Senior Vice President McCullough, Ronald L. Senior Vice President McCutcheon, Bruce A. Senior Vice President McDermott, Robert J. Senior Vice President McInis, Brian S. Vice President McKenna, Mark J. Managing Director Mee, Kellie F. Assistant Vice President Mehta, Ashok Senior Vice President Metelmann, Claye A. Senior Vice President Michejda, Marek A. Senior Vice President Miller Jr., Edward D. Vice President Millette, Michelle T. Assistant Vice President Mills, Ronald K. Vice President Minsk, Judith Vice President Mintzer, Matthew P. Senior Vice President Molesky, Kevin P. Vice President Monaghan, Richard A. Director Monahan, Kimberly A. Vice President Moody, Paul R. Senior Vice President Moret, Mitchell L. Senior Vice President Nadherny, Robert Charles Managing Director Nakamura, Denise-Marie Senior Vice President Nardone, Laura E. Assistant Vice President Nelson, Brian W. Vice President Nickodemus, John P. Managing Director Nickolini, Michael A. Vice President Nickse, Gail A. Assistant Vice President Nicolazzo, Jon C. Senior Vice President Noble, John D. Senior Vice President Norcross, George H. Assistant Vice President O'Connell Jr., Paul P. Senior Vice President O'Connor, Brian P. Senior Vice President O'Connor, Matthew P. Senior Vice President O'Connor, Scott D. Assistant Vice President O'Gannon, Kristina Cullen Assistant Vice President O'Sullivan, Shawn M. Vice President Olsen, Stephen Assistant Vice President Olson, Christopher W. Vice President Ondek, David P. Assistant Vice President Otsuka, Fumihiko Senior Vice President Palmer, Patrick J. Senior Vice President Patton, Robert J. Senior Vice President Perkins, Erin M. Vice President Phoenix, Joseph T. Managing Director Piersol, Willow B. Vice President Pitcher, Ciara L. Assistant Vice President Platt, Thomas R. Senior Vice President Prina, Paul Senior Vice President Pulkrabek, Scott M. Senior Vice President Puzzangara, John C. Vice President Quinn, Brian J. Vice President Regner, Thomas M. Managing Director Reid, Sandra L. Vice President Rickson, Alexander Assistant Vice President Riley, Megan G. Assistant Vice President Ritter, Jesse D. Vice President Rodammer, Kris Senior Vice President Rosalanko, Thomas J. Managing Director Rose, Laura Assistant Vice President Rosmarin, Adam L. Vice President Rountree, G. Manning Senior Vice President Rowe, Robert B. Senior Vice President Ruys de Perez, Charles A. Managing Director Ryan, Deborah A. Vice President Ryan, William M. Senior Vice President Salsman, Elizabeth P. Assistant Vice President Saunders, Catherine A. Managing Director Sawyer, Matthew A. Senior Vice President Schaub, Gerald D. Vice President Schlafman, Jonathan E. Vice President Schug, Mark R. Assistant Vice President Schultz, Susan L. Assistant Vice President Segers, Elizabeth R. Managing Director Seward, Lindsay H. Vice President Sheridan, Michael F. Assistant Vice President Short Jr., Harold P. Senior Vice President Short, Jonathan D. Senior Vice President Siebold, Mark J. Senior Vice President Siemon Jr., Frank E. Senior Vice President Sliney, Michael J. Vice President Spigelmeyer III, Carl M. Vice President Spooner, Andrew C. Assistant Vice President Squires, Melissa H. Vice President Stark, Kerri A. Vice President Stathoulopoulos, Manny Assistant Vice President Stickney, Paul R. Senior Vice President Storkerson, John K. Senior Vice President Stuart, James F. Vice President Sullivan, Brian L. Senior Vice President Sullivan, Elaine M. Senior Vice President Sweeney, Brian S. Vice President Sweeney, Janet C. Senior Vice President Taber, Rene B. Vice President Tanner, B. Iris Vice President Tassinari, Michael J . Assistant Vice President Terry, Kimberley A. Assistant Vice President Tierney, Tracy L. Assistant Vice President Totovian, James H. Assistant Vice President Tucker, Jason A. Senior Vice President Tyrie, David C. Managing Director Urban, Elke R. Assistant Vice President Valentin, Carmen Assistant Vice President Wadera-Sandhu, Jyotsana Assistant Vice President Wallace, Stephen Senior Vice President Walsh, Julia A. Vice President Werths, Beth K. Vice President Whiting, Amanda M. Vice President Wilde, Michael R. Assistant Vice President Williams, Christopher J. Assistant Vice President Williams, Jason M. Vice President Wolfson, Jane Senior Vice President Zannino, David J. Assistant Vice President Zechello, Steven R. Vice President Zografos-Preusser, Laura J. Senior Vice President deMont, Lisa M. Senior Vice President Item 27. Location of Accounts and Records Persons maintaining physical possession of accounts, books and other documents required to be maintained by Section 31(a) of the Investment Company Act of 1940 and the Rules promulgated thereunder are Registrant's Clerk, Judith Cohen; Registrant's investment adviser, Putnam Investment Management, LLC; Registrant's principal underwriter, Putnam Retail Management Limited Partnership; Registrant's custodian, Putnam Fiduciary Trust Company ("PFTC"); and Registrant's transfer and dividend disbursing agent, Putnam Investor Services, a division of PFTC. The address of the Clerk, investment adviser, principal underwriter, custodian and transfer and dividend disbursing agent is One Post Office Square, Boston, Massachusetts 02109. Item 28. Management Services None. Item 29. Undertakings None. NOTICE A copy of the Agreement and Declaration of Trust of Putnam New Opportunities Fund is on file with the Secretary of The Commonwealth of Massachusetts and notice is hereby given that this instrument is executed on behalf of the Registrant by an officer of the Registrant as an officer and not individually and the obligations of or arising out of this instrument are not binding upon any of the Trustees, officers or shareholders individually but are binding only upon the assets and property of the Registrant. POWER OF ATTORNEY I, the undersigned Officer of each of the funds listed on Schedule A hereto, hereby severally constitute and appoint John Hill, George Putnam III, Charles E. Porter, Patricia Flaherty, John W. Gerstmayr, Bryan Chegwidden and Gordon H. Silver, and each of them singly, my true and lawful attorneys, with full power to them and each of them, to sign for me, and in my name and in the capacities indicated below, the Registration Statements on Form N-1A or Form N-14 of each of the funds listed on Schedule A hereto and any and all amendments (including post-effective amendments) to said Registration Statements and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto my said attorneys, and each of them acting alone, full power and authority to do and perform each and every act and thing requisite or necessary to be done in the premises, as fully to all intents and purposes as he might or could do in person, and hereby ratify and confirm all that said attorneys or any of them may lawfully do or cause to be done by virtue thereof. WITNESS my hand and seal on the date set forth below. Signature Title Date /s/ Charles E. Porter - --------------------------- Executive Vice President; March 19, 2004 Charles E. Porter Treasurer and Principal Executive Officer Schedule A Putnam American Government Income Fund Putnam Arizona Tax Exempt Income Fund Putnam Asset Allocation Funds Putnam California Tax Exempt Income Fund Putnam Capital Appreciation Fund Putnam Classic Equity Fund Putnam Convertible Income-Growth Trust Putnam Diversified Income Trust Putnam Discovery Growth Fund Putnam Equity Income Fund Putnam Europe Equity Fund Putnam Florida Tax Exempt Income Fund Putnam Funds Trust The George Putnam Fund of Boston Putnam Global Equity Fund Putnam Global Income Trust Putnam Global Natural Resources Fund The Putnam Fund for Growth and Income Putnam Health Sciences Trust Putnam High Yield Advantage Fund Putnam High Yield Trust Putnam Income Fund Putnam Intermediate U.S. Government Income Fund Putnam International Equity Fund Putnam Investment Funds Putnam Investors Fund Putnam Massachusetts Tax Exempt Income Fund Putnam Michigan Tax Exempt Income Fund Putnam Minnesota Tax Exempt Income Fund Putnam Money Market Fund Putnam Municipal Income Fund Putnam New Jersey Tax Exempt Income Fund Putnam New Opportunities Fund Putnam New York Tax Exempt Income Fund Putnam Ohio Tax Exempt Income Fund Putnam OTC & Emerging Growth Fund Putnam Pennsylvania Tax Exempt Income Fund Putnam Tax Exempt Income Fund Putnam Tax Exempt Money Market Fund Putnam Tax-Free Income Trust Putnam Tax Smart Funds Trust Putnam U.S. Government Income Trust Putnam Utilities Growth and Income Fund Putnam Variable Trust Putnam Vista Fund Putnam Voyager Fund SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant certifies that it meets all of the requirements for effectiveness of this Registration Statement under Rule 485(b) under the Securities Act of 1933 and has duly caused this Amendment to its Registration Statement to be signed on its behalf by the undersigned, duly authorized, in the City of Boston, and The Commonwealth of Massachusetts, on the 27th day of October, 2004. Putnam New Opportunities Fund By: /s/ Charles E. Porter, Executive Vice President Pursuant to the requirements of the Securities Act of 1933, this Amendment to the Registration Statement has been signed below by the following persons in the capacities and on the dates indicated: Signature Title John A. Hill Chairman of the Board; Trustee George Putnam, III President; Trustee Charles E. Porter Executive Vice President; Associate Treasurer and Principal Executive Officer Steven D. Krichmar Vice President and Principal Financial Officer Michael T. Healy Assistant Treasurer and Principal Accounting Officer Jameson A. Baxter Trustee Charles B. Curtis Trustee Ronald J. Jackson Trustee Paul L. Joskow Trustee Elizabeth T. Kennan Trustee John H. Mullin, III Trustee Robert E. Patterson Trustee A.J.C. Smith Trustee W. Thomas Stephens Trustee By: /s/ Charles E. Porter, as Attorney-in-Fact October 27, 2004 EXHIBIT INDEX Item 23 Exhibit (h)(2) Letter of Indemnity (h)(3) Liability Insurance Allocation Agreement (j) Consent of Independent Accountants (p)(1) Putnam Funds Code of Ethics (p)(2) Putnam Investments Code of Ethics EX-99.J OTHER OPININ 2 exnnj2.txt EX-99.J OTHER OPININ CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We hereby consent to the incorporation by reference in this Post-Effective Amendment No. 15 to the registration statement on Form N-1A (File No. 33-35576) ("Registration Statement") of our report dated August 11, 2004, relating to the financial statements and financial highlights appearing in the June 30, 2004, Annual Report of Putnam New Opportunities Fund, which are also incorporated by reference into the Registration Statement. We also consent to the references to us under the headings "Financial highlights" and "Independent Auditors and Financial Statements" in such Registration Statement. PricewaterhouseCoopers LLP Boston, Massachusetts October 25, 2004 EX-99.H OTH MAT CONT 4 li1.txt December 18, 2003 The Putnam Funds One Post Office Square Boston, MA 02109 Re: Letter of Indemnity Ladies and Gentlemen: Reference is made to the administrative proceedings (the "Administrative Proceedings") commenced on October 28, 2003 against Putnam Investment Management LLC ("Putnam") by the Securities and Exchange Commission and by the Massachusetts Securities Division alleging various matters related to market timing or other improper trading activity in Putnam Fund shares. Putnam serves as investment manager for each of the Putnam Funds (the "Funds") pursuant to Management Contracts which are subject to termination by the Funds on 60 days notice. Putnam is an indirect wholly-owned subsidiary of Putnam Investments LLC, which is in turn an indirect majority-owned subsidiary of March & McLennan Companies Inc. Whereas the independent trustees of the Funds have undertaken various investigations of the matters alleged in the Administrative Proceedings; and Whereas these matters and related matters (such as the fair valuation of portfolio holdings, the disclosure of portfolio holdings and prospectus disclosures related to the foregoing) may be the basis of further regulatory actions involving or potentially affecting the Funds or Putnam; Whereas these matters and related matters are the basis in whole or in part for numerous private actions brought by shareholders of the Funds, in many cases as purported class actions or derivative actions, variously against the Funds, their Trustees and officers, Putnam and certain other parties (the "Private Litigation"); and Whereas these matters and related matters may be the basis for further private actions against the Funds, their Trustees and officers; In consideration of the continuation of the current Management Contract and other contractual and financial arrangements between each Fund and Putnam and its affiliates, Putnam hereby agrees to indemnify and hold harmless each of the Funds against any and all loss, damage, liability and expense, including reasonable fees and expenses of counsel, arising out of the matters alleged in the Administrative Proceedings, the Private Litigation or any proceedings or actions that may be threatened or commenced in the future by any person (including any regulatory authority) arising out of matters reasonably related to the foregoing matters, including without limitation: (i) all legal and other expenses incurred by the Funds in connection with investigations undertaken by the independent Trustees; (ii) all legal and other expenses incurred by the Funds in connection with any such proceedings or actions, including without limitation expenses related to the defense of any such proceedings or actions, compliance with disclosure requirements related to the foregoing and any special communications to Fund shareholders; (iii) all liabilities and expenses incurred by the Funds in connection with any judgment resulting from, or settlement of, any such proceedings or actions; and (iv) all liabilities and expenses incurred by the Funds under the provisions of the Agreement and Declaration of Trust of any Fund providing for indemnification of trustees and officers. The Funds will use their best efforts to notify Putnam of any proceedings or actions commenced against them or against their Trustees or officers, but the failure to provide such notification shall not relieve Putnam of any liability or obligation hereunder. The Funds shall be entitled to defend any such proceedings or action against them using counsel of their choosing. Putnam shall be entitled, at its expense, to participate in the defense of any such proceedings or actions against the Funds and shall be entitled to defend any such proceedings or actions against Putnam, in each case using counsel of their choosing. The Funds will not enter into any settlement of any such proceeding or action without the consent of Putnam which consent shall not be unreasonably withheld. In the event that the foregoing indemnification shall be unavailable to any Fund, then Putnam hereby agrees to contribute to the amount paid or payable by a Fund as a result of any loss, damage, liability or expense in such proportion as is appropriate to reflect the relative fault of Putnam and such Fund with respect to the matters which resulted in such loss, damage, liability or expense, as well as any other relevant equitable considerations. To the extent Putnam or MMC makes a payment under this indemnity agreement, Putnam or MMC may seek reimbursement for such payment under any applicable policies of insurance. The foregoing undertakings by Putnam shall survive the termination of any of the aforesaid Management Contracts. Please acknowledge your receipt and acceptance of the foregoing by signing the enclosed copy of this letter in the space provided below. Very truly yours, Putnam Investment Management LLC By ----------------------------- The foregoing undertakings are hereby accepted: The Putnam Funds By ----------------------------- GUARANTY For good and valuable consideration, the receipt of which is hereby acknowledged, Marsh & McLennan Companies, Inc. hereby absolutely, unconditionally and irrevocably guarantees the payment by Putnam when due of all sums payable by it under this Agreement. IN WITNESS WHEREOF, it has caused this Guaranty to be executed by its officers hereunto duly authorized as of the day and year first written above. Marsh & McLennan Companies, Inc. By ----------------------------- EX-99.H OTH MAT CONT 5 lia1.txt LIABILITY INSURANCE ALLOCATION AGREEMENT This Insurance Allocation Agreement (the "Agreement") is made as of December 18, 2003, by and among the Putnam Funds (the "Funds"), Marsh & McLennan Companies, Inc. ("MMC") and Putnam Investments LLC ("Putnam") acting on its own behalf and on behalf of Putnam Investment Management LLC (the "Investment Manager") and its other direct and indirect subsidiaries (individually hereinafter referred to as an "Affiliate" or collectively as "Affiliates"). WHEREAS, the Investment Manager acts as investment manager (or investment adviser and administrator) of the Funds and in such capacity participates in the application for and purchase of joint liability insurance policies for the protection of Putnam and its Affiliates and the Funds and may also from time to time participate in the handling and settlement of claims under such policies; WHEREAS, the Funds, MMC, Putnam and the Affiliates have been named as joint insured parties ("Insureds") under joint mutual fund/investment advisor professional liability insurance policies and excess multi-line joint insurance policies and such other joint insurance policies (hereinafter referred to individually as a "Policy" and collectively as the "Policies") approved, from time to time, by the Funds' respective Boards of Trustees; WHEREAS, the Funds and the Investment Manager entered into a letter of indemnity dated as of December 18, 2003 (the "Letter of Indemnity"), pursuant to which the Investment Manager agreed to indemnify and hold harmless the Funds against any and all loss, damage, liability and expense, including reasonable fees and expenses of counsel, arising out of the matters alleged in the Administrative Proceedings (as defined in the Letter of Indemnity), the Private Litigation (as defined in the Letter of Indemnity) or any proceedings or actions that may be threatened or commenced in the future by any person (including any regulatory authority) arising out of matters reasonably related to the Administrative Proceedings or the Private Litigation (any loss, damage, liability and expense reasonably related to the foregoing proceedings is hereinafter referred to as an "Indemnifiable Loss"); WHEREAS, certain of the parties hereto have heretofore entered into an Agreement dated as of January 21, 2003 providing for certain minimum coverages for the Funds, their Trustees and their officers (hereinafter referred to collectively as the "Fund Insureds"); WHEREAS, the parties desire to establish the criteria by which the amounts payable under the Policies shall be allocated among the parties to this Agreement and to provide for certain contingencies; NOW, THEREFORE, it is agreed as follows: 1. In the event that the claims of loss of two or more Insureds under the Policies for any period exceed the amount of insurance coverage available to pay such claims, or in the event that the aggregate recovery by two or more Insureds under the claims, or in the event that the aggregate recovery by two or more Insureds under the policies for any related claims is less that the aggregate loss incurred by the Insureds that gave rise to such claims, the following rules shall determine, as among the claimants, the allocation of the amounts payable under the Policies: Such amounts shall be allocated as follows: (i) the first $15 million shall be allocated to any losses of the Fund Insureds, other than Fund Insureds who were directors or officers of MMC, Putnam or its Affiliates at any time after January 1, 1997 (the "Affiliated Fund Insureds") and (ii) the balance shall be allocated first (A) on an equitable and proportionate basis among the Fund Insureds (other than the Affiliated Fund Insureds), MMC and Putnam and its Affiliates with respect to any losses of the Fund Insureds (other than the Affiliated Fund Insureds) and any losses (other than losses arising out of the proceedings that are the subject of the Letter of Indemnity) of MMC and Putnam and its Affiliates, and then (B) to MMC and Putnam and its Affiliates with respect to any losses arising out of the proceedings that are the subject of the Letter of Indemnity (including without limitation any Indemnifiable Losses paid by MMC and Putnam and its Affiliates to the Funds pursuant to the Letter of Indemnity). As used in this Agreement, the terms "loss" and "losses" shall include and be limited to any covered loss, damage, judgment, settlement cost, legal or other expense or other cost which is covered under a Policy, but, with respect to the Funds, such terms shall not include any loss with respect to which payment has been made to the Funds pursuant to the Letter of Indemnity. The aforesaid allocation shall not adversely affect the rights of any insured person or entity entitled to make a claim under the Policies who is not a party to this Agreement, including, without limitation, the individual directors and others of MMC, Putnam or its Affiliates. In the event that any party to this Agreement receives payment of any insurance claim in contravention of the allocation priorities established herein, whether or not ascertainable at the time of such receipt, such party shall on demand promptly pay such amount over to the parties entitled to such payment under the terms of this Agreement. 2. In the event that insurance coverage under any Policy shall be denied for any claim of loss made by any Fund Insureds (other than the Affiliated Fund Insureds) based on any alleged misrepresentation made by MMC, Putnam and/or its Affiliates in connection with the application for such Policy or other alleged improper conduct by MC, Putnam and/or its Affiliates or any director, officer or employee thereof, then MMC, Putnam and its Affiliates will be responsible, jointly and severally, for payment of such loss. The defense of any claim pertaining to any such loss shall be conducted in accordance with the procedural provisions of the Letter of Indemnity. 3. To the extent that any amounts payable under the Policies are paid to any current or former director, trustee, officer or employee of MMC, Putnam and/or its Affiliates on account of losses incurred by such person in connection with proceedings or actions that are the subject of the Letter of Indemnity, with the result that the amounts payable under the Policies that are paid to any individual Fund Insured other than (other than the Affiliated Fund Insureds) are insufficient to cover fully all loss incurred by such person in connection with the aforesaid proceedings or actions, then MMC, Putnam and its Affiliates will be responsible, jointly and severally, for payment of such loss. 4. In the event that MMC, Putnam or its Affiliates pay any Indemnifiable Losses of the Funds pursuant to the Letter to Indemnity that would otherwise constitute claims that the Funds would be entitled to assert under the Policies, then upon request by MMC or Putnam and its Affiliates, the Funds shall assign their interest in such claims to MMC or Putnam and its Affiliates, as the case may be. Such assigned claims shall be subordinated as provided in clause (ii)(B) of the second paragraph of Section 1 above. 5. This Agreement shall be effective as to any and all Policies now or heretofore in effect and may be terminated only by mutual agreement of the parties. This Agreement supersedes all prior agreements dealing with the subject matter hereof. This Agreement shall survive the termination of any management contract between any Fund and the Investment Manager. 6. The Funds are organized as Massachusetts business trusts, and this Agreement is not binding upon any of the trustees or holders of shares of beneficial interest of any such trust individually, but shall bind only the assets and property of such Funds. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their officers, as appropriate, hereunto duly authorized all as of the day and year first above written. The Putnam Funds By: /s/ Charles E. Porter, Executive Vice President Marsh & McLennan Companies, Inc. By: /s/ William L. Rosoff Putnam Investments, LLC on behalf of itself and each of its Affiliates By: /s/ Gordon H. Silver, Senior Managing Director EX-99.P CODE ETH 6 mod1.txt THE PUTNAM FUNDS Code of Ethics Each of The Putnam Funds (the "Funds") has determined to adopt this Code of Ethics with respect to certain types of personal securities transactions by officers and Trustees of the Funds which might be deemed to create possible conflicts of interest and to establish reporting requirements and enforcement procedures with respect to such transactions. I. Rules Applicable to Officers and Trustees Affiliated with Putnam Investments Trust or Its Subsidiaries A. Incorporation of Adviser's Code of Ethics. The provisions of the Code of Ethics for employees of Putnam Investments Trust and its subsidiaries (the "Putnam Investments Code of Ethics"), which is attached as Appendix A hereto, are hereby incorporated herein as the Funds' Code of Ethics applicable to officers and Trustees of the Funds who are employees of the Funds or officers, directors or employees of Putnam Investments Trust or its subsidiaries. A violation of the Putnam Investments Code of Ethics shall constitute a violation of the Funds' Code. B. Reports. Officers and Trustees of each of the Funds who are made subject to the Putnam Investments Code of Ethics pursuant to the preceding paragraph shall file the reports required by the Putnam Investments Code of Ethics with the Code of Ethics Officer designated therein. A report filed with the Code of Ethics Officer shall be deemed to be filed with each of the Funds of which the reporting individual is an officer or Trustee. C. Review. (1) The Code of Ethics Officer shall compare the reported personal securities transactions with completed and contemplated portfolio transactions of each of the Funds to determine whether a violation of this Code may have occurred. Before making any determination that a violation has been committed by any person, the Code of Ethics Officer shall give such person an opportunity to supply additional explanatory material. (2) If the Code of Ethics Officer determines that a violation of this Code has or may have occurred, he shall submit his written determination, together with any additional explanatory material, to the Chairman of the Funds, who shall make an independent determination of whether a violation has occurred. D. Sanctions. If the Chairman of the Funds finds that a violation has occurred, he shall report the violation and any sanction imposed under the Putnam Code of Ethics to the Trustees of the Funds who may impose such additional sanctions as they deem appropriate. II. Rules Applicable to Unaffiliated Trustees A. Definitions. (1) "Beneficial ownership" shall be interpreted in the same manner as it would be in determining whether a person is subject to the provisions of Section 16 of the Securities Exchange Act of 1934 and the rules and regulations thereunder. (2) "Control" means the power to exercise a controlling influence over the management or policies of a company, unless such power is solely the result of an official position with such company. (3) "Interested Trustee" means a Trustee of a Fund who is an "interested person" of the Fund within the meaning of the Investment Company Act. (4) "Purchase or sale of a security" includes, among other things, the writing of an option to purchase or sell a security. (5) "Security" shall have the same meaning as that set forth in Section 2(a)(36) of the Investment Company Act (in effect, all securities) except that it shall not include securities issued by the Government of the United States or an agency thereof, bankers' acceptances, bank certificates of deposit, commercial paper and shares of registered open-end investment companies. (6) "Unaffiliated Trustee" means a Trustee who is not made subject to the Putnam Investments Code of Ethics pursuant to Part I hereof. B. Prohibited Purchases and Sales. No Unaffiliated Trustee of any of the Funds shall purchase or sell, directly or indirectly, any security in which he has, or by reason of such transaction acquires, any direct or indirect beneficial ownership and which to his actual knowledge at the time of such purchase or sale: (1) is being considered for purchase or sale by the Fund; (2) is being purchased or sold by the Fund; or (3) was purchased or sold by the Fund within the most recent five days if such person participated in the recommendation to, or the decision by, Putnam Investment Management to purchase or sell such security for the Fund. C. Exempted Transactions. The prohibitions of Section II-B of this Code shall not apply to: (1) purchases or sales effected in any account over which the Unaffiliated Trustee has no direct or indirect influence or control; (2) purchases or sales which are non-volitional on the part of either the Unaffiliated Trustee or the Fund; (3) purchases which are part of an automatic dividend reinvestment plan; (4) purchases effected upon the exercise of rights issued by an issuer pro rata to all holders of a class of its securities, to the extent such rights were acquired from such issuer, and sales of such rights so acquired; (5) purchases or sales other than those exempted in (1) through (4) above which do not cause the Unaffiliated Trustee to gain improperly a personal benefit through his relationship with the Fund and are only remotely potentially harmful to a Fund because they would be very unlikely to affect a highly institutional market, and are previously approved by the Code of Ethics Officer under the Putnam Code of Ethics or the Chairman of the Funds, which approval shall be confirmed in writing. D. Reporting. (1) Whether or not one of the exemptions listed in Section II-C applies, every Unaffiliated Trustee of a Fund shall file with the Chairman of the Funds a report containing the information described in Section II-D(2) of this Code with respect to transactions in any security in which such Unaffiliated Trustee has, or by reason of such transaction acquires, any direct or indirect beneficial ownership, if such Trustee, at the time of that transaction, knew or, in the ordinary course of fulfilling his official duties as a Trustee of the Fund, should have known that, during the 15-day period immediately preceding or after the date of the transaction by the Trustee: (a) such security was or is to be purchased or sold by the Fund or (b) such security was or is being considered for purchase or sale by the Fund; provided, however, that an Unaffiliated Trustee shall not be required to make a report with respect to transactions effected for any account over which such person does not have any direct or indirect influence or control. (2) Every report shall be made not later than 10 days after the end of the calendar quarter in which the transaction to which the report relates was effected, and shall contain the following information: (a) The date of the transaction, the title and the number of shares, and the principal amount of each security involved; (b) The nature of the transaction (i.e., purchase, sale or any other type of acquisition or disposition); (c) The price at which the transaction was effected; and (d) The name of the broker, dealer or bank with or through whom the transaction was effected. (3) Every report concerning a purchase or sale prohibited under Section II-B hereof with respect to which the reporting person relies upon one of the exemptions provided in Section II-C shall contain a brief statement of the exemption relied upon and the circumstances of the transaction. (4) Any such report may contain a statement that the report shall not be construed as an admission by the person making such report that he has any direct or indirect beneficial ownership in the security to which the report relates. (5) Notwithstanding anything to the contrary contained herein, an Unaffiliated Trustee who is an "interested person" of the Fund shall also file the reports required by Rule 17j-1(d)(1) under the Investment Company Act of 1940. E. Review. (1) The Chairman of the Funds shall compare the reported personal securities transactions with completed and contemplated portfolio transactions of the Funds to determine whether any transaction ("Reviewable Transactions") listed in Section II-B (disregarding exemptions provided by Section II-C(1) through (5)) may have occurred. (2) If the Chairman determines that a Reviewable Transaction may have occurred, he shall then determine whether a violation of this Code may have occurred, taking into account all the exemptions provided under Section II-C. Before making any determination that a violation has occurred, the Chairman shall give the person involved an opportunity to supply additional information regarding the transaction in question. F. Sanctions. If the Chairman determines that a violation of this Code has occurred, he shall so advise a committee consisting of the Unaffiliated Trustees, other than the person whose transaction is under consideration, and shall provide the committee with a report of the matter, including any additional information supplied by such person. The committee may impose such sanctions as it deems appropriate. III. Miscellaneous A. Amendments to the Putnam Investments Code of Ethics. Any amendment to the Putnam Investments Code of Ethics shall be deemed an amendment to Section I-A of this Code effective 30 days after written notice of such amendment shall have been received by the Chairman of the Funds, unless the Trustees of the Funds expressly determine that such amendment shall become effective at an earlier or later date or shall not be adopted. B. Records. The Funds shall maintain records in the manner and to the extent set forth below, which records may be maintained on microfilm under the conditions described in Rule 31a-2(f)(1) under the Investment Company Act and shall be available for examination by representatives of the Securities and Exchange Commission. (1) A copy of this Code and any other code which is, or at any time within the past five years has been, in effect shall be preserved in an easily accessible place; (2) A record of any violation of this Code and of any action taken as a result of such violation shall be preserved in an easily accessible place for a period of not less than five years following the end of the fiscal year in which the violation occurs; (3) A copy of each report made by an officer or Trustee pursuant to this Code shall be preserved for a period of not less than five years from the end of the fiscal year in which it is made, the first two years in an easily accessible place; and (4) A list of all persons who are, or within the past five years have been, required to make reports pursuant to this Code shall be maintained in an easily accessible place. To the extent any record required to be kept by this section is also required to be kept by Putnam Investments pursuant to the Putnam Investments Code of Ethics, Putnam Investments shall maintain such record on behalf of the Funds as well. C. Confidentiality. All reports of securities transactions and any other information filed with any Fund pursuant to this Code shall be treated as confidential, but are subject to review as provided herein and by personnel of the Securities and Exchange Commission. D. Interpretation of Provisions. The Trustees may from time to time adopt such interpretations of this Code as they deem appropriate. E. Delegation by Chairman. The Chairman of the Funds may from time to time delegate any or all of his responsibilities under this Code, either generally or as to specific instances, to such officer or Trustee of the Funds as he may designate. As revised July 8, 2004 EX-99.P CODE ETH 7 coe1.txt working@Putnam August 2004 CODE OF ETHICS CODE OF ETHICS PUTNAM INVESTMENTS [SCALE LOGO OMITTED] It is the personal responsibility of every Putnam employee to avoid any conduct that could create a conflict, or even the appearance of a conflict, with our fund shareholders and other clients, or to do anything that could damage or erode the trust our fund shareholders and other clients place in Putnam and its employees. TABLE OF CONTENTS OVERVIEW.............................................................iii PREAMBLE..............................................................vi DEFINITIONS: Code of Ethics .........................................vii SECTION I. Personal Securities Rules for All Employees ............... 1 A. Pre-clearance and the Restricted List ............................. 1 B. Prohibited Transactions.............................................5 C. Discouraged Transactions.......................................... 11 D. Exempted Transactions .............................................11 SECTION II. Additional Special Rules for Personal Securities Transactions of Access Persons and Certain Investment Professionals.. 13 SECTION III. General Rules for All Employees .........................18 SECTION IV. Special Rules for Officers and Employees of Putnam Investments Limited ................................................. 29 SECTION V. Reporting Requirements for All Employees.................. 31 SECTION VI. Education Requirements ...................................34 SECTION VII. Compliance and Appeal Procedures.........................35 APPENDIX A: Policy Statement Concerning Insider Trading Prohibitions PREAMBLE ............................................................ 37 DEFINITIONS: Insider Trading..........................................38 SECTION I. Rules Concerning Inside Information .......................39 SECTION II. Overview of Insider Trading ..............................41 APPENDIX B: Policy Statement Regarding Employee Trades in Shares of Putnam Closed-End Funds ..............................................45 APPENDIX C: Contra-Trading Rule Clearance Form........................46 APPENDIX D: AIMR Code of Ethics and Standards of Professional Conduct .................................................47 APPENDIX E: Report of Entertainment Form..............................53 INDEX ................................................................55 OVERVIEW Every Putnam employee is required, as a condition of continued employment, to read, understand, and comply with the entire Code of Ethics. Additionally, employees are expected to comply with the policies and procedures contained within the Putnam Employee Handbook, which can be accessed online through www.ibenefitcenter.com. This overview is provided only as a convenience and is not intended to substitute for a careful reading of the complete document. It is the personal responsibility of every Putnam employee to avoid any conduct that could create a conflict, or even the appearance of a conflict, with our fund shareholders or other clients, or do anything that could damage or erode the trust our clients place in Putnam and its employees. This is the spirit of the Code of Ethics. In accepting employment at Putnam, every employee accepts the absolute obligation to comply with the letter and the spirit of the Code of Ethics. Failure to comply with the spirit of the Code of Ethics is just as much a violation of the Code as failure to comply with the written rules of the Code. The rules of the Code cover activities, including personal securities transactions, of Putnam employees, certain family members of employees, and entities (such as corporations, trusts, or partnerships) that employees may be deemed to control or influence. Sanctions will be imposed for violations of the Code of Ethics. Sanctions may include bans on personal trading, reductions in salary increases or bonuses, disgorgement of trading profits, suspension of employment, and termination of employment. Insider trading Putnam employees are forbidden to buy or sell any security while either Putnam or the employee is in possession of material, non-public information (inside information) concerning the security or the issuer. A violation of Putnam's insider trading policies may result in criminal and civil penalties, including imprisonment and substantial fines. An employee aware of or in possession of inside information must report it immediately to the Code of Ethics Officer. See Appendix A, Section ll: Overview of Insider Trading. Conflicts of interest The Code of Ethics imposes limits on activities of Putnam employees where the activity may conflict with the interests of Putnam or its clients. These include limits on the receipt and solicitation of gifts and on service as a fiduciary for a person or entity outside of Putnam. For example, Putnam employees generally may not accept gifts over $100 in total value in a calendar year from any entity or any supplier of goods or services to Putnam. In addition, a Putnam employee may not serve as a director of any corporation or other entity without prior approval of the Code of Ethics Officer, and Putnam employees may not be members of investment clubs. Confidentiality Information about Putnam clients and Putnam investment activity and research is proprietary and confidential and may not be disclosed or used by any Putnam employee outside Putnam without a valid business purpose. Personal securities trading Putnam employees may not buy or sell any security for their own account without clearing the proposed transaction in advance. Clearance is facilitated through the online pre-clearance system for equity securities, and directly with the Code of Ethics Administrator for fixed-income securities and transactions in Putnam closed-end funds. Certain securities are exempted from this pre-clearance requirement (e.g., shares of open-end (not closed-end) mutual funds). Clearance must be obtained in advance, between 11:30 a.m. and 4:00 p.m. Eastern Standard Time (EST) on the day of the trade, except in the case of a trade for up to 1,000 shares of stock of an issuer whose capitalization exceeds $5 billion, clearance may be obtained between 9:00 a.m. and 4:00 p.m. EST on the day of the trade. A clearance is valid only for the day it is obtained. Putnam employees are strongly discouraged from engaging in excessive trading for their personal accounts. Beginning with the fourth quarter of 2004, employees will be prohibited from making more than 25 trades in individual securities. Trading in excess of this level will be reviewed with the Code of Ethics Oversight Committee. Putnam mutual funds All employees and certain family members are subject to a minimum 90-day holding period for shares in Putnam's open-end mutual funds. This restriction does not apply to Putnam's money market funds. Except in limited circumstances, all employees must hold Putnam open-end fund shares in accounts at Putnam Preferred Access. Portfolio managers and others with access to investment information (so-called "Access Persons") are subject to a minimum one-year holding period for holding Putnam open-end fund shares. Short selling Putnam employees are prohibited from short selling any security, whether or not it is held in a Putnam client portfolio, except that short selling against broad market indexes and "against the box" are permitted. Note, however, that short selling "against the box" or otherwise hedging an investment in shares of Marsh & McLennan (MMC) stock is prohibited. Confirmations of trading and periodic account statements All Putnam employees must have their brokers send confirmations and statements of personal securities transactions, including transactions of immediate family members and accounts over which the employee has investment discretion, to the Code of Ethics Officer. Employees must contact the Code of Ethics Administrator to obtain an authorization letter from Putnam for setting up a personal brokerage account. Quarterly and annual reporting Access persons must report all their securities transactions in each calendar quarter to the Code of Ethics Officer within 10 days after the end of the quarter. All Access Persons must disclose all personal securities holdings (even those to which pre-clearance may not apply) upon commencement of employment and thereafter on an annual basis. You will be notified if these requirements apply to you. If these requirements apply to you and you fail to report as required, salary increases and bonuses may be reduced. Egregious conduct, e.g., willful failures to report, will be subject to harsher sanctions, which may include termination of employment. IPOs and private placements Putnam employees may not buy any securities in an initial public offering or in a private placement, except in limited circumstances when prior written authorization is obtained. Personal securities transactions by Access Persons and certain investment professionals The Code imposes several special restrictions on personal securities transactions by Access Persons and certain investment professionals, which are summarized as follows. (Refer to Section II for details): * 60-Day Holding Period. No Access Person shall purchase and then sell at a profit, or sell and then repurchase at a lower price, any security or related derivative security within 60 calendar days. * 7-Day Rule. Before a portfolio manager places an order to buy a security for any portfolio he manages, he must sell from his personal account any such security or related derivative security purchased within the preceding seven calendar days and disgorge any profit from the sale. * Blackout Rules. No portfolio manager may sell any security or related derivative security for her personal account until seven calendar days have passed since the most recent purchase of that security or related derivative security by any portfolio she manages. No portfolio manager may buy any security or related derivative security for his personal account until seven calendar days have passed since the most recent sale of that security or related derivative security by any portfolio he manages. * Contra-Trading Rule. No portfolio manager may sell out of her personal account any security or related derivative security that is held in any portfolio she manages unless she has received the written approval of an appropriate CIO and the Code of Ethics Officer. * No portfolio manager may cause a Putnam client to take action for the manager's own personal benefit. Similar rules limit personal securities transactions by analysts, co-managers, and chief investment officers. Please read these rules carefully as you are responsible for understanding the restrictions. PREAMBLE It is the personal responsibility of every Putnam employee to avoid any conduct that would create a conflict, or even the appearance of a conflict, with our fund shareholders or other clients, or do anything that could damage or erode the trust our clients place in Putnam and its employees. This is the spirit of the Code of Ethics. In accepting employment at Putnam, every employee also accepts the absolute obligation to comply with the letter and the spirit of the Code of Ethics. Failure to comply with the spirit of the Code of Ethics is just as much a violation of the Code as failure to comply with the written rules of the Code. Sanctions will be imposed for violations of the Code of Ethics, including the Code's reporting requirements. Sanctions may include bans on personal trading, reductions in salary increases or bonuses, disgorgement of trading profits, suspension of employment, and termination of employment. Putnam Investments is required by law to adopt a Code of Ethics. The purposes of the law are to ensure that companies and their employees comply with all applicable laws and to prevent abuses in the investment advisory business that can arise when conflicts of interest exist between the employees of an investment advisor and its clients. By adopting and enforcing a Code of Ethics, we strengthen the trust and confidence reposed in us by demonstrating that, at Putnam, client interests come before personal interests. The Code that follows represents a balancing of important interests. On the one hand, as a registered investment advisor, Putnam owes a duty of undivided loyalty to its clients, and must avoid even the appearance of a conflict that might be perceived as abusing the trust they have placed in Putnam. On the other hand, Putnam does not want to prevent conscientious professionals from investing for their own account where conflicts do not exist or are so attenuated as to be immaterial to investment decisions affecting Putnam clients. When conflicting interests cannot be reconciled, the Code makes clear that, first and foremost, Putnam employees owe a fiduciary duty to Putnam clients. In most cases, this means that the affected employee will be required to forego conflicting personal securities transactions. In some cases, personal investments will be permitted, but only in a manner, which, because of the circumstances and applicable controls, cannot reasonably be perceived as adversely affecting Putnam client portfolios or taking unfair advantage of the relationship Putnam employees have to Putnam clients. The Code contains specific rules prohibiting defined types of conflicts. Because every potential conflict cannot be anticipated in advance, the Code also contains certain general provisions prohibiting conflict situations. In view of these general provisions, it is critical that any individual who is in doubt about the applicability of the Code in a given situation seek a determination from the Code of Ethics Officer about the propriety of the conduct in advance. The procedures for obtaining such a determination are described in Section VII of the Code. It is critical that the Code be strictly observed. Not only will adherence to the Code ensure that Putnam renders the best possible service to its clients, it will ensure that no individual is liable for violations of law. It should be emphasized that adherence to this policy is a fundamental condition of employment at Putnam. Every employee is expected to adhere to the requirements of this Code of Ethics despite any inconvenience that may be involved. Any employee failing to do so may be subject to such disciplinary action, including financial penalties and termination of employment, as determined by the Code of Ethics Oversight Committee or the Chief Executive Officer of Putnam Investments. DEFINITIONS: Code of Ethics The words below are defined specifically for the purpose of Putnam's Code of Ethics. Gender references in the Code of Ethics alternate. Rule of construction regarding time periods Unless the context indicates otherwise, time periods used in the Code of Ethics shall be measured inclusively, i.e., beginning on the dates from which the measurement is made. Access Persons Access Persons are (a) employees within Putnam's Investment Division, and (b) all other employees of Putnam who, in connection with their regular duties, have access to information regarding purchases or sales of portfolio securities by a Putnam mutual fund, or who have access to information regarding recommendations with respect to such purchases or sales (such as certain Information Services Division employees and certain members of the Legal and Compliance Department). Each employee will be informed if he or she is considered a Code of Ethics Access Person. The Code of Ethics Officer maintains a list of all Access Persons. Code of Ethics Administrator The individual designated by the Code of Ethics Officer to assume responsibility for day-to-day, nondiscretionary administration of this Code. The current Code of Ethics Administrator is Laura Rose, who can be reached at extension 11104. Code of Ethics Officer The Putnam officer who has been assigned the responsibility of enforcing and interpreting this Code. The Code of Ethics Officer shall be the Chief Compliance Officer or such other person as is designated by the Chief Executive Officer of Putnam Investments. If the Code of Ethics Officer is unavailable, the Deputy Code of Ethics Officer shall act in his or her stead. The Code of Ethics Officer is Tony Ruys de Perez. The Deputy Code of Ethics Officer is Kathleen Griffin. Code of Ethics Oversight Committee Has oversight responsibility for administering the Code of Ethics. Members include the Code of Ethics Officer and other members of Putnam's senior management approved by the Chief Executive Officer of Putnam. Immediate family Spouse, minor children, or other relatives living in the same household as the Putnam employee. Narrow-based derivative A future, swap, option, or similar derivative instrument whose return is determined by reference to fewer than 25 underlying issuers. Single stock futures and exchange traded funds based on fewer than 25 issuers are included. Policy statements The Policy Statement Concerning Insider Trading Prohibitions attached to the Code as Appendix A and the Policy Statement Regarding Employee Trades in Shares of Putnam closed-end funds attached to the Code as Appendix B. Private placement Any offering of a security not offered to the public and not requiring registration with the relevant securities authorities. Purchase or sale of a security Any acquisition or transfer of any interest in the security for direct or indirect consideration; this includes the writing of an option. Putnam Any or all of Putnam Investments Trust, and its subsidiaries, any one of which shall be a Putnam company. Putnam client Any of the Putnam mutual funds, or any advisory, trust, or other client of Putnam. Putnam employee (or employee) Any employee of Putnam Restricted list The list established in accordance with Rule 1 of Section I.A. Security Any type or class of equity or debt security; any rights relating to a security, such as warrants, convertible securities, and any narrow-based derivative. Pre-clearance in all trades for any narrow-based derivative is required. Unless otherwise noted, the term security does not include: currencies, direct and indirect obligations of the U.S. government and its agencies, commercial paper, certificates of deposit, repurchase agreements, bankers' acceptances, any other money market instruments. Exchange traded index funds containing a portfolio or securities of 25 or more issuers (e.g., SPDRs, WEBs, QQQs), commodities, and any option on a broad-based market index or an exchange-traded futures contract or option thereon are excluded. Transaction for a personal account (or personal securities transaction) Securities transactions: (a) for the personal account of any employee; (b) for the account of a member of the family of any employee; (c) for the account of a partnership in which a Putnam employee or immediate family member is a general partner or a partner with investment discretion; (d) for the account of a trust in which a Putnam employee or immediate family member is a trustee with investment discretion; (e) for the account of a closely-held corporation in which a Putnam employee or immediate family member holds shares and for which he has investment discretion; and (f ) for any account other than a Putnam client account, which receives investment advice of any sort from the employee or immediate family member, or as to which the employee or immediate family member has investment discretion. SECTION I Personal Securities Rules for All Employees A. Pre-clearance and the Restricted List Rule 1 No Putnam employee shall purchase or sell for his personal account any security (other than shares of open-end investment companies) without prior clearance obtained through Putnam's intranet pre-clearance system (under the @Putnam tab of www.ibenefitcenter.com). Fixed-income securities must be pre-cleared by calling the Code of Ethics Administrator, and there are special rules for trading in Putnam closed-end funds. See Appendix B. Subject to the limited exceptions below, no clearance will be granted for securities appearing on the Restricted List. Securities will be placed on the Restricted List in the following circumstances: (a) When orders to purchase or sell such security have been entered for any Putnam client, or the security is being actively considered for purchase for any Putnam client, unless the security is a nonconvertible investment grade rated (BBB by S&P or Baa by Moody's) fixed-income investment; (b) When such a security is a voting security of a corporation in the banking, savings and loan, communications, or gaming (i.e., casinos) industries, if holdings of Putnam clients in that corporation exceed 7% (for public utilities, the threshold is 4%); (c) When, in the judgment of the Code of Ethics Officer, other circumstances warrant restricting personal transactions of Putnam employees in a particular security; (d) The circumstances described in the Policy Statement Concerning Insider Trading Prohibitions, attached as Appendix A. Reminder: Securities for an employee's personal account include securities owned by certain family members of a Putnam employee. Thus, this Rule prohibits certain trades by family members of Putnam employees. See Definitions. Compliance with this rule does not exempt an employee from complying with any other applicable rules of the Code, such as those described in Section III. In particular, Access Persons and certain investment professionals must comply with the special rules set forth in Section II. IMPLEMENTATION A. Maintenance of Restricted List. The Restricted List shall be maintained by the Code of Ethics Administrator. B. Consulting Restricted List. An employee wishing to trade any security for his personal account shall first obtain clearance through Putnam's Intranet pre-clearance system. The system may be accessed online at ibenefitcenter.com. Select Employee Essentials under the @Putnam tab. Employees may pre-clear all securities between 11:30 a.m. and 4:00 p.m. EST, and may pre-clear purchases or sales of up to 1,000 shares of issuers having a market capitalization of more than $5 billion between 9:00 a.m. and 4:00 p.m. EST. Requests to make personal securities transactions may not be made using the system or presented to the Code of Ethics Administrator after 4:00 p.m. EST. Pre-clearance of fixed income securities and Putnam closed-end funds must be made by calling the Code of Ethics Administrator. The pre-clearance system will inform the employee whether the security may be traded and whether trading in the security is subject to the "Large Cap" limitation. The response of the pre-clearance system as to whether a security appears on the Restricted List and, if so, whether it is eligible for the exceptions set forth after this Rule shall be final, unless the employee appeals to the Code of Ethics Officer, using the procedure described in Section VII, regarding the request to trade a particular security. A clearance is only valid for trading on the day it is obtained. Trades in securities listed on Asian or European stock exchanges, however, may be executed within one business day after pre-clearance is obtained. If a security is not on the Restricted List, other classes of securities of the same issuer (e.g., preferred or convertible preferred stock) may be on the Restricted List. It is the employee's responsibility to identify with particularity the class of securities for which permission is being sought for a personal investment. If the pre-clearance system does not recognize a security, or if an employee is unable to use the system or has any questions with respect to the system or pre-clearance, the employee may consult the Code of Ethics Administrator. The Code of Ethics Administrator shall not have authority to answer any questions about a security other than whether trading is permitted. The response of the Code of Ethics Administrator as to whether a security appears on the Restricted List and, if so, whether it is eligible for any applicable exceptions set forth after this Rule shall be final, unless the employee appeals to the Code of Ethics Officer, using the procedure described in Section VII, regarding the request to trade a particular security. EXCEPTIONS A. Large Cap Exception. If a security appearing on the Restricted List is an equity security for which the issuer has a market capitalization (defined as outstanding shares multiplied by current price per share) of over $5 billion, then a Putnam employee may purchase or sell up to 1,000 shares of the security per day for his personal account. This exception does not apply if the security appears on the Restricted List in the circumstances described in subpart (b), (c), or (d) of Rule 1. B. Pre-clearing Transactions Effected by Share Subscription. The purchase of securities made by subscription rather than on an exchange are limited to issuers having a market capitalization of $5 billion or more and are subject to a 1,000 share limit. The following are procedures to comply with Rule 1 when effecting a purchase or sale of shares by subscription: (a) The Putnam employee must pre-clear the trade on the day he or she submits a subscription to the issuer, rather than on the actual day of the trade since the actual day of the trade typically will not be known to the employee who submits the subscription. At the time of pre-clearance, the employee will be told whether the purchase is permitted (in the case of a corporation having a market capitalization of $5 billion or more), or not permitted (in the case of a smaller capitalization issuer). (b) The subscription for any purchase or sale of shares must be reported on the employee's quarterly personal securities transaction report, noting the trade was accomplished by subscription. (c) Because no brokers are involved in the transaction, the confirmation requirement will be waived for these transactions, although the Putnam employee must provide the Legal and Compliance Department with any transaction summaries or statements sent by the issuer. C. Trades in Approved Discretionary Brokerage Accounts. A transaction does not need to be pre-cleared if it takes place in an account that the Code of Ethics Officer has approved in writing as exempt from the pre-clearance requirement. In the sole discretion of the Code of Ethics Officer accounts that will be considered for exclusion from the pre-clearance requirement are only those for which an employee's securities broker or investment advisor has complete discretion (a discretionary account) and the following conditions are met (i) the employee certifies annually in writing that the employee has no influence over the transactions in the discretionary account and is not aware of the transactions in the discretionary account prior to their execution, (ii) the compliance department of the employee's broker or investment advisor certifies annually in writing that the employee has no influence over the transactions in the discretionary account and is not aware of the transactions in the discretionary account prior to their execution; and (iii) each calendar quarter, the broker or investment advisor sends Putnam's Code of Ethics Administrator copies of each quarterly statement for the discretionary account. Employees wishing to seek such an exemption must send a written request to the Code of Ethics Administrator. COMMENTS * Pre-clearance. Subpart (a) of Rule 1 is designed to avoid the conflict of interest that might occur when an employee trades for his personal account a security that currently is being traded or is likely to be traded for a Putnam client. Such conflicts arise, for example, when the trades of an employee might have an impact on the price or availability of a particular security, or when the trades of the client might have an impact on price to the benefit of the employee. Thus, exceptions involve situations where the trade of a Putnam employee is unlikely to have an impact on the market. * Regulatory Limits. Owing to a variety of federal statutes and regulations in the banking, savings and loan, communications, and gaming industries, it is critical that accounts of Putnam clients not hold more than 10% of the voting securities (5% for public utilities) of any issuer in those industries. Because of the risk that the personal holdings of Putnam employees may be aggregated with Putnam holdings for these purposes, subpart (b) of this Rule limits personal trades in these areas. The 7% limit (4% for public utilities) will allow the regulatory limits to be observed. * Options. For the purposes of this Code, options are treated like the underlying security. See Definitions. Thus, an employee may not purchase, sell, or "write" option contracts for a security that is on the Restricted List. The automatic exercise of an options contract (the purchase or writing of which was previously pre-cleared) does not have to be pre-cleared. Note, however, that the sale of securities obtained through the exercise of options must be pre-cleared. * Involuntary transactions. Involuntary personal securities transactions are exempted from the Code. Special attention should be paid to this exemption. (See Section I.D.) * Tender offers. This Rule does not prohibit an employee from tendering securities from his personal account in response to an any and all tender offer, even if Putnam clients are also tendering securities. A Putnam employee is, however, prohibited from tendering securities from his personal account in response to a partial tender offer, if Putnam clients are also tendering securities. * MMC securities. The pre-clearance, reporting and the rules applicable to personal trading apply to securities of MMC, including MMC shares held in the Putnam 401(k) plans and in the MMC Stock Purchase Plan. SANCTION GUIDELINES A. Failure to Pre-clear a Personal Trade * First violation: One month trading ban with written warning that a future violation will result in a longer trading ban. * Second violation: Three month trading ban and written notice to the Senior Managing Director of the employee's division. * Third violation: Six month trading ban with possible longer or permanent trading ban based upon review by Code of Ethics Oversight Committee. B. Failure to Pre-clear Securities on the Restricted List * First violation: Disgorgement of any profit from the transaction, one month trading ban, and written warning that a future violation will result in a longer trading ban. * Second violation: Disgorgement of any profit from the transaction, three month trading ban, and written notice to the Senior Managing Director of the employee's division. * Third violation: Disgorgement of any profit from the transaction, and six month trading ban with possible longer or permanent trading ban based upon review by Code of Ethics Oversight Committee. NOTE These are the sanction guidelines for successive failures to pre-clear personal trades within a two-year period. The Code of Ethics Oversight Committee retains the right to increase or decrease the sanction for a particular violation in light of the circumstances. The Committee's belief that an employee has violated the Code of Ethics intentionally will result in more severe sanctions than outlined in the guidelines above. The sanctions described in paragraph B apply to Restricted List securities that are: (a) small-cap stocks (i.e., stocks not entitled to the Large Cap exception) and (b) large-cap stocks that exceed the daily 1,000 share maximum permitted under the Large Cap exception. Failure to pre-clear an otherwise permitted trade of up to 1,000 shares of a large-cap security is subject to the sanctions described above in paragraph A. B. Prohibited Transactions Rule 1 Putnam employees are prohibited from short selling any security, whether or not the security is held in a Putnam client portfolio. Employees are prohibited from hedging investments made in securities of MMC. EXCEPTIONS Short selling against broad market indexes (such as the Dow Jones Industrial Average, the NASDAQ index, and the S&P 100 and 500 indexes) and short selling against the box are permitted (except that short selling shares of MMC against the box is not permitted). Rule 2 No Putnam employee shall purchase any security for her personal account in an initial public offering. EXCEPTION Pre-existing Status Exception. A Putnam employee shall not be barred by this Rule or by Rule 1(a) of Section I.A. from purchasing securities for her personal account in connection with an initial public offering of securities by a bank or insurance company when the employee's status as a policyholder or depositor entitles her to purchase securities on terms more favorable than those available to the general public, in connection with the bank's conversion from mutual or cooperative form to stock form, or the insurance company's conversion from mutual to stock form, provided that the employee has had the status entitling her to purchase on favorable terms for at least two years. This exception is only available with respect to the value of bank deposits or insurance policies that an employee owns before the announcement of the initial public offering. This exception does not apply, however, if the security appears on the Restricted List in the circumstances set forth in subparts (b), (c), or (d) of Section I.A., Rule 1. IMPLEMENTATION A. General Implementation. An employee shall inquire, before any purchase of a security for her personal account, whether the security to be purchased is being offered pursuant to an initial public offering. If the security is offered through an initial public offering, the employee shall refrain from purchasing that security for her personal account unless the exception applies. B. Administration of Exception. If the employee believes the exception applies, she shall consult the Code of Ethics Administrator concerning whether the security appears on the Restricted List and if so, whether it is eligible for this exception. COMMENTS * The purpose of this Rule is twofold. First, it is designed to prevent a conflict of interest between Putnam employees and Putnam clients who might be in competition for the same securities in a limited public offering. Second, the Rule is designed to prevent Putnam employees from being subject to undue influence as a result of receiving favors in the form of special allocations of securities in a public offering from broker-dealers who seek to do business with Putnam. * Purchases of securities in the immediate after-market of an initial public offering are not prohibited, provided they do not constitute violations of other portions of the Code of Ethics. For example, participation in the immediate after-market as a result of a special allocation from an underwriting group would be prohibited by Section III, Rule 3 concerning gifts and other favors. * Public offerings subsequent to initial public offerings are not deemed to create the same potential for competition between Putnam employees and Putnam clients because of the pre-existence of a market for the securities. Rule 3 No Putnam employee shall purchase any security for his personal account in a limited private offering or private placement. Privately placed limited partnerships are specifically included in this Rule. COMMENTS * The purpose of this Rule is to prevent a Putnam employee from investing in securities for his own account pursuant to a limited private offering that could compete with or disadvantage Putnam clients, and to prevent Putnam employees from being subject to efforts to curry favor by those who seek to do business with Putnam. * Exemptions to the prohibition will generally not be granted where the proposed investment relates directly or indirectly to investments by a Putnam client, or where individuals involved in the offering (including the issuers, broker, underwriter, placement agent, promoter, fellow investors and affiliates of the foregoing) have any prior or existing business relationship with Putnam or a Putnam employee, or where the Putnam employee believes that such individuals may expect to have a future business relationship with Putnam or a Putnam employee. * An exemption may be granted, subject to reviewing all the facts and circumstances, for investments in: (a) Pooled investment funds, including hedge funds, subject to the condition that an employee investing in a pooled investment fund would have no involvement in the activities or decision-making process of the fund except for financial reports made in the ordinary course of the fund's business, and subject to the condition that the hedge fund does not invest significantly in registered investment companies. (b) Private placements where the investment cannot relate, or be expected to relate, directly or indirectly to Putnam or investments by a Putnam client. * Employees who apply for an exemption will be expected to disclose to the Code of Ethics Officer in writing all facts and relationships relating to the proposed investment. * Applications to invest in private placements will be reviewed by the Code of Ethics Oversight Committee. This review will take into account, among other factors, the considerations described in the preceding comments. Rule 4 No Putnam employee shall purchase or sell any security for her personal account or for any Putnam client account while in possession of material, nonpublic information concerning the security or the issuer. EXCEPTIONS None. Please read Appendix A, Policy Statement Concerning Insider Trading Prohibitions. Rule 5 No Putnam employee shall purchase from or sell to a Putnam client any securities or other property for his personal account, nor engage in any personal transaction to which a Putnam client is known to be a party, or which transaction may have a significant relationship to any action taken by a Putnam client. EXCEPTIONS None. IMPLEMENTATION It shall be the responsibility of every Putnam employee to make inquiry prior to any personal transaction sufficient to satisfy himself that the requirements of this Rule have been met. COMMENT This rule is required by federal law. It does not prohibit a Putnam employee from purchasing any shares of an open-end Putnam fund. The policy with respect to employee trading in closed-end Putnam funds is attached as Appendix B. Rule 6 Putnam employees may not hold shares of Putnam open-end U.S. mutual funds other than through accounts maintained at Putnam through Putnam Preferred Access (PPA). Employees placing purchase orders in shares of Putnam open-end funds must place such orders through Putnam and not through an outside broker or other intermediary. Employees redeeming or exchanging shares of Putnam open-end funds must place those orders through Putnam and not through an outside broker or other intermediary. Contact a PPA representative at 1-800-634-1590 for instructions on how to transfer these funds. NOTE: For purposes of this Rule, "employee" includes: * Members of the immediate family of a Putnam employee who share the same household as the employee or for whom the Putnam employee has investment discretion (family member); * Any trust in which a Putnam employee or family member is a trustee with investment discretion and in which such Putnam employee or any family member are collectively beneficiaries; * Any closely-held entity (such as a partnership, limited liability company, or corporation) in which a Putnam employee and his or her family members hold a controlling interest and with respect to which they have investment discretion; and * Any account (including any retirement, pension, deferred compensation, or similar account) in which a Putnam employee or family member has a substantial economic interest and over which said Putnam employee or family member exercises investment discretion. COMMENTS * These requirements also apply to self-directed IRA accounts holding Putnam fund shares. * For Putnam Profit Sharing Plan or other Putnam deferred compensation accounts, trades may continue to be placed through ibenefitcenter.com. * These Rules apply to variable insurance accounts, which invest in Putnam Variable Trust such as the Putnam/Hartford Capital Manager. Employees must designate Putnam Retail Management as the broker of record for all such accounts. EXCEPTION Retirement, pension, deferred compensation and similar accounts that cannot be legally transferred to Putnam are not subject to the requirement. For example, a spouse of a Putnam employee may have a 401(k) plan with her employer that invests in Putnam funds. Any employee who continues to hold shares in open-end Putnam funds outside of Putnam must notify the Code of Ethics Officer in writing of the account information, provide the reason why the account cannot be transferred to Putnam and arrange for a quarterly statement of transaction in such account to be sent to the Code of Ethics Administrator. Rule 7 (a) Employees defined in Rule 6 may not, within a 90-calendar day period, make a purchase followed by a sale, or a sale followed by a purchase, of shares of the same open-end Putnam mutual fund even if the transactions occur in different accounts. (b) Employees who are Access Persons may not, within a one-year period, make a purchase followed by a sale, or a sale followed by a purchase, of shares of the same open-end Putnam mutual fund or of shares of any U.S. registered mutual fund to which Putnam acts as advisor or sub-advisor even if the transactions occur in different accounts. COMMENTS * This restriction applies across all accounts maintained by an employee as follows: An employee who buys shares of an open-end Putnam mutual fund may not sell any shares of the same mutual fund until 90 calendar days have passed. Example. If an employee buys shares of a Putnam fund on Day 1 for a retail account and then sells (by exchange) shares of the same fund for his or her Putnam Profit Sharing 401(k) Plan account on Day 85, the employee has violated the rule. Similarly, an employee who sells shares of an open-end Putnam mutual fund may not buy any shares of the same mutual fund until 90 calendar days have passed. Example. If an employee sells shares of a Putnam fund on day 1 for a retail account and then sells (by exchange out) shares of the same fund for his or her Putnam Profit Sharing 401(k) Plan account on day 85, the employee may not buy (or exchange in) shares of that fund in any account until day 176, which is more than 90 days after the most recent sale of shares of that fund. * The purpose of these blackout periods restriction is to prevent any market timing, or appearance of market timing activity. * This Rule applies to transactions by a Putnam employee in any type of account, including retail, IRA, variable annuity, college savings 529 plans, Profit Sharing 401(k) Plan, and any deferred compensation accounts. * The minimum sanction for an initial violation of the blackout period shall be disgorgement of any profit made on the transaction. Additional sanctions may apply, including termination of employment. EXCEPTIONS A. This restriction does not apply to Putnam's money market funds and Putnam Stable Value Fund. B. Profit Sharing 401(k) Plan Contributions and Payroll Deductions. The 90-day restriction is not triggered by initial allocation of regular employee or employer contributions or forfeitures to an employee's account under the terms of Putnam employee benefit plans or a Putnam payroll deduction direct investment program; later exchanges of these contributions will be subject to the 90-day blackout period. C. Systematic Programs. This restriction does not apply with respect to shares sold or acquired as a result of participation in a systematic program for contributions, withdrawals or exchanges, provided that an election to participate in any such program and the participation dates of the program may not be changed more often than quarterly after the program is elected by the employee. Access Persons may elect a quarterly or semiannual rebalancing program although it may only be changed on an annual basis; D. Employee Benefit Plan Withdrawals and Distributions. This restriction does not apply with respect to shares sold for withdrawals, loans or distributions under the terms of Putnam employee benefit plans; E. Dividends, Distributions, Mergers, and Share Class Conversions. This restriction does not apply with respect to the requisitioned shares as a result of reinvestment of dividends, distributions, mergers, conversions of share classes, or other similar actions. Subsequent transactions with respect to the shares will be covered. F. In special situations, Putnam's Code of Ethics Oversight Committee may grant exceptions to the blackout periods as a result of death, disability, or special circumstances (such as, personal hardship), all as determined from time to time by the Committee. Employees can request an exception by submitting a written request to the Code of Ethics Officer. Rule 8: Good Until Canceled Orders Good Until Canceled (GTC) Orders and Limit Orders are prohibited. Any order not executed on the day of pre-clearance must be resubmitted for pre-clearance before being executed on a subsequent day. "Good until canceled" or "limit" orders are prohibited because of the potential failure to pre-clear. Rule 9: Excessive Trading Putnam employees are strongly discouraged from engaging in excessive trading for their personal accounts. Beginning with the fourth quarter of 2004, employees will be prohibited from making more than 25 trades in individual securities in any given quarter. Excessive trading within Putnam open-end mutual funds is prohibited. COMMENTS * Although a Putnam employee's excessive trading may not itself constitute a conflict of interest with Putnam clients, Putnam believes that its clients' confidence in Putnam will be enhanced and the likelihood of Putnam achieving better investment results for its clients over the long term will be increased if Putnam employees rely on their investment-- as opposed to trading-- skills in transactions for their own account. Moreover, excessive trading by a Putnam employee for his or her own account diverts an employee's attention from the responsibility of servicing Putnam clients, and increases the possibilities for transactions that are in actual or apparent conflict with Putnam client transactions. Short-term trading is strongly discouraged while employees are encouraged to take a long-term view. * Employees should be aware that their trading activity is closely monitored. Ten trades or more per quarter will be discouraged and will warrant a review memo. Activity exceeding 25 trades per quarter will be prohibited by the Code of Ethics Oversight Committee. Sanctions will be imposed such as a trading ban or a more stringent sanction may be determined at the discretion of the Committee. Different rules apply with respect to trading in shares of Putnam open-end mutual funds. See Section I. B, Rule 7 above. C. Discouraged Transactions Rule 1 Putnam employees are strongly discouraged from engaging in writing (selling) naked options for their personal accounts. Naked option transactions are particularly dangerous, because a Putnam employee may be prevented by the restrictions in this Code of Ethics from covering the naked option at the appropriate time. All employees should keep in mind the limitations on their personal securities trading imposed by this Code when contemplating such an investment strategy. Engaging in naked options transactions on the basis of material, nonpublic information is prohibited. See Appendix A, Policy Statement Concerning Insider Trading Prohibitions. EXCEPTIONS None. D. Exempted Transactions Rule 1 Transactions that are involuntary on the part of a Putnam employee are exempt from the prohibitions set forth in Sections I.A., I.B., and I.C. EXCEPTIONS None. COMMENTS * This exemption is based on categories of conduct that the Securities and Exchange Commission does not consider "abusive." * Examples of involuntary personal securities transactions include: (a) Sales out of the brokerage account of a Putnam employee as a result of bona fide margin call, provided that withdrawal of collateral by the Putnam employee within the ten days previous to the margin call was not a contributing factor to the margin call; (b) Purchases arising out of an automatic dividend reinvestment program of an issuer of a publicly traded security. * Transactions by a trust in which the Putnam employee (or a member of his immediate family) holds a beneficial interest, but for which the employee has no direct or indirect influence or control with respect to the selection of investments, are involuntary transactions. In addition, these transactions do not fall within the definition of "personal securities transactions." See Definitions. * A good-faith belief on the part of the employee that a transaction was involuntary will not be a defense to a violation of the Code of Ethics. In the event of confusion as to whether a particular transaction is involuntary, the burden is on the employee to seek a prior written determination of the applicability of this exemption. The procedures for obtaining such a determination appear in Section VII, Part 4. Rule 2 Transactions that have been determined in writing by the Code of Ethics Officer before the transaction occurs to be no more than remotely harmful to Putnam clients because the transaction would be very unlikely to affect a highly institutional market, or because the transaction is clearly not related economically to the securities to be purchased, sold, or held by a Putnam client, are exempt from the prohibitions set forth in Sections I.A., I.B., and I.C. IMPLEMENTATION An employee may seek an ad-hoc exemption under this Rule by following the procedures in Section VII, Part 4. COMMENTS * This exemption is also based upon categories of conduct that the Securities and Exchange Commission does not consider "abusive." * The burden is on the employee to seek a prior written determination that the proposed transaction meets the standards for an ad hoc exemption set forth in this Rule. SECTION II Additional Special Rules for Personal Securities Transactions of Access Persons and Certain Investment Professionals Access Persons (including all investment professionals and other employees as defined on page vii) Rule 1: 60-Day Rule No Access Person shall purchase and then sell at a profit, or sell and then repurchase at a lower price, any security or related derivative security within 60 calendar days. EXCEPTIONS None, unless prior written approval from the Code of Ethics Officer is obtained. Exceptions may be granted on a case-by-case basis when no abuse is involved and the equities of the situation support an exemption. For example, although an Access Person may buy a stock as a long-term investment, that stock may have to be sold involuntarily due to unforeseen activity such as a merger. IMPLEMENTATION A. The 60-Day Rule applies to all Access Persons, as defined in the Definitions section of the Code. B. Calculation of whether there has been a profit is based upon the market prices of the securities. The calculation is not net of commissions or other sales charges. C. As an example, an Access Person would not be permitted to sell a security at $12 that he purchased within the prior 60 days for $10. Similarly, an Access Person would not be permitted to purchase a security at $10 that she had sold within the prior 60 days for $12. COMMENTS * The prohibition against short-term trading profits by Access Persons is designed to minimize the possibility that they will capitalize inappropriately on the market impact of trades involving a client portfolio about which they might possibly have information. * Although chief investment officers, portfolio managers, and analysts may sell securities at a profit within 60 days of purchase in order to comply with the requirements of the 7-Day Rule applicable to them (described below), the profit will have to be disgorged to charity under the terms of the 7-Day Rule. * Effective in the fourth quarter of 2004, the 60-Day Rule will become a Black Out Rule. An Access Person cannot trade a security within 60 days regardless of tax lot election. Certain Investment Professionals Rule 2: 7-Day Rule (a) Portfolio Managers: Before a portfolio manager (including a chief investment officer with respect to an account he manages) places an order to buy a security for any Putnam client portfolio that he manages, he shall sell any such security or related derivative security purchased in a transaction for his personal account within the preceding seven calendar days. (b) Comanagers: Before a portfolio manager places an order to buy a security for any Putnam client he manages, his comanager shall sell any such security or related derivative security purchased in a transaction for his personal account within the preceding seven calendar days. (c) Analysts: Before an analyst makes a buy recommendation for a security (including designation of a security for inclusion in the portfolio of the Putnam Research Fund), he shall sell any such security or related derivative security purchased in a transaction for his personal account within the preceding seven calendar days. COMMENTS * This Rule applies to portfolio managers (including chief investment officers (CIO) with respect to accounts they manage) in connection with any purchase (no matter how small) in any client account managed by that portfolio manager or CIO (even so-called "clone accounts"). In particular, it should be noted that the requirements of this Rule also apply with respect to purchases in client accounts, including "clone accounts," resulting from "cash flows." To comply with the requirements of this Rule, it is the responsibility of each portfolio manager or CIO to be aware of the placement of all orders for purchases of a security by client accounts that he or she manages for seven days following the purchase of that security for his or her personal account. * An investment professional who must sell securities to be in compliance with the 7-Day Rule must absorb any loss and disgorge to charity any profit resulting from the sale. The recipient charity will be chosen by the Code of Ethics Officer. * This Rule is designed to avoid even the appearance of a conflict of interest between an investment professional and a Putnam client. A greater burden is placed on these professionals given their positions in the organization. Transactions executed for the employee's personal account must be conducted in a manner consistent with the Code of Ethics and in such a manner as to avoid any actual or perceived conflict of interest or any abuse of the employee's position of trust and responsibility. * "Portfolio manager" is used in this Section as a functional label, and is intended to cover any employee with authority to authorize a trade on behalf of a Putnam client, whether or not such employee bears the title "portfolio manager." "Analyst" is also used in this Section as a functional label, and is intended to cover any employee who is not a portfolio manager but who may make recommendations regarding investments for Putnam clients. EXCEPTIONS None. Rule 3: Blackout Rule (a) Portfolio Managers: No portfolio manager (including a chief investment officer with respect to an account she manages) shall: (i) sell any security or related derivative security for her personal account until seven calendar days have elapsed since the most recent purchase of that security or related derivative security by any Putnam client portfolio she manages or comanages; or (ii) purchase any security or related derivative security for her personal account until seven calendar days have elapsed since the most recent sale of that security or related derivative security from any Putnam client portfolio that she manages or comanages. (b) Analysts: No analyst shall: (i) sell any security or related derivative security for his personal account until seven calendar days have elapsed since his most recent buy recommendation for that security or related derivative security (including designation of a security for inclusion in the portfolio of the Putnam Research Fund); or (ii) purchase any security or related derivative security for his personal account until seven calendar days have elapsed since his most recent sell recommendation for that security or related derivative security (including the removal of a security from the portfolio of the Putnam Research Fund). COMMENTS * This Rule applies to portfolio managers (including chief investment officers with respect to accounts they manage) in connection with any purchase (no matter how small) in any client account managed by that portfolio manager or CIO (even clone accounts). In particular, it should be noted that the requirements of this rule also apply with respect to transactions in client accounts, including clone accounts, resulting from cash flows. In order to comply with the requirements of this Rule, it is the responsibility of each portfolio manager and CIO to be aware of all transactions in a security by client accounts that he or she manages that took place within the seven days preceding a transaction in that security for his or her personal account. * This Rule is designed to prevent a Putnam portfolio manager or analyst from engaging in personal investment conduct that appears to be counter to the investment strategy she is pursuing or recommending on behalf of a Putnam client. * Trades by a Putnam portfolio manager for her personal account in the "same direction" as the Putnam client portfolio she manages, and trades by an analyst for his personal account in the same direction as his recommendation, do not present the same danger, so long as any same direction trades do not violate other provisions of the Code or the Policy Statements. EXCEPTIONS None. Rule 4: Contra Trading Rule (a) Portfolio Managers: No portfolio manager shall, without prior clearance, sell out of his personal account securities or related derivative securities held in any Putnam client portfolio that he manages or comanages (b) Chief Investment Officers: No chief investment officer shall, without prior clearance, sell out of his personal account securities or related derivative securities held in any Putnam client portfolio managed in his investment group. EXCEPTIONS None, unless prior clearance and written approval are given. IMPLEMENTATION A. Individuals Authorized to Give Approval. Prior to engaging in any such sale, a portfolio manager shall seek approval, in writing, of the proposed sale. In the case of a portfolio manager or director, prior written approval of the proposed sale shall be obtained from a chief investment officer to whom he reports or, in his absence, another chief investment officer. In the case of a chief investment officer, prior written approval of the proposed sale shall be obtained from another chief investment officer. In addition to the foregoing, prior written approval must also be obtained from the Code of Ethics Officer. B. Contents of Written Approval. In every instance, the written approval form attached as Appendix C (or such other form as the Code of Ethics Officer shall designate) shall be used. The written approval should be signed by the chief investment officer giving approval and dated the date such approval was given, and shall state, briefly, the reasons why the trade was allowed and why the investment conduct pursued by the portfolio manager, director, or chief investment officer was deemed inappropriate for the Putnam client account controlled by the individual seeking to engage in the transaction for his personal account. Such written approval shall be sent by the chief investment officer approving the transaction to the Code of Ethics Officer, for her approval, within 24 hours or as promptly as circumstances permit. Approvals obtained after a transaction has been completed or while it is in process will not satisfy the requirements of this Rule. COMMENT This Rule, like Rule 3 of this Section, is designed to prevent a Putnam portfolio manager from engaging in personal investment conduct that appears to be counter to the investment strategy that he is pursuing on behalf of a Putnam client. Rule 5 No portfolio manager shall cause, and no analyst shall recommend, a Putnam client to take action for the portfolio manager's or analyst's own personal benefit. EXCEPTIONS None. COMMENTS * A portfolio manager who trades in, or an analyst who recommends, particular securities for a Putnam client account in order to support the price of securities in his personal account, or who "front runs" a Putnam client order is in violation of this Rule. Portfolio managers and analysts should be aware that this Rule is not limited to personal transactions in securities (as that word is defined in Definitions). Thus, a portfolio manager or analyst who front runs a Putnam client purchase or sale of obligations of the U.S. government is in violation of this Rule, although U.S. government obligations are excluded from the definition of security. * This Rule is not limited to instances when a portfolio manager or analyst has malicious intent. It also prohibits conduct that creates an appearance of impropriety. Portfolio managers and analysts who have questions about whether proposed conduct creates an appearance of impropriety should seek a prior written determination from the Code of Ethics Officer, using the procedures described in Section VII, Part 3. SECTION III General Rules for All Employees Rule 1: Compliance with All Laws, Regulations and Policies All employees must comply with applicable laws and regulations as well as company policies. This includes tax, anti-trust, political contribution, and international boycott laws. In addition, no employee at Putnam may engage in fraudulent conduct of any kind. EXCEPTIONS None. COMMENTS * Putnam may report to the appropriate legal authorities conduct by Putnam employees that violates this Rule. * It should also be noted that the U.S. Foreign Corrupt Practices Act makes it a criminal offense to make a payment or offer of payment to any non-U.S. governmental official, political party, or candidate to induce that person to affect any governmental act or decision, or to assist Putnam's obtaining or retaining business. Rule 2: Conflicts of Interest No Putnam employee shall conduct herself in a manner, which is contrary to the interests of, or in competition with, Putnam or a Putnam client, or which creates an actual or apparent conflict of interest with a Putnam client. EXCEPTIONS None. COMMENTS * This Rule is designed to recognize the fundamental principle that Putnam employees owe their chief duty and loyalty to Putnam and Putnam clients. * It is expected that a Putnam employee who becomes aware of an investment opportunity that she believes is suitable for a Putnam client who she services will present it to the appropriate portfolio manager, prior to taking advantage of the opportunity herself. Rule 3: Gifts and Entertainment Policy No Putnam employee shall accept anything of material value from any broker-dealer, financial institution, corporation or other entity, any existing or prospective supplier of goods or services with a business relationship to Putnam, or any company or other entity whose securities are held in or are being considered as investments for the Putnam funds, or any other client account. Included are gifts, favors, preferential treatment, special arrangements, or access to special events. COMMENTS This Rule is intended to permit the acceptance of only proper types of customary and limited business amenities. A Putnam employee may not, under any circumstances, accept anything that could create the appearance of any kind of conflict of interest. For example, acceptance of any consideration is prohibited if it would create the appearance of a reward or inducement for conducting Putnam business either with the person providing the gift or his employer. IMPLEMENTATION A. Gifts. An employee may not accept small gifts with an aggregate value of more than $100 in any year from any one source. Any Putnam employee who is offered or receives an item exceeding $100 in value is prohibited by this Rule and must report the details to the Code of Ethics Officer. Any entertainment event provided to an employee where the host is not in attendance is treated as a gift and is subject to the $100 per year per source limit. B. Entertainment. Putnam's rules are designed to permit reasonable, ordinary business entertainment, but prohibit any events, which may be perceived as extravagant or involving lavish expenditures. 1. Occasional lunches, dinners, cocktail parties, or comparable gatherings conducted for business purposes are permitted. For example, occasional attendance at group functions sponsored by sell side firms is permitted where the function relates to investments or other business activity. Occasional attendance at these functions is not required to be counted against the limits described in paragraph 2(b) below. 2. Other entertainment events, such as, sporting events, theater, movies, concerts, or other forms of entertainment conducted for business purposes, are permitted only under the following conditions: (i) The host must be present for the event. (ii) The location of the event must be in the metropolitan area in which the office of the employee is located. (iii) Spouses or other family members of the employee may not attend the entertainment event or any meals before or after the entertainment event. (iv) The value of the entertainment event provided to the employee may not exceed $150, not including the value of any meals that may be provided to the employee before or after the event. Acceptance of entertainment events having a market value materially exceeding the face value of the entertainment including, for example, attendance at sporting event playoff games, is prohibited. This prohibition applies even if the face value of tickets to the events is $150 or less or when the Putnam employee offers to pay for the tickets. If there is any ambiguity about whether to accept an entertainment event in these circumstances, please consult the Code of Ethics Officer. (v) The employee may not accept entertainment events under this provision (B)(2) more than six times a year and not more than two times in any year from any single source. (vi) The Code of Ethics Officer may grant exceptions to these rules. For example, it may be appropriate for an employee attending a legitimate conference in a location away from the office to attend a business entertainment event in that location. All exceptions must be approved in advance by written request to the Code of Ethics Officer. 3. Any employee attending any entertainment event under (B)(1) or (B)(2) above must file a Report of Entertainment Form (attached as Appendix E) with the Code of Ethics Officer within 10 days following the date of the entertainment event. Failure to file the notice is a violation of the Code of Ethics. 4. Meals and entertainment, which are part of the regular program at an investment conference (i.e., open to all participants) are not subject to the limits of this section (B)(2) above. C. Among the items that are prohibited are: 1. Any entertainment event attendance, which would reflect badly on Putnam as a firm of the highest fiduciary and ethical standards. For example, events involving adult entertainment or gambling must be avoided. 2. Entertainment involving travel away from the metropolitan area in which the employee is located. Even in the event an exception is granted as contemplated by (B)(2)(vi) above, payment by a third party of the cost of transportation to a location outside the employee's metropolitan area, lodging while in another location, and any meals not specifically approved by the Code of Ethics officer, are prohibited; 3. Personal loans to a Putnam employee on terms more favorable than those generally available for comparable credit standing and collateral; and 4. Preferential brokerage or underwriting commissions or spreads or allocations of shares or interests in an investment for the personal account of a Putnam employee; and 5. Cash or cash equivalents D. As with any of the provisions of the Code of Ethics, a sincere belief by the employee that he was acting in accordance with the requirements of this Rule will not satisfy his obligations under the Rule. Therefore, an employee who is in doubt concerning the propriety of any gift or favor should seek a prior written determination from the Code of Ethics Officer, as provided in number 3 of Section VII. E. No Putnam employee may solicit any gift or entertainment from any person, even if the gift or entertainment, if unsolicited, would be permitted. F. The Rule does not prohibit employees on business travel from using local transportation and arrangements customarily supplied by brokers or similar entities. For example, it is customary for brokers in developing markets to make local transportation arrangements. These arrangements are permitted so long as the expense of lodging and air travel are paid by Putnam. Rule 4: Anti-bribery/Kickback Policy No Putnam employee shall pay, offer, or commit to pay any amount of consideration which might be or appear to be a bribe or kickback in connection with Putnam's business. EXCEPTIONS None. COMMENT Although the rule does not specifically address political contributions (which are described in Rule 5 below), Putnam employees should be aware that it is against corporate policy to use company assets to fund political contributions of any sort, even where such contributions may be legal. No Putnam employee should offer or agree to make any political contributions (including political dinners and similar fundraisers) on behalf of Putnam, and no employee will be reimbursed by Putnam for such contributions made by the employee personally. Rule 5: Political Contributions/Solicitations Policy No contributions may be made with corporate funds to any political party or campaign, whether directly or by reimbursement to an employee for the expense of such a contribution. No Putnam employee shall solicit any charitable, political, or other contributions using Putnam letterhead or making reference to Putnam in the solicitation. No Putnam employee shall personally solicit any such contribution while on Putnam business. EXCEPTIONS None. COMMENTS * Putnam has established a political action committee (PAC) that contributes to worthy candidates for political office. Any request received by a Putnam employee for a political contribution must be directed to Putnam's Legal and Compliance Department. * This rule prohibits solicitation on personal letterhead by Putnam employees except as approved by the Code of Ethics Officer. * Certain officers and employees of Putnam Retail Management and other employees involved in Putnam's College Advantage Section 529 Plan with Ohio Tuition Trust Authority are subject to special rules on political contributions. For questions on these requirements, please call the Code of Ethics Administrator. Rule 6: Confidentiality of Putnam Business Information No unauthorized disclosure may be made by any employee or former employee of any trade secrets or proprietary information of Putnam or of any confidential information. No information regarding any Putnam client portfolio, actual or proposed securities trading activities of any Putnam client, or Putnam research shall be disclosed outside the Putnam organization unless doing so has a valid business purpose and is in accord with any relevant procedures established by Putnam relating to such disclosures. COMMENT All information about Putnam and Putnam clients is strictly confidential. Putnam research information should not be disclosed without proper approval and never for personal gain. Rule 7: Roles At Other Entities No Putnam employee shall serve as officer, employee, director, trustee, or general partner of a corporation or entity other than Putnam, without prior approval of the Code of Ethics Officer. Requests for a role at a publicly-traded company will be closely reviewed and permission will be granted on an ad-hoc basis. EXCEPTION Charitable or Non-profit Exception. This Rule shall not prevent any Putnam employee from serving as officer, director, or trustee of a charitable or not-for-profit institution, provided that the employee abides by the Code of Ethics and the Policy Statements with respect to any investment activity for which she has any discretion or input as officer, director, or trustee. The pre-clearance and reporting requirements of the Code of Ethics do not apply to the trading activities of such charitable or not-for-profit institutions for which an employee serves as an officer, director, or trustee unless the employee is responsible for day-to-day portfolio management of the account. COMMENTS * This Rule is designed to ensure that Putnam cannot be deemed an affiliate of any issuer of securities by virtue of service by one of its officers or employees as director or trustee. * Positions with public companies are especially problematic and will normally not be approved. * Certain charitable or not-for-profit institutions have assets (such as endowment funds or employee benefit plans) which require prudent investment. To the extent that a Putnam employee (because of her position as officer, director, or trustee of an outside entity) is charged with responsibility to invest such assets prudently, she may not be able to discharge that duty while simultaneously abiding by the spirit of the Code of Ethics and the Policy Statements. Employees are cautioned that they should not accept service as an officer, director, or trustee of an outside charitable or not-for-profit entity where such investment responsibility is involved, without seriously considering their ability to discharge their fiduciary duties with respect to such investments. Rule 8: Role as Trustee or Fiduciary Outside of Putnam No Putnam employee shall serve as a trustee, executor, custodian, any other fiduciary, or as an investment advisor or counselor for any account outside Putnam. EXCEPTIONS A. Charitable or Religious Exception. This Rule shall not prevent any Putnam employee from serving as fiduciary with respect to a religious or charitable trust or foundation, so long as the employee abides by the spirit of the Code of Ethics and the Policy Statements with respect to any investment activity over which he has any discretion or input. The pre-clearance and reporting requirements of the Code of Ethics do not apply to the trading activities of such a religious or charitable trust or foundation unless the employee is responsible for day-to-day portfolio management of the account. B. Family Trust or Estate Exception. This Rule shall not prevent any Putnam employee from serving as fiduciary with respect to a family trust or estate, so long as the employee abides by all of the Rules of the Code of Ethics with respect to any investment activity over which he has any discretion. COMMENT The roles permissible under this Rule may carry with them the obligation to invest assets prudently. Once again, Putnam employees are cautioned that they may not be able to fulfill their duties in that respect while abiding by the Code of Ethics and the Policy Statements. Rule 9: Investment Clubs No Putnam employee may be a member of any investment club. EXCEPTIONS None. COMMENT This Rule guards against the danger that a Putnam employee may be in violation of the Code of Ethics and the Policy Statements by virtue of his personal securities transactions in or through an entity that is not bound by the restrictions imposed by this Code of Ethics and the Policy Statements. Please note that this restriction also applies to the spouse of a Putnam employee and any relatives of a Putnam employee living in the same household as the employee, as their transactions are covered by the Code of Ethics (see page vii). Rule 10: Business Negotiations For Putnam No Putnam employee may become involved in a personal capacity in consultations or negotiations for corporate financing, acquisitions, or other transactions for outside companies (whether or not held by any Putnam client), nor negotiate nor accept a fee in connection with these activities without obtaining the prior written permission of the president of Putnam Investments. EXCEPTIONS None. Rule 11: Accurate Records No employee may create, alter or destroy (or participate in the creation, alteration or destruction of) any record that is intended to mislead anyone or to conceal anything that is, or is reasonably believed to be, improper. In addition, all employees responsible for the preparation, filing, or distribution of any regulatory filings or public communications must ensure that such filings or communications are timely, complete, fair, accurate, and understandable. EXCEPTIONS None. COMMENTS * In many cases, this is not only a matter of company policy and ethical behavior but also required by law. Our books and records must accurately reflect the transactions represented and their true nature. For example, records must be accurate as to the recipient of all payments; expense items, including personal expense reports, must accurately reflect the true nature of the expense. No unrecorded fund or asset shall be established or maintained for any reason. * All financial books and records must be prepared and maintained in accordance with Generally Accepted Accounting Principles and Putnam's existing accounting controls, to the extent applicable. Rule 12: Interest in Entities Doing Business with Putnam No employee shall have any direct or indirect (including by a family member or close relative) personal financial interest (other than normal investments not material to the employee in the entity's publicly-traded securities) in any business, with which Putnam has dealings unless such interest is disclosed and approved by the Code of Ethics Officer. Rule 13: Affiliated Entities No employee shall, with respect to any affiliate of Putnam that provides investment advisory services and is listed below in Comment 4 to this Rule, as revised from time to time (each a Non-Putnam affiliate or NPA), (a) Directly or indirectly seek to influence the purchase, retention, or disposition of, or exercise of voting consent, approval or similar rights with respect to, any portfolio security in any account or fund advised by the NPA and not by Putnam, (b) Transmit any information regarding the purchase, retention or disposition of, or exercise of voting, consent, approval, or similar rights with respect to, any portfolio security held in a Putnam or NPA client account to any personnel of the NPA, (c) Transmit any trade secrets, proprietary information, or confidential information of Putnam to the NPA unless doing so has a valid business purpose and is in accord with any relevant procedures established by Putnam relating to such disclosures, (d) Use confidential information or trade secrets of the NPA for the benefit of the employee, Putnam, or any other NPA, or (e) Breach any duty of loyalty to the NPA derived from the employee's service as a director or officer of the NPA. COMMENTS * Sections (a) and (b) of the Rule are designed to help ensure that the portfolio holdings of Putnam clients and clients of the NPA need not be aggregated for purposes of determining beneficial ownership under Section 13(d) of the Securities Exchange Act or applicable regulatory or contractual investment restrictions that incorporate such definition of beneficial ownership. Persons who serve as directors or officers of both Putnam and an NPA should take care to avoid even inadvertent violations of Section (b). Section (a) does not prohibit a Putnam employee who serves as a director or officer of the NPA from seeking to influence the modification or termination of a particular investment product or strategy in a manner that is not directed at any specific securities. Sections (a) and (b) do not apply when a Putnam affiliate serves as an advisor or sub-advisor to the NPA or one of its products, in which case normal Putnam aggregation rules apply. * As a separate entity, any NPA may have trade secrets or confidential information that it would not choose to share with Putnam. This choice must be respected. * When Putnam employees serve as directors or officers of an NPA, they are subject to common law duties of loyalty to the NPA, despite their Putnam employment. In general, this means that when performing their duties as NPA directors or officers, they must act in the best interest of the NPA and its shareholders. Putnam's Legal and Compliance Department will assist any Putnam employee who is a director or officer of an NPA and has questions about the scope of his or her responsibilities to the NPA. * Entities that are currently non-Putnam affiliates within the scope of this Rule are: Cisalpina Gestioni, S.p.A., Nissay Asset Management Co., Ltd., Thomas H. Lee Partners, L.P., Ampega Asset Management, GMBH, and Sceptre Investment Counsel, Ltd. Rule 14: Computer System/Network Policies No employee shall use computer hardware, software, data, Internet, electronic mail, voice mail, electronic messaging (e-mail or cc: Mail), or telephone communications systems in a manner that is inconsistent with their use as set forth in policy statements governing their use that are adopted from time to time by Putnam. No employee shall introduce a computer virus or computer code that may result in damage to Putnam's information or computer systems. COMMENT Putnam's policy statements relating to these matters are contained in the Computer System and Network Responsibilities section of the Employment Issues category within the Employee Handbook. The online Employee Handbook is located online at www.ibenefitcenter.com under Policies and Procedures under the @Putnam tab. EXCEPTIONS None. Rule 15: AIMR Code of Ethics All employees must follow and abide by the spirit of the Code of Ethics and the Standards of Professional Conduct of the Association of Investment Management and Research (AIMR). The texts of the AIMR Code of Ethics and Standards of Professional Conduct are set forth in Exhibit D. EXCEPTIONS None. Rule 16: Privacy Policy Except as provided below, no employee may disclose to any outside organization or person any nonpublic personal information about any individual who is a current or former shareholder of any Putnam retail or institutional fund, or current or former client of a Putnam company. All employees shall follow the security procedures as established from time to time by a Putnam company to protect the confidentiality of all shareholder and client account information. Except as Putnam's Legal and Compliance Department may expressly authorize, no employee shall collect any nonpublic personal information about a prospective or current shareholder of a Putnam Fund or prospective or current client of a Putnam company, other than through an account application (or corresponding information provided by the shareholder's financial representative) or in connection with executing shareholder or client transactions, nor shall any information be collected other than the following: name, address, telephone number, Social Security number, and investment, broker, and transaction information. EXCEPTIONS A. Putnam Employees. Nonpublic personal information may be disclosed to Putnam employees in connection with processing transactions or maintaining accounts for shareholders of a Putnam fund and clients of a Putnam company, to the extent that access to such information is necessary to the performance of that employee's job functions. B. Shareholder Consent Exception. Nonpublic personal information about a shareholder's or client's account may be provided to a non-Putnam organization at the specific request of the shareholder or client or with the shareholder's or client's prior written consent. C. Broker or Advisor Exception. Nonpublic personal information about a shareholder's or client's account may be provided to the shareholder's or client's broker of record. D. Third-Party Service Provider Exception. Nonpublic personal information may be disclosed to a service provider that is not affiliated with a Putnam fund or Putnam company only when such disclosure is necessary for the service provider to perform the specific services contracted for, and only (a) if the service provider executes Putnam's standard confidentiality agreement, or (b) pursuant to an agreement containing a confidentiality provision that has been approved by the Legal and Compliance Department. Examples of such service providers include proxy solicitors and proxy vote tabulators, mail services, and providers of other administrative services, and Information Services Division consultants who have access to nonpublic personal information. COMMENTS * Nonpublic personal information is any information that personally identifies a shareholder of a Putnam fund or client of a Putnam company and is not derived from publicly available sources. This privacy policy applies to shareholders or clients who are individuals, not institutions. However, as a general matter, all information that we receive about a shareholder of a Putnam fund or client of a Putnam company shall be treated as confidential. No employee may sell or otherwise provide shareholder or client lists or any other information relating to a shareholder or client to any marketing organization. * All Putnam employees with access to shareholder or client account information must be trained in and follow Putnam's security procedures designed to safeguard that information from unauthorized use. For example, a telephone representative must be trained in and follow Putnam's security procedures to verify the identity of a caller requesting account information. * Any questions regarding this privacy policy should be directed to Putnam's Legal and Compliance Department. A violation of this policy will be subject to the sanctions imposed for violations of Putnam's Code of Ethics. * Employees must report any violation of this policy or any possible breach of the confidentiality of client information (whether intentional or accidental) to the managing director in charge of the employee's business unit. Managing directors who are notified of such a violation or possible breach must immediately report it in writing to Putnam's chief compliance officer and, in the event of a breach of computerized data, Putnam's chief technology officer. Rule 17: Anti-money Laundering Policy No employee may engage in any money laundering activity or facilitate any money-laundering activity through the use of any Putnam account or client account. Any situations giving rise to a suspicion that attempted money laundering may be occurring in any account must be reported immediately to the managing director in charge of the employee's business unit. Managing directors who are notified of such a suspicion of money laundering activity must immediately report it in writing to Putnam's chief compliance officer and chief financial officer. Rule 18: Record Retention All employees must comply with the record retention requirements applicable to the business unit. Employees should check with their managers or the chief administrative officer of their division to determine what record retention requirements apply to their business unit. SECTION IV Special Rules for Officers and Employees of Putnam Investments Limited Rule 1 In situations subject to Section I.A., Rule 1 (Restricted List Personal Securities Transactions, the Putnam Investments Limited (PIL) employee must obtain clearance not only as provided in that rule, but also from PIL's Compliance Officer or her designee, who must approve the transaction before any trade is placed and record the approval. EXCEPTIONS None. IMPLEMENTATION Putnam's Code of Ethics Administrator in Boston (the Boston Administrator) has also been designated the Assistant Compliance Officer of PIL and has been delegated the right to approve or disapprove personal securities transactions in accordance with the requirements of Section I.A. Therefore, approval from the Code of Ethics Administrator for PIL employees to make personal securities investments constitutes approval under the Code of Ethics and also for purposes of compliance with the Financial Services Authority, the U.K. self-regulatory organization that regulates PIL. The position of London Code of Ethics Administrator (the London Administrator) has also been created (Jane Barlow is the current London Administrator). All requests for clearances must be made by e-mail to the Boston Administrator copying the London Administrator. The e-mail must include the number of shares to be bought or sold and the name of the broker(s) involved. Where time is of the essence clearances may be made by telephone to the Boston Administrator but they must be followed up by e-mail. Both the Boston and London Administrators will maintain copies of all clearances for inspection by senior management and regulators. Rule 2 No PIL employee may trade with any broker or dealer unless that broker or dealer has sent a letter to the London Administrator agreeing to deliver copies of trade confirmations and statements to PIL. No PIL employee may enter into any margin or any other special dealing arrangement with any broker-dealer without the prior written consent of the PIL compliance officer. EXCEPTIONS None. IMPLEMENTATION PIL employees will be notified separately of this requirement once a year by the PIL compliance officer, and are required to provide an annual certification of compliance with the Rule. All PIL employees must inform the London Administrator of the names of all brokers and dealers with whom they trade prior to trading. The London Administrator will send a letter to the broker(s) in question requesting them to agree to deliver copies of confirms to PIL. The London Administrator will forward copies of the confirms to the Boston Administrator. PIL employees may trade with a broker only when the London Administrator has received the signed agreement from that broker. Rule 3 For purposes of the Code of Ethics, including Putnam's Policy Statement on Insider Trading Prohibitions, PIL employees must also comply with Part V of the Criminal Justice Act 1993 on insider dealing. EXCEPTIONS None. IMPLEMENTATION To ensure compliance with UK insider dealing legislation, PIL employees must observe the relevant procedures set forth in PIL's Compliance Manual, a copy of which is sent to each PIL employee, and sign an annual certification as to compliance. SECTION V Reporting Requirements for All Employees Reporting of Personal Securities Transactions Rule 1 Each Putnam employee shall ensure that copies of all confirmations for securities transactions for his personal brokerage accounts, and, beginning in the fourth quarter 2004, brokerage account statements are sent to the Putnam Compliance Department's (Code of Ethics Administrator). (For the purpose of this Rule, securities shall also include ETFs, futures, and other derivatives on broad-based market indexes excluded from the pre-clearance requirement.) Statements and confirmations are required for Putnam funds not held at PPA or in a Putnam retirement plan, as well as for U.S. mutual funds sub-advised by Putnam. EXCEPTION None. IMPLEMENTATION A. Putnam employees must instruct their broker-dealers to send statements and confirmations to Putnam and must follow up with the broker-dealer on a reasonable basis to ensure that the instructions are being followed. For brokerage accounts, Putnam employees should contact the Code of Ethics Administrator to obtain a letter from Putnam authorizing the setting up of a personal brokerage account. B. Statements and confirmations should be submitted to the Code of Ethics Administrator. C. Specific procedures apply to employees of PIL. Employees of PIL should contact the London Code of Ethics Administrator. D. Failure of a broker-dealer to comply with the instructions of a Putnam employee to send confirmations shall be a violation by the Putnam employee of this Rule. Similarly, failure by an employee to report the existence of a personal account (and, if the account is opened after joining Putnam, failure to obtain proper authorization to establish the account) shall be a violation of this Rule. E. Statements and confirmations must also be sent for members of an employees' immediate family, including statements received with respect to a family member's 401(k) plan at another employer. COMMENTS * Transactions for personal accounts is defined broadly to include more than transaction in accounts under an employee's own name. See Definitions. * Statements and confirmations are required for all personal securities transactions, whether or not exempted or excepted by this Code. * To the extent that a Putnam employee has investment authority over securities transactions of a family trust or estate, confirmations of those transactions must also be made, unless the employee has received a prior written exception from the Code of Ethics Officer. Rule 2 Every Access Person shall file a quarterly report, within ten calendar days of the end of each quarter, recording all purchases and sales of any securities for personal accounts as defined in the Definitions. (For the purpose of this Rule, "securities" shall include exchange traded funds (ETF), futures, and any option on a security or securities index, including broad-based market indexes excluded from the pre-clearance requirement and also includes transactions in Putnam open-end funds if the account for the Putnam funds is not held at PPA or in a Putnam retirement plan and for transactions in U.S. mutual funds sub-advised by Putnam.) EXCEPTIONS None. IMPLEMENTATION All employees required to file such a report will receive by e-mail a blank form at the end of the quarter from the Code of Ethics Administrator. The form will specify the information to be reported. The form shall also contain a representation that employees have complied fully with all provisions of the Code of Ethics. COMMENTS * The date for each transaction required to be disclosed in the quarterly report is the trade date for the transaction, not the settlement date. * If the requirement to file a quarterly report applies to you and you fail to report within the required 10-day period, salary increases and bonuses will be reduced in accordance with guidelines stated in the form. It is the responsibility of the employee to request an early report if he has knowledge of a planned absence, i.e., vacation or business trip. Reporting of Personal Securities Holdings Rule 3 Access Persons must disclose all personal securities holdings to the Code of Ethics Officer upon commencement of employment within ten calendar days of hire and thereafter on an annual basis. This requirement is mandated by SEC regulations and is designed to facilitate the monitoring of personal securities transactions. Putnam's Code of Ethics Administrator will provide Access Persons with the form for making these reports and the specific information that must be disclosed at the time that the disclosure is required. Reporting Irregular Activity Rule 4 If a Putnam employee suspects that fraudulent, illegal, or other irregular activity (including violations of the Code of Ethics) might be occurring at Putnam, the activity should be reported immediately to the managing director in charge of that employee's business unit. Managing directors who are notified of any such activity must immediately report it in writing to Putnam's financial officer and Putnam's Chief Compliance Officer. An employee who does not feel comfortable reporting this activity to the relevant managing director may instead contact the chief compliance officer, the Putnam or MMC Ethics hotlines or the ombudsman. Rule 5 Putnam has established a formal Office of the Ombudsman as an additional mechanism for an employee to report an impropriety or conduct that is not in line with the company's value system. The ombudsman is a person who is authorized to receive complaints or questions confidentially about alleged acts, omissions, improprieties, and broader systemic problems within the organization. Communication with the Ombudsman is confidential. SECTION VI Education Requirements Every Putnam employee has an obligation to fully understand the requirements of the Code of Ethics. The Rules set forth below are designed to enhance this understanding. Rule 1 A copy of the Code of Ethics will be distributed to every Putnam employee periodically. All Access Persons will be required to certify annually that they have read, understood, and will comply with the provisions of the Code of Ethics, including the Code's Policy Statement Concerning Insider Trading Prohibitions. Rule 2 Every employee will annually be required to complete training on Putnam's Code of Ethics. SECTION VII Compliance and Appeal Procedures A. Assembly of Restricted List The Code of Ethics Administrator will coordinate the assembly and maintenance of the Restricted List. The list will be assembled each day by 11:30 a.m. No employee may engage in a personal securities transaction without prior clearance on any day, even if the employee believes that the trade will be subject to an exception. Note that pre-clearance may be obtained after 9:00 a.m. for purchases or sales of up to 1,000 shares of issuers having a market capitalization in excess of $5 billion. B. Consultation of Restricted List It is the responsibility of each employee to pre-clear through the pre-clearance system or consult with the Code of Ethics Administrator prior to engaging in a personal securities transaction, to determine if the security he proposes to trade is on the Restricted List and, if so, whether it is subject to the large-cap exception. The pre-clearance system and the Code of Ethics Administrator will be able to tell an employee whether a security is on the Restricted List. No other information about the Restricted List is available through the pre-clearance system. The Code of Ethics Administrator shall not be authorized to answer any questions about the Restricted List, or to render an opinion about the propriety of a particular personal securities transaction. Any such questions shall be directed to the Code of Ethics Officer. C. Request for Determination An employee who has a question concerning the applicability of the Code of Ethics to a particular situation shall request a determination from the Code of Ethics Officer before engaging in the conduct or personal securities transaction about which he has a question. If the question pertains to a personal securities transaction, the request shall state for whose account the transaction is proposed, the relationship of that account to the employee, the security proposed to be traded, the proposed price and quantity, the entity with whom the transaction will take place (if known), and any other information or circumstances of the trade that could have a bearing on the Code of Ethics Officer's determination. If the question pertains to other conduct, the request for determination shall give sufficient information about the proposed conduct to assist the Code of Ethics Officer in ascertaining the applicability of the Code. In every instance, the Code of Ethics Officer may request additional information, and may decline to render a determination if the information provided is insufficient. The Code of Ethics Officer shall make every effort to render a determination promptly. No perceived ambiguity in the Code of Ethics shall excuse any violation. Any person who believes the Code to be ambiguous in a particular situation shall request a determination from the Code of Ethics Officer. D. Request for Ad Hoc Exemption Any employee who wishes to obtain an ad hoc exemption under Section I.D., Rule 2, shall request from the Code of Ethics Officer an exemption in writing in advance of the conduct or transaction sought to be exempted. In the case of a personal securities transaction, the request for an ad hoc exemption shall give the same information about the transaction required in a request for determination under number 3 of this section, and shall state why the proposed personal securities transaction would be unlikely to affect a highly institutional market, or is unrelated economically to securities to be purchased, sold, or held by any Putnam client. In the case of other conduct, the request shall give information sufficient for the Code of Ethics Officer to ascertain whether the conduct raises questions of propriety or conflict of interest (real or apparent). The Code of Ethics Officer shall make reasonable efforts to promptly render a written determination concerning the request for an ad hoc exemption. E. Appeal to Code of Ethics Officer with Respect to Restricted List If an employee ascertains that a security that he wishes to trade for his personal account appears on the Restricted List, and thus the transaction is prohibited, he may appeal the prohibition to the Code of Ethics Officer by submitting a written memorandum containing the same information as would be required in a request for a determination. The Code of Ethics Officer shall make every effort to respond to the appeal promptly. F. Information Concerning Identity of Compliance Personnel The names of Code of Ethics personnel are available by contacting the Legal and Compliance Department and will be published on Putnam's Web site. APPENDIX A: Policy Statement Concerning Insider Trading Prohibitions PREAMBLE Putnam has always forbidden trading on material nonpublic information (inside information) by its employees. Tough federal laws make it important for Putnam to state that prohibition in the strongest possible terms, and to establish, maintain, and enforce written policies and procedures to prevent the misuse of material nonpublic information. Unlawful trading while in possession of inside information can be a crime. Federal law provides that an individual convicted of trading on inside information may go to jail for a period of time. There is also significant monetary liability for an inside trader; the Securities and Exchange Commission can seek a court order requiring a violator to pay back profits, as well as penalties substantially greater than those profits. In addition private plaintiffs can seek recovery for harm suffered by them. The inside trader is not the only one subject to liability. In certain cases, controlling persons of inside traders (including supervisors of inside traders or Putnam itself ) can be liable for large penalties. Section 1 of this Policy Statement contains rules concerning inside information. Section 2 contains a discussion of what constitutes unlawful insider trading. Neither material nonpublic information nor unlawful insider trading is easy to define. Section 2 of this Policy Statement gives a general overview of the law in this area. However, the legal issues are complex and must be resolved by the Code of Ethics Officer. If an employee has any doubt as to whether she has received material nonpublic information, she must consult with the Code of Ethics Officer prior to using that information in connection with the purchase or sale of a security for his own account or the account of any Putnam client, or communicating the information to others. A simple rule of thumb is if you think the information is not available to the public at large, don't disclose it to others and don't trade securities to which the inside information relates. An employee aware of or in possession of inside information must report it immediately to the Code of Ethics Officer. If an employee has failed to consult the Code of Ethics Officer, Putnam will not excuse employee misuse of inside information on the ground that the employee claims to have been confused about this Policy Statement or the nature of the information in his possession. If Putnam determines, in its sole discretion, that an employee has failed to abide by this Policy Statement, or has engaged in conduct that raises a significant question concerning insider trading, he will be subject to disciplinary action, including termination of employment. There are no exceptions to this policy statement and no one is exempt. APPENDIX A DEFINITIONS: Insider Trading Gender references in Appendix A alternate. Code of Ethics Administrator The individual designated by the Code of Ethics Officer to assume responsibility for day-to-day, non-discretionary administration of this Policy Statement. Code of Ethics Officer The Putnam officer who has been assigned the responsibility of enforcing and interpreting this Policy Statement. The Code of Ethics Officer shall be the chief compliance officer or such other person as is designated by the chief executive officer of Putnam Investments. If he or she is unavailable, the Deputy Code of Ethics Officer (to be appointed by the Code of Ethics Officer) shall act in his or her stead. Immediate family Spouse, minor children or other relatives living in the same household as the Putnam employee. Purchase or sale of a security Any acquisition or transfer of any interest in the security for direct or indirect consideration, including the writing of an option. Putnam Any or all of Putnam, LLC, and its subsidiaries, any one of which shall be a Putnam company. Putnam client Any of the Putnam Funds, or any advisory or trust client of Putnam. Putnam employee (or employee) Any employee of Putnam. Security Anything defined as a security under federal law. The term includes any type of equity or debt security, any interest in a business trust or partnership, and any rights relating to a security, such as put and call options, warrants, convertible securities, and securities indices. (Note: The definition of security in this Policy Statement varies significantly from that in the Code of Ethics. For example, the definition in this Policy Statement specifically includes all securities of any type.) Transaction for a personal account (or personal securities transaction) Securities transactions: (a) for the personal account of any employee; (b) for the account of a member of the immediate family of any employee; (c) for the account of a partnership in which a Putnam employee or immediate family member is a partner with investment discretion; (d) for the account of a trust in which a Putnam employee or immediate family member is a trustee with investment discretion; (e) for the account of a closely-held corporation in which a Putnam employee or immediate family member holds shares and for which he has investment discretion; and (f ) for any account other than a Putnam client account which receives investment advice of any sort from the employee or immediate family member, or as to which the employee or immediate family member has investment discretion. Officers and employees of PIL must also consult the relevant procedures on compliance with U.K. insider dealing legislation set forth in PIL's Compliance Manual (See Rule 3 of Section IV of the Code of Ethics). APPENDIX A SECTION I: Rules Concerning Inside Information Rule 1 No Putnam employee shall purchase or sell any security listed on the Inside Information List (the Red List) either for his personal account or for a Putnam client. IMPLEMENTATION When an employee contacts the Code of Ethics Administrator seeking clearance for a personal securities transaction, the Code of Ethics Administrator's response as to whether a security appears on the Restricted List will include securities on the Red List. COMMENT This Rule is designed to prohibit any employee from trading a security while Putnam may have inside information concerning that security or the issuer. Every trade, whether for a personal account or for a Putnam client, is subject to this Rule. Rule 2 No Putnam employee shall purchase or sell any security, either for a personal account or for the account of a Putnam client, while in possession of material, nonpublic information concerning that security or the issuer, without the prior written approval of the Code of Ethics Officer. IMPLEMENTATION In order to obtain prior written approval of the Code of Ethics Officer, a Putnam employee should follow the reporting steps prescribed in Rule 3. COMMENTS * Rule 1 concerns the conduct of an employee when Putnam possesses material nonpublic information. Rule 2 concerns the conduct of an employee who herself possesses material, nonpublic information about a security that is not yet on the Red List. * If an employee has any question as to whether information she possesses is material and/or nonpublic information, she must contact the Code of Ethics Officer in accordance with Rule 3 prior to purchasing or selling any security related to the information or communicating the information to others. The Code of Ethics Officer shall have the sole authority to determine what constitutes material, nonpublic information for the purposes of this Policy Statement. Rule 3 Any Putnam employee who believes he may have received material, nonpublic information concerning a security or the issuer shall immediately report the information to the Code of Ethics Officer, the Deputy Code of Ethics Officer or, in their absence, the general counsel and to no one else. After reporting the information, the Putnam employee shall comply strictly with Rule 2 by not trading in the security without the prior written approval of the Code of Ethics Officer and shall: (a) take precautions to ensure the continued confidentiality of the information; and (b) refrain from communicating the information in question to any person. IMPLEMENTATION A. In order to make any use of potential material, nonpublic information, including purchasing or selling a security or communicating the information to others, an employee must communicate that information to the Code of Ethics Officer in a way designed to prevent the spread of such information. Once the employee has reported potential material, nonpublic information to the Code of Ethics Officer, the Code of Ethics Officer will evaluate whether information constitutes material, nonpublic information, and whether a duty exists that makes use of such information improper. If the Code of Ethics Officer determines either (a) that the information is not material or is public, or (b) that use of the information is proper, he will issue a written approval to the employee specifically authorizing trading while in possession of the information, if the employee so requests. If the Code of Ethics Officer determines (a) that the information may be nonpublic and material, and (b) that use of such information may be improper, he will place the security that is the subject of such information on the Red List. B. An employee who reports potential inside information to the Code of Ethics Officer should expect that the Code of Ethics Officer will need significant information (and time to gather such information) to make the evaluation described in the foregoing paragraph, including information about (a) the manner in which the employee acquired the information, and (b) the identity of individuals to whom the employee has revealed the information, or who have otherwise learned the information. In appropriate situations, the Code of Ethics Officer shall place the affected security or securities on the Red List pending the completion of his evaluation. C. If an employee possesses documents, disks, or other materials containing the potential inside information, an employee must take precautions to ensure the confidentiality of the information in question. Those precautions include (a) putting documents containing such information out of the view of a casual observer, and (b) securing files containing such documents or ensuring that computer files reflecting such information are secure from viewing by others. D. Members of the executive board of directors and members of chief financial officer's staff may not trade securities of MMC in the period from the end of each calendar quarter to the date of announcement of MMC's earnings for such quarter. COMMENTS While all employees must pre-clear trades of MMC securities and make sure they are not in possession of material inside information about MMC when trading, certain employees who may receive information about Putnam's earnings are subject to the rules above concerning trading black out periods. APPENDIX A SECTION II: Overview of Insider Trading Introduction This section of the Policy Statement provides guidelines for employees as to what may constitute inside information. It is possible that in the course of her employment, an employee may receive inside information. No employee should misuse that information, either by trading for her own account or by communicating the information to others. What constitutes unlawful insider trading? The basic definition of unlawful insider trading is trading on material, nonpublic information (also called inside information) by an individual who has a duty not to take advantage of the information. The following sections help explain the definition. What is material information? Trading on inside information is not a basis for liability unless the information is material. Information is material if a reasonable person would attach importance to the information in determining his course of action with respect to a security. Information that is reasonably likely to affect the price of a company's securities is material, but effect on price is not the sole criterion for determining materiality. Information that employees should consider material includes but is not limited to: dividend changes, earnings estimates, changes in previously released earnings estimates, reorganization, recapitalization, asset sales, plans to commence a tender offer, merger or acquisition proposals or agreements, major litigation, liquidity problems, significant contracts, and extraordinary management developments. Material information does not have to relate to a company's business. For example, a court considered as material certain information about the contents of a forthcoming newspaper column that was expected to affect the market price of a security. In that case, a reporter for The Wall Street Journal was found criminally liable for disclosing to others the dates that reports on various companies would appear in the Journal's "Heard on the Street" column and whether those reports would be favorable or not. What is nonpublic information? Information is nonpublic until it has been effectively communicated to, and sufficient opportunity has existed for it to be absorbed by, the marketplace. One must be able to point to some fact to show that the information is generally public. For example, information found in a report filed with the Securities and Exchange Commission, or appearing in Dow Jones, Reuters Economic Services, The Wall Street Journal, or other publications of general circulation would be considered public. Who has a duty not to "take advantage" of inside information? Unlawful insider trading occurs only if there is a duty not to take advantage of material nonpublic information. When there is no such duty, it is permissible to trade while in possession of such information. Questions as to whether a duty exists are complex, fact-specific, and must be answered by a lawyer. Insiders and Temporary Insiders Corporate insiders have a duty not to take advantage of inside information. The concept of insider is broad. It includes officers, directors, and employees of a corporation. In addition, a person can be a temporary insider if she enters into a special confidential relationship with a corporation and as a result is given access to information concerning the corporation's affairs. A temporary insider can include, among others, accounting firms, consulting firms, law firms, banks, and the employees of such organizations. Putnam would generally be a temporary insider of a corporation it advises or for which it performs other services, because typically Putnam clients expect Putnam to keep any information disclosed to it confidential. EXAMPLE An investment advisor to the pension fund of a large publicly-traded corporation, Acme, Inc., learns from an Acme employee that Acme will not be making the minimum required annual contribution to the pension fund because of a serious downturn in Acme's financial situation. The information conveyed is material and nonpublic. COMMENT Neither the investment advisor or its employees, nor its clients can trade on the basis of that information, because the investment advisor and its employees could be considered "temporary insiders" of Acme. Misappropriators Certain people who are not insiders (or temporary insiders) also have a duty not to deceptively take advantage of inside information. Included in this category is an individual who misappropriates (or takes for his own use) material, nonpublic information in violation of a duty owed either to the corporation that is the subject of inside information or some other entity. Such a misappropriator can be held liable if he trades while in possession of that material, nonpublic information. EXAMPLE The Chief Investment Officer of Acme, Inc., is aware of Acme's plans to engage in a hostile takeover of Profit, Inc. The proposed hostile takeover is material and nonpublic. COMMENT The Chief Investment Officer of Acme cannot trade in Profit, Inc.'s stock for his own account. Even though he owes no duty to Profit, Inc., or its shareholders, he owes a duty to Acme not to take advantage of the information about the proposed hostile takeover by using it for his personal benefit. Tippers and Tippees A person (the tippee) who receives material, nonpublic information from an insider or misappropriator (the tipper) has a duty not to trade while in possession of that information if he knew or should have known that the information was provided by the tipper for an improper purpose and in breach of a duty owed by the tipper. In this context, it is an improper purpose for a person to provide such information for personal benefit, such as money, affection, or friendship. EXAMPLE The Chief Executive Officer of Acme, Inc., tells his daughter that negotiations concerning a previously announced acquisition of Acme have been terminated. This news is material and, at the time the father tells his daughter, nonpublic. The daughter sells her shares of Acme. COMMENT The father is a tipper because he has a duty to Acme and its shareholders not to take advantage of the information concerning the breakdown of negotiations, and he has conveyed the information for an improper purpose (here, out of love and affection for his daughter). The daughter is a tippee and is liable for trading on inside information because she knew or should have known that her father was conveying the information to her for his personal benefit, and that her father had a duty not to take advantage of Acme information. A person can be a tippee even if he did not learn the information directly from the tipper, but learned it from a previous tippee. EXAMPLE An employee of a law firm which works on mergers and acquisitions learns at work about impending acquisitions. She tells her friend and her friend's stockbroker about the upcoming acquisitions on a regular basis. The stockbroker tells the brother of a client on a regular basis, who in turn tells two friends, A and B. A and B buy shares of the companies being acquired before public announcement of the acquisition, and regularly profit from such purchases. A and B do not know the employee of the law firm. They do not, however, ask about the source of the information. COMMENT A and B, although they have never heard of the tipper, are tippees because they did not ask about the source of the information, even though they were experienced investors, and were aware that the "tips" they received from this particular source were always right. Who can be liable for insider trading? The categories of individuals discussed above (insiders, temporary insiders, misappropriators, or tippees) can be liable if they trade while in possession of material nonpublic information. In addition, individuals other than those who actually trade on inside information can be liable for trades of others. A tipper can be liable if (a) he provided the information in exchange for a personal benefit in breach of a duty, and (b) the recipient of the information (the tippee) traded while in possession of the information. Most importantly, a controlling person can be liable if the controlling person knew or recklessly disregarded the fact that the controlled person was likely to engage in misuse of inside information and failed to take appropriate steps to prevent it. Putnam is a controlling person of its employees. In addition, certain supervisors may be controlling persons of those employees they supervise. EXAMPLE A supervisor of an analyst learns that the analyst has, over a long period of time, secretly received material inside information from Acme, Inc.'s Chief Investment Officer. The supervisor learns that the analyst has engaged in a number of trades for his personal account on the basis of the inside information. The supervisor takes no action. COMMENT Even if he is not liable to a private plaintiff, the supervisor can be liable to the Securities and Exchange Commission for a civil penalty of up to three times the amount of the analyst's profit. (Penalties are discussed in the following section.) Penalties for insider trading Penalties for misuse of inside information are severe, both for individuals involved in such unlawful conduct and their employers. A person who violates the insider trading laws can be subject to some or all of the types penalties below, even if he does not personally benefit from the violation. Penalties include: * Jail sentences, criminal monetary penalties. * Injunctions permanently preventing an individual from working in the securities industry. * Injunctions ordering an individual to pay over profits obtained from unlawful insider trading. * Civil penalties substantially greater than the profit gained or loss avoided by the trader, even if the individual paying the penalty did not trade or did not benefit personally. * Civil penalties for the employer or other controlling person. * Damages in the amount of actual losses suffered by other participants in the market for the security at issue. Regardless of whether penalties or money damages are sought by others, Putnam will take whatever action it deems appropriate (including dismissal) if Putnam determines, in its sole discretion, that an employee appears to have committed any violation of this Policy Statement, or to have engaged in any conduct which raises significant questions about whether an insider trading violation has occurred. APPENDIX B: Policy Statement Regarding Employee Trades in Shares of Putnam Closed-End Funds Pre-clearance for all employees Any purchase or sale of Putnam closed-end fund shares by a Putnam employee must be pre-cleared by the Code of Ethics Officer or, in his absence, the Deputy Code of Ethics Officer. A list of the closed-end funds can be obtained from the Code of Ethics Administrator. The automated pre-clearance system is not available for Putnam closed-end fund clearance. Trading in shares of closed-end funds is subject to all the rules of the Code of Ethics. Contact the Code of Ethics Administrator with these pre-clearance requests. Special Rules Applicable to Managing Directors of Putnam Investment Management, LLC and officers of the Putnam Funds. Please be aware that any employee who is a managing director of Putnam Investment Management, Inc. (the investment manager of the Putnam mutual funds) and officers of the Putnam Funds will not receive clearance to engage in any combination of purchase and sale or sale and purchase of the shares of a given closed-end fund within six months of each other. Therefore, purchases should be made only if you intend to hold the shares more than six months; no sales of fund shares should be made if you intend to purchase additional shares of that same fund within six months. You are also required to file certain forms with the Securities and Exchange Commission in connection with purchases and sales of Putnam closed-end funds. Please contact the Code of Ethics Officer Administrator for further information. Reporting by all employees As with any purchase or sale of a security, duplicate confirmations of all such purchases and sales must be forwarded to the Code of Ethics Officer by the broker-dealer utilized by an employee. If you are required to file a quarterly report of all personal securities transactions, this report should include all purchases and sales of closed-end fund shares. Please contact the Code of Ethics Officer or Deputy Code of Ethics Officer if there are any questions regarding these matters. APPENDIX C: Contra-Trading Rule Clearance Form To: Code of Ethics Officer From: __________________________________________________________________ Date: __________________________________________________________________ Re: Personal Securities Transaction of__________________________________ This serves as prior written approval of the personal securities transaction described below: Name of portfolio manager contemplating personal trade: ______________________ Security to be traded: _______________________________________________________ Amount to be traded: _________________________________________________________ Fund holding securities: _____________________________________________________ Amount held by fund: _________________________________________________________ Reason for personal trade: ___________________________________________________ Specific reason sale of securities is inappropriate for fund: ________________ ________________________________________________________________________ ________________________________________________________________________ (Please attach additional sheets if necessary.) CIO approval: ___________________________________ Date:_______________________ Legal/compliance approval: ________________________ Date:_____________________ APPENDIX D: AIMR Code of Ethics and Standards of Professional Conduct The Code of Ethics (Full Text) Members of the Association for Investment Management and Research shall: * Act with integrity, competence, dignity, and in an ethical manner when dealing with the public, clients, prospects, employers, employees, and fellow members. * Practice and encourage others to practice in a professional and ethical manner that will reflect credit on members and their profession. * Strive to maintain and improve their competence and the competence of others in the profession. * Use reasonable care and exercise independent professional judgment. The Standards of Professional Conduct All members of the Association for Investment Management and Research and the holders of and candidates for the Chartered Financial Analyst designation are obligated to conduct their activities in accordance with the following Code of Ethics. Disciplinary sanctions may be imposed for violations of the Code and Standards. * Fundamental responsibilities * Relationships with and responsibilities to a profession * Relationships with and responsibilities to an employer * Relationships with and responsibilities to clients and prospects * Relationships with and responsibilities to the public * Standards of Practice Handbook Fundamental Responsibilities Members shall maintain knowledge of and comply with all applicable laws, rules, and regulations (including AIMR's Code of Ethics and Standards of Professional Conduct) of any government, governmental agency, regulatory organization, licensing agency, or professional association governing the members' professional activities. Not knowingly participate in or assist any violation of such laws, rules, or regulations. Relationships with and Responsibilities to the Profession Use of Professional Designation AIMR members may reference their membership only in a dignified and judicious manner. The use of the reference may be accompanied by an accurate explanation of the requirements that have been met to obtain membership in these organizations. Those who have earned the right to use the Chartered Financial Analyst designation may use the marks "Chartered Financial Analyst" or "CFA" and are encouraged to do so, but only in a proper, dignified, and judicious manner. The use of the designation may be accompanied by an accurate explanation of the requirements that have been met to obtain the right to use the designation. Candidates in the CFA Program, as defined in the AIMR Bylaws, may reference their participation in the CFA Program, but the reference must clearly state that an individual is a candidate in the CFA Program and cannot imply that the candidate has achieved any type of partial designation. Professional Misconduct Members shall not engage in any professional conduct involving dishonesty, fraud, deceit, or misrepresentation or commit any act that reflects adversely on their honesty, trustworthiness, or professional competence. Members and candidates shall not engage in any conduct or commit any act that compromises the integrity of the CFA designation or the integrity or validity of the examinations leading to the award of the right to use the CFA designation. Prohibition against Plagiarism Members shall not copy or use, in substantially the same form as the original, material prepared by another without acknowledging and identifying the name of the author, publisher, or source of such material. Members may use, without acknowledgment, factual information published by recognized financial and statistical reporting services or similar sources. Relationships with and Responsibilities to the Employer Obligation to Inform Employer of Code and Standards Members shall inform their employer in writing, through their direct supervisor, that they are obligated to comply with the Code and Standards and are subject to disciplinary sanctions for violations thereof. Members shall deliver a copy of the Code and Standards to their employer if the employer does not have a copy. Duty to Employer Members shall not undertake any independent practice that could result in compensation or other benefit in competition with their employer unless they obtain written consent from both their employer and the persons or entities for whom they undertake independent practice. Disclosure of Conflicts to Employer Members shall comply with any prohibitions on activities imposed by their employer if a conflict of interest exists. Disclosure of Additional Compensation Arrangements Members shall disclose to their employer in writing all monetary compensation or other benefits that they receive for their services that are in addition to compensation or benefits conferred by a member's employer. Responsibilities of Supervisors Members with supervisory responsibility, authority, or the ability to influence the conduct of others shall exercise reasonable supervision over those subject to their supervision or authority to prevent any violation of applicable statutes, regulations, or provisions of the Code and Standards. In so doing, members are entitled to rely on reasonable procedures to detect and prevent such violations. Relationships with and Responsibilities to Clients and Prospects Investment Process REASONABLE BASIS AND REPRESENTATIONS * Exercise diligence and thoroughness in making investment recommendations or in taking investment actions. * Have a reasonable and adequate basis, supported by appropriate research and investigation, for such recommendations or actions. * Make reasonable and diligent efforts to avoid any material misrepresentation in any research report or investment recommendation. * Maintain appropriate records to support the reasonableness of such recommendations or actions. RESEARCH REPORTS * Use reasonable judgment regarding the inclusion or exclusion of relevant factors in research reports. * Distinguish between facts and opinions in research reports. * Indicate the basic characteristics of the investment involved when preparing for public distribution a research report that is not directly related to a specific portfolio or client. INDEPENDENCE AND OBJECTIVITY * Members shall use reasonable care and judgment to achieve and maintain independence and objectivity in making investment recommendations or taking investment action. Interactions with Clients and Prospects FIDUCIARY DUTIES In relationships with clients, members shall use particular care in determining applicable fiduciary duty and shall comply with such duty as to those persons and interests to whom the duty is owed. Members must act for the benefit of their clients and place their clients' interests before their own. PORTFOLIO INVESTMENT RECOMMENDATIONS AND ACTIONS Members shall: * Make a reasonable inquiry into a client's financial situation, investment experience, and investment objectives prior to making any investment recommendations and shall update this information as necessary, but no less frequently than annually, to allow the members to adjust their investment recommendations to reflect changed circumstances. * Consider the appropriateness and suitability of investment recommendations or actions for each portfolio or client. In determining appropriateness and suitability, members shall consider applicable relevant factors, including the needs and circumstances of the portfolio or client, the basic characteristics of the investment involved, and the basic characteristics of the total portfolio. * Members shall not make a recommendation unless they reasonably determine that the recommendation is suitable to the client's financial situation, investment experience, and investment objectives. * Distinguish between facts and opinions in the presentation of investment recommendations. * Disclose to clients and prospects the basic format and general principles of the investment processes by which securities are selected and portfolios are constructed and shall promptly disclose to clients and prospects any changes that might significantly affect those processes. FAIR DEALING Members shall deal fairly and objectively with all clients and prospects when disseminating investment recommendations, disseminating material changes in prior investment recommendations, and taking investment action. PRIORITY OF TRANSACTIONS Transactions for clients and employers shall have priority over transactions in securities or other investments of which a member is the beneficial owner so that such personal transactions do not operate adversely to their clients' or employer's interests. If members make a recommendation regarding the purchase or sale of a security or other investment, they shall give their clients and employer adequate opportunity to act on their recommendations before acting on their own behalf. For purposes of the Code and Standards, a member is a "beneficial owner" if the member has: * direct or indirect pecuniary interest in the securities; * the power to vote or direct the voting of the shares of the securities or investments; * the power to dispose or direct the disposition of the security or investment. PRESERVATION OF CONFIDENTIALITY Members shall preserve the confidentiality of information communicated by clients, prospects, or employers concerning matters within the scope of the client-member, prospect-member, or employer-member relationship unless a member receives information concerning illegal activities on the part of the client, prospect, or employer. PROHIBITION AGAINST MISREPRESENTATION Members shall not make any statements, orally or in writing, that misrepresent * the services that they or their firms are capable of performing; * their qualifications or the qualifications of their firm; * the member's academic or professional credentials. Members shall not make or imply, orally or in writing, any assurances or guarantees regarding any investment except to communicate accurate information regarding the terms of the investment instrument and the issuer's obligations under the instrument. DISCLOSURE OF CONFLICTS TO CLIENTS AND PROSPECTS Members shall disclose to their clients and prospects all matters, including beneficial ownership of securities or other investments, that reasonably could be expected to impair the members' ability to make unbiased and objective recommendations. DISCLOSURE OF REFERRAL FEES Members shall disclose to clients and prospects any consideration or benefit received by the member or delivered to others for the recommendation of any services to the client or prospect. Relationships with and Responsibilities to the Public PROHIBITION AGAINST USE OF MATERIAL NONPUBLIC INFORMATION Members who possess material nonpublic information related to the value of a security shall not trade or cause others to trade in that security if such trading would breach a duty or if the information was misappropriated or relates to a tender offer. If members receive material nonpublic information in confidence, they shall not breach that confidence by trading or causing others to trade in securities to which such information relates. Members shall make reasonable efforts to achieve public dissemination of material nonpublic information disclosed in breach of a duty. PERFORMANCE PRESENTATION Members shall not make any statements, orally or in writing, that misrepresent the investment performance that they or their firms have accomplished or can reasonably be expected to achieve. If members communicate individual or firm performance information directly or indirectly to clients or prospective clients, or in a manner intended to be received by clients or prospective clients, members shall make every reasonable effort to assure that such performance information is a fair, accurate, and complete presentation of such performance. APPENDIX E: Report of Entertainment Form This form must be filed with the Putnam Legal and Compliance Department within 10 days of date of entertainment. Send to: Laura Rose Assistant Vice President and Code of Ethics Administrator Mailstop L-5 OR Attach to an e-mail to: laura_rose@putnam.com Name of employee:____________________________________________ Name of party providing entertainment: Firm: _______________________________________________________ Person:______________________________________________________ Date of entertainment:_______________________________________ Describe entertainment provided:_____________________________ (e.g., name and location of restaurant, sporting, or cultural event) Value of entertainment (excluding meals):____________________ Signature: ____________________________________ Date:_______________ INDEX 7-Day Rule transactions by portfolio managers, analysts, and CIOs .......................................................14 60-Day Rule...............................................................13 A Access Persons definition ............................................................. vii special rules on trading..................................................13 AIMR Code of Ethics and Standards of Professional Conduct .................................................... 47 Analysts special rules on trading................................................. 14 Appeals Procedures................................................................36 B Bankers' acceptances excluded from securities ...............................................viii Blackout rule trading by portfolio managers, analysts and CIOs........................................................ 15 Boycott anti-trust and other laws.................................................18 Bribes ...................................................................21 C Certificates of Deposit excluded from securities ...............................................viii Clearance how long pre-clearance is valid............................................2 required for personal securities transactions ...................................................1 Closed-end funds pre-clearance and reporting ..............................................45 Commercial paper excluded from securities ...............................................viii Commodities (other than securities indices) excluded from securities ...............................................viii Computer use compliance with corporate policies required ........................................................26 Confidentiality required of all employees.............................................22, 26 Confirmations and broker statements required for personal transactions........................................31 Conflicts of interest with Putnam and Putnam clients............................................18 Contra-trading rule transactions by portfolio managers and CIOs .................................................................16 Convertible securities defined as securities...................................................viii Currencies excluded as securities..................................................viii D Definitions..............................................................vii Director prohibited to serve for another entity....................................23 Dividend reinvestment program.............................................11 E Employee prohibited to serve for another entity ...................................23 Excessive trading (over 25 trades) prohibited ............................10 Exchange traded index funds, excluded from securities ...............................................viii Exemptions..........................................................3, 4, 11 F Family members covered in personal securities transactions .........................................viii, 7, 38 Fiduciary prohibited to serve for another entity....................................23 Fraudulent or irregular activities reporting ................................................................24 G Gifts and Entertainment Policy .......................................18, 19 Good-until-canceled orders................................................10 H Holdings of securities disclosure by Access Persons..............................................32 I Initial public offerings/IPOs purchases are prohibited...................................................5 Insider trading policy statement and explanations ........................................38 prohibited............................................................iii, 5 Investment clubs prohibited................................................................23 Involuntary personal securities transactions exemptions ............................................................4, 11 L Large Cap Exception for clearance of securities on Restricted List............................................................2 Limit Orders..............................................................10 M Market timing prohibition..................................................9 Money market instruments excluded from securities............................................... viii N Naked options by employees discouraged..................................................11 Non-Putnam affiliates (NPAs) transactions and relationships............................................25 O Officer prohibited to serve for another entity ...............................22, 23 Options defined as securities...................................................viii relationship to securities on Restricted or Red Lists....................................................3 Ombudsman.................................................................33 P Partner prohibited to serve as general partner of another entity........................................................... 23 Partnerships covered in personal securities transactions ...................................................... viii, 37 Personal securities transaction defined ............................................................viii, 38 Political contributions...................................................21 Portfolio managers special rules on trading..............................................14, 17 Privacy policy ...........................................................26 Private offerings, purchases in private placements................................................................ 6 Putnam Investments Limited special rules ............................................................29 Q Quarterly Report of securities transactions ..............................32 R Reporting requirements....................................................31 Repurchase agreements excluded from securities................................................viii S Sanctions ................................................................vi for failure to pre-clear properly ........................................ 4 Shares by subscription procedures to preclear trades............................................. 2 Short sales prohibited conduct........................................................ 5 T Tender offers .............................................................4 Trustee prohibited to serve for another entity....................................23 Trusts covered in personal securities transactions .......................................................viii, 38 U U.S. government obligations excluded from securities................................................viii V Violations of Law reporting ................................................................33 W Warrants defined as securities...................................................viii PUTNAM INVESTMENTS One Post Office Square Boston, Massachusetts 02109 1-800-225-1581 www.putnaminvestments.com 215845 8/04 -----END PRIVACY-ENHANCED MESSAGE-----