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Putnam Funds Trust

Filed: 2 Mar 20, 4:21pm

As filed with the Securities and Exchange Commission on  
March 2, 2020  
 
Securities Act File No. 333-235893  
 
 
 
SECURITIES AND EXCHANGE COMMISSION  
WASHINGTON, D.C. 20549  
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FORM N-14  
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REGISTRATION STATEMENT UNDER THE SECURITIES / / 
ACT OF 1933 ---- 
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Pre-Effective Amendment No. /1/ / X / 
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Post-Effective Amendment No. // / / 
and/or ---- 
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(Check appropriate box or boxes)  
 
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PUTNAM FUNDS TRUST  
(Exact Name of Registrant as Specified in Charter)  
 
100 Federal Street, Boston, Massachusetts 02110  
(Address of Principal Executive Offices)  
 
(617) 292-1000  
(Area Code and Telephone Number)  

 



ROBERT T. BURNS, Vice President 
Putnam Funds Trust
100 Federal Street
Boston, Massachusetts 02110
(Name and address of agent for service) 
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Copy to:
 
BRYAN CHEGWIDDEN, Esquire 
ROPES & GRAY LLP 
1211 Avenue of the Americas 
New York, New York 10036 
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Title of Securities Being Registered: 
 
Class A of Putnam Focused Equity Fund, a series of the Registrant 
Class B of Putnam Focused Equity Fund, a series of the Registrant 
Class C of Putnam Focused Equity Fund, a series of the Registrant 
Class R of Putnam Focused Equity Fund, a series of the Registrant 
Class Y of Putnam Focused Equity Fund, a series of the Registrant 

 

Approximate date of Proposed Offering: As soon as practicable after this Registration Statement becomes effective.

An indefinite amount of the Registrant’s securities have been registered under the Securities Act of 1933 pursuant to Rule 24f-2 under the Investment Company Act of 1940. In reliance upon such Rule, no filing fee is paid at this time.






A message from the President and Chair

 
 
Putnam Capital Spectrum Fund 
Putnam Equity Spectrum Fund 
 

 

March 6, 2020

Dear Fellow Shareholder:

At your fund’s upcoming shareholder meeting, you will be asked to consider the merger of your fund, Putnam Capital Spectrum Fund or Putnam Equity Spectrum Fund, with and into Putnam Focused Equity Fund. In these mergers, shares of Putnam Capital Spectrum Fund or Putnam Equity Spectrum Fund would, in effect, be exchanged for shares of Putnam Focused Equity Fund with an equal total net asset value. These exchanges are expected to qualify as tax-free reorganizations for federal income tax purposes. The approval or closing of each merger is not conditioned on the approval or closing of the other merger.

Each of Putnam Capital Spectrum Fund and Putnam Equity Spectrum Fund has an identical or similar investment objective to Putnam Focused Equity Fund, with Putnam Equity Spectrum Fund and Putnam Focused Equity Fund seeking capital appreciation and Putnam Capital Spectrum Fund seeking total return. Both Putnam Capital Spectrum Fund and Putnam Equity Spectrum Fund have similar investment strategies to Putnam Focused Equity Fund, however, there are some differences between how the funds invest. All three funds invest in equity securities, with Putnam Equity Spectrum Fund and Putnam Capital Spectrum Fund investing in equity securities of companies of any size and Putnam Focused Equity Fund investing mainly in equity securities of large and midsize companies. Each of Putnam Equity Spectrum Fund and Putnam Focused Equity Fund invests, under normal circumstances, at least 80% of its net assets in equity investments. Putnam Capital Spectrum Fund may also invest to a

2    Proxy Statement 

 



significant extent in fixed-income securities, although in recent years that has not been the case.

Putnam Management has recommended the proposed mergers because it believes that they are in the best interests of the shareholders of each of Putnam Capital Spectrum Fund, Putnam Equity Spectrum Fund, and Putnam Focused Equity Fund. Because the funds proposed to be merged into Putnam Focused Equity Fund have identical or similar investment objectives and similar, although not identical, investment strategies to Putnam Focused Equity Fund, Putnam Management believes that the funds are appropriate merger partners. While at every asset level, Putnam Focused Equity Fund pays a lower management fee as a percentage of net assets than the base management fee as a percentage of net assets paid by Putnam Capital Spectrum Fund and Putnam Equity Spectrum Fund, following the mergers, shareholders of each acquired fund would be invested in a larger fund with a higher total expense ratio. The combined fund’s higher total expense ratio is solely the result of the removal of the negative performance adjustments that apply to Putnam Capital Spectrum Fund and Putnam Equity Spectrum Fund’s management fee, which have resulted in Putnam Management receiving no management fees for managing these funds and paying approximately $5.0 million to Putnam Capital Spectrum Fund and $3.4 million to Putnam Equity Spectrum Fund since 2017. Shareholders of Putnam Focused Equity Fund would experience a lower relative expense ratio following the proposed mergers. Putnam Management also believes that the combined fund would have improved commercial and scale opportunities at broker-dealers.

The Trustees of each of Putnam Capital Spectrum Fund and Putnam Equity Spectrum Fund have carefully reviewed the terms of the proposed merger of each fund into Putnam Focused Equity Fund and determined to recommend that shareholders of each of Putnam Capital Spectrum Fund and Putnam Equity Spectrum Fund approve the proposed mergers. Details regarding the terms of the proposed mergers, and their potential benefits and costs to shareholders, are discussed in the prospectus/proxy statement, which we urge you to review carefully.

Proxy Statement    3 

 



We appreciate your time and consideration of this important matter. If you have questions about this proposal, please call a customer service representative at 1-833-501-4818 or contact your financial advisor.

 

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Table of Contents

Notice of a Joint Special Meeting of Shareholders  6 
Prospectus/Proxy Statement  7 

 

PROXY CARD(S) ENCLOSED

If you have any questions, please contact us at 1-833-501-4818 or call your financial advisor. Please refer to your proxy card for the touchtone voting phone number.

Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meetings to be Held on April 15, 2020 for Putnam Capital Spectrum Fund and Putnam Equity Spectrum Fund.

The proxy statement for each meeting is available at http://www.putnam.com/static/pdf/email/SpectrumFunds-proxy-voting.pdf.

 



Notice of a Joint Special Meeting of Shareholders

To the Shareholders of Putnam Capital Spectrum Fund and Putnam Equity Spectrum Fund:

This is the formal agenda for your fund’s shareholder meeting. It tells you what matters will be voted on and provides the time and place of the meeting in case you wish to attend in person.

A Special Meeting of Shareholders of Putnam Capital Spectrum Fund will be held on April 15, 2020, at 11 a.m. Eastern Time, on the 2nd Floor of 100 Federal Street, Boston, Massachusetts, 02110 to consider the following proposal:

Approving an Agreement and Plan of Reorganization providing for the transfer of all of the assets of Putnam Capital Spectrum Fund to Putnam Focused Equity Fund in exchange for the assumption by Putnam Focused Equity Fund of all of the liabilities of Putnam Capital Spectrum Fund, the issuance and delivery of shares of beneficial interest of Putnam Focused Equity Fund, and the distribution of these shares to the shareholders of Putnam Capital Spectrum Fund in complete liquidation of Putnam Capital Spectrum Fund.

A Special Meeting of Shareholders of Putnam Equity Spectrum Fund will be held on April 15, 2020, at 11 a.m. Eastern Time, on the 2nd Floor of 100 Federal Street, Boston, Massachusetts, 02110 to consider the following proposal:

Approving an Agreement and Plan of Reorganization providing for the transfer of all of the assets of Putnam Equity Spectrum Fund to Putnam Focused Equity Fund in exchange for the assumption by Putnam Focused Equity Fund of all of the liabilities of Putnam Equity Spectrum Fund, the issuance and delivery of shares of beneficial interest of Putnam Focused Equity Fund, and the distribution of these shares to the shareholders of Putnam Equity Spectrum Fund in complete liquidation of Putnam Equity Spectrum Fund.

By Michael J. Higgins, Clerk, and by the Trustees 
 
Kenneth R. Leibler, Chair  Catharine Bond Hill 
Robert L. Reynolds, President  Paul L. Joskow 
Liaquat Ahamed  Robert E. Patterson 
Ravi Akhoury  George Putnam, III 
Barbara M. Baumann  Manoj P. Singh 
Katinka Domotorffy   

 

In order for you to be represented at your fund’s shareholder meeting, we urge you to record your voting instructions over the internet or by telephone or to mark, sign, date, and mail the enclosed proxy card(s) in the postage-paid envelope provided.

March 6, 2020

 



Prospectus/Proxy Statement

March 2, 2020
 
Acquisition of the assets and assumption of the liabilities of 
 
Putnam Capital Spectrum Fund
100 Federal Street
Boston, Massachusetts 02110
1-617-292-1000
 
Putnam Equity Spectrum Fund
100 Federal Street
Boston, Massachusetts 02110
1-617-292-1000
 
by and in exchange for shares of
 
Putnam Focused Equity Fund
100 Federal Street
Boston, Massachusetts 02110
1-617-292-1000

 

Table of Contents

I.  Questions and Answers Regarding the Proposed Mergers  10 
II.  Risk Factors  24 
III.  Information about the Proposed Mergers  34 
IV.  Information about Voting and the Shareholder Meetings  53 
V.  Additional Information about Putnam Focused Equity Fund  66 
 Appendix A — Form of Agreement and Plan of Reorganization  A-1 
 
 Appendix B — Financial Intermediary Specific Sales Charge Waiver Information  B-1 

 

This prospectus/proxy statement relates to the proposed mergers of Putnam Capital Spectrum Fund and Putnam Equity Spectrum Fund with and into Putnam Focused Equity Fund. In the mergers, each shareholder of Putnam Capital Spectrum Fund and Putnam Equity Spectrum Fund will receive shares of the corresponding class of Putnam Focused Equity Fund equal in aggregate value at the date of the exchange to the aggregate value of the shareholder’s Putnam Capital Spectrum Fund or Putnam Equity Spectrum Fund shares, as applicable.

The Notice of Special Meeting, the proxy card(s), and this prospectus/proxy statement are being mailed on or about March 6, 2020. The prospectus/proxy statement explains

 



what you should know before voting on the proposed mergers or investing in Putnam Focused Equity Fund, an open-end non-diversified management investment company. Please read this prospectus/proxy statement and keep it for future reference.

The statement of additional information relating to the proposed mergers, dated March 2, 2020 (the “Merger SAI”) and the other documents identified below are incorporated into this prospectus/proxy statement by reference. Shareholders may obtain free copies of any document incorporated by reference into this prospectus/proxy statement, request other information about the funds, or make shareholder inquiries by contacting their financial advisor, by visiting the Putnam Investments website at www.putnam.com, by calling Putnam toll-free at 1-800-225-1581, or by emailing Putnam at funddocuments@putnam.com. This information may also be obtained by contacting the Securities and Exchange Commission (the “SEC”), as described below.

The securities offered by this prospectus/proxy statement have not been approved or disapproved by the SEC, nor has the SEC passed upon the accuracy or adequacy of this prospectus/proxy statement. Any representation to the contrary is a criminal offense.

Shares of Putnam Focused Equity Fund are not deposits or obligations of, or guaranteed or endorsed by, any financial institution, are not insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other agency, and involve risk, including the possible loss of principal amounts invested.

The following documents have been filed with the SEC and are incorporated into this prospectus/proxy statement by reference:

(i) The statement of additional information of Putnam Focused Equity Fund, dated December 30, 2019, as supplemented (File Nos. 811-07513 and 333-00515);

(ii) the prospectus and statement of additional information of Putnam Capital Spectrum Fund, dated August 30, 2019, as supplemented (File Nos. 811-07513 and 333-00515);

(iii) the prospectus and statement of additional information of Putnam Equity Spectrum Fund, dated August 30, 2019, as supplemented (File Nos. 811-07513 and 333-00515);

(iv) the Merger SAI (File No. 333-235893);

(v) the Report of Independent Registered Public Accounting Firm and the audited financial highlights and financial statements included in Putnam Focused Equity Fund’s Annual Report to Shareholders for the fiscal year ended August 31, 2019 (File Nos. 811-07513 and 333-00515);

(vi) the Report of Independent Registered Public Accounting Firm and the audited financial highlights and financial statements included in Putnam Capital Spectrum Fund’s Annual Report to Shareholders for the fiscal year ended April 30, 2019 (File Nos. 811-07513 and 333-00515);

(vii) the unaudited financial highlights and financial statements included in Putnam Capital Spectrum Fund’s Semiannual Report to Shareholders for the six-month period ended October 31, 2019 (File Nos. 811-07513 and 333-00515);

 



(viii) the Report of Independent Registered Public Accounting Firm and the audited financial highlights and financial statements included in Putnam Equity Spectrum Fund’s Annual Report to Shareholders for the fiscal year ended April 30, 2019 (File Nos. 811-07513 and 333-00515);

(ix) the unaudited financial highlights and financial statements included in Putnam Equity Spectrum Fund’s Semiannual Report to Shareholders for the six-month period ended October 31, 2019 (File Nos. 811-07513 and 333-00515).

Information regarding Putnam Focused Equity Fund is included in this prospectus/proxy statement, including information regarding Putnam Focused Equity Fund’s dividends and distributions, sales charges, and 12b-1 fees, investment advisor and portfolio manager; the pricing, purchase, sale, and redemption of Putnam Focused Equity Fund shares; the tax treatment of distributions and tax consequences to shareholders of buying, holding, exchanging, and selling Putnam Focused Equity Fund shares; Putnam Focused Equity Fund’s financial highlights; and Putnam Focused Equity Fund’s policy regarding frequent trading in Putnam Focused Equity Fund shares.

This document will give you information about the proposed mergers. Much of the information is required under SEC rules; some of it is technical. If there is anything you do not understand, please contact Putnam Investor Services, Inc. (“Putnam Investor Services”) at its toll-free number, 1-833-501-4818, or call your financial advisor. Like Putnam Capital Spectrum Fund and Putnam Equity Spectrum Fund, Putnam Focused Equity Fund is in the family of funds managed by Putnam Investment Management, LLC (“Putnam Management”). Putnam Focused Equity Fund, Putnam Capital Spectrum Fund and Putnam Equity Spectrum Fund are collectively referred to as the “funds,” and each is referred to individually as a “fund.” Putnam Capital Spectrum Fund and Putnam Equity Spectrum Fund are also referred to as the “Acquired Funds,” and each is referred to individually as an “Acquired Fund.” Putnam Capital Spectrum Fund, Putnam Equity Spectrum Fund, and Putnam Focused Equity Fund are each subject to the informational requirements of the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the Investment Company Act of 1940, as amended (the “1940 Act”), and, as a result, file reports and other information with the SEC. You may review and copy information about the funds, including proxy materials, reports and the Merger SAI, at the SEC’s public reference room at 100 F Street, N.E., Room 1580, Washington, DC 20549. You may call the SEC at 202-551-8090 for information about the operation of the public reference room. You may obtain 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 SEC’s Public Reference Branch, Office of Consumer Affairs and Information Services, Securities and Exchange Commission, Washington, DC 20549-1520. You may also access reports and other information about the funds on the EDGAR database on the SEC’s website at www.sec.gov. You may need to refer to a fund’s file number.

 



I. Questions and Answers Regarding the Proposed Mergers

The responses to the questions that follow provide an overview of key points typically of interest to shareholders considering a proposed mutual fund merger. These responses are qualified in their entirety by the remainder of the prospectus/proxy statement, which contains additional information and further details about the proposed mergers.

1. What is being proposed?

The Trustees of The Putnam Funds and Putnam Management are recommending that shareholders of Putnam Capital Spectrum Fund and shareholders of Putnam Equity Spectrum Fund approve the proposed merger of their fund into Putnam Focused Equity Fund, as contemplated by the Agreement and Plan of Reorganization (the form of which is attached as Appendix A and described in Part III).

If approved by shareholders, upon the closing of each merger of an Acquired Fund into Putnam Focused Equity Fund, all of the assets of the Acquired Fund will be transferred to Putnam Focused Equity Fund, the acquiring fund. In exchange, Putnam Focused Equity Fund will issue and deliver shares of Putnam Focused Equity Fund (the “Merger Shares”) to the Acquired Fund and will also assume all of the liabilities of the Acquired Fund. The Merger Shares issued to the Acquired Fund will have an aggregate value equal to the value of the Acquired Fund’s assets net of liabilities. Immediately after the Acquired Fund receives its Merger Shares, the Acquired Fund will distribute its Merger Shares to its shareholders, pro rata. The Acquired Fund shareholders will receive Merger Shares of the same class as the Acquired Fund shares they held.

It is currently anticipated that the mergers will close on or about April 27, 2020, with the net asset value of shares to be issued in the mergers currently expected to be determined on or about April 24, 2020.

2. What will happen to my Acquired Fund shares as a result of the proposed mergers?

Your Acquired Fund shares will, in effect, be exchanged for shares of Putnam Focused Equity Fund of the same class and with an equal aggregate net asset value on the date of the merger of your fund with and into Putnam Focused Equity Fund.

3. Why are the mergers being proposed?

Putnam Management has recommended the proposed mergers because it believes that the mergers are in the best interests of shareholders of Putnam Capital Spectrum Fund, Putnam Equity Spectrum Fund, and Putnam Focused Equity Fund. Because Putnam Capital Spectrum Fund and Putnam Equity Spectrum Fund have identical or similar investment objectives and similar, although not identical, investment strategies to Putnam Focused Equity Fund (the acquiring fund), with Putnam Equity Spectrum Fund and Putnam Focused Equity Fund having a strategy generally focused on investing in a limited number of issuers of equities and Putnam Capital Spectrum Fund having a strategy focused on investing in a limited number of issuers of equities, with the flexibility to invest

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significantly in fixed income securities, Putnam Management believes that the funds are appropriate merger partners. Putnam Management also believes that the combined fund would have improved commercial and scale opportunities at broker-dealers and that Putnam Capital Spectrum Fund’s and Putnam Equity Spectrum Fund’s shareholders may benefit from improved performance due to the employment of Putnam Focused Equity Fund’s investment strategy over the long term. Shareholders of all three funds may also benefit from the possibility of additional economies of scale through the spreading of certain expenses across a larger asset base.

The Trustees of The Putnam Funds serve as Trustees of each of the funds involved in the proposed mergers. The Trustees of your fund, including all of the Trustees who are not “interested persons” (as defined in the 1940 Act) of your fund or Putnam Management (referred to as “Independent Trustees” throughout this prospectus/proxy statement), have carefully considered the anticipated benefits and costs of each proposed merger to the shareholders of your fund. The Trustees have determined that each proposed merger is in the best interests of the shareholders of each fund and recommend that shareholders vote FOR approval of the proposed mergers.

4. How do the investment objectives, strategies, policies, and restrictions of your fund and Putnam Focused Equity Fund compare?

Investment Objectives and Strategies

Both Putnam Capital Spectrum Fund and Putnam Equity Spectrum Fund have identical or similar investment objectives to Putnam Focused Equity Fund, with Putnam Equity Spectrum Fund and Putnam Focused Equity Fund seeking capital appreciation and Putnam Capital Spectrum Fund seeking total return. Both Putnam Capital Spectrum Fund and Putnam Equity Spectrum Fund have similar investment strategies to Putnam Focused Equity Fund, as all three funds employ an investment strategy focused on investing in a limited number of issuers, however, there are some differences between how the funds invest. All three funds invest in equity securities, with Putnam Equity Spectrum Fund and Putnam Capital Spectrum Fund investing in equity securities of companies of any size and Putnam Focused Equity Fund investing mainly in equity securities of large and midsize companies. Each of Putnam Equity Spectrum Fund and Putnam Focused Equity Fund invests, under normal circumstances, at least 80% of its net assets in equity investments, including common stocks, preferred stocks, convertible securities, and warrants. Putnam Focused Equity Fund, however, may also consider investments in American Depositary Receipts (“ADRs”) and Global Depositary Receipts (“GDRs”) towards its 80% investment policy. Putnam Capital Spectrum Fund may also invest to a significant extent in fixed-income securities, although in recent years that has not been the case. Both Putnam Capital Spectrum Fund and Putnam Equity Spectrum Fund expect to invest in companies that employ significant leverage in their capital structure and may engage in short sales of securities, while Putnam Focused Equity Fund does not have a stated investment strategy related to leveraged companies or short sales of securities.

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 Putnam Capital  Putnam Equity  Putnam Focused  
 Spectrum Fund   Spectrum Fund   Equity Fund   
Investment The fund seeks total return. The fund seeks capital The fund seeks capital 
Objective  appreciation. appreciation. 
Investment For this non-diversified For this non-diversified For this non-diversified 
Strategies fund, Putnam Management fund, Putnam Management fund, Putnam Management 
 invests in equity and invests in equity securities invests mainly in equity 
 fixed-income securities, of companies of any size, securities (growth or value 
 including floating and fixed including both growth and or both) of large and midsize 
 rate bank loans, high-yield value stocks, that it believes companies that we believe 
 bonds, convertible securi- have favorable investment have favorable investment 
 ties, and both growth and potential. potential. The fund may 
 value stocks, of companies  consider, among other 
 of any size that it believes Under normal circum- factors, a company’s valu- 
 have favorable investment stances, Putnam ation, financial strength, 
 potential. Management invests at growth potential, competi- 
  least 80% of the fund’s net tive position in its industry, 
 The fund is “non- assets in equity invest- projected future earnings, 
 diversified,” which means ments, including common cash flows and dividends 
 it may invest a greater stocks, preferred stocks, when deciding whether to 
 percentage of its assets in convertible securities and buy or sell investments. 
 fewer issuers than a “diversi- warrants. This policy may be  
 fied” fund. Furthermore, changed only after 60 days’ Under normal circum- 
 the fund has the flexibility notice to shareholders. stances, we invest at least 
 to focus its investments For purposes of this policy, 80% of the fund’s net assets 
 in particular types of the fund treats short sales in equity investments, 
 securities. of equity securities as including common stocks, 
  investments in the equity preferred stocks, convert- 
 From time to time the securities sold short. The ible securities, warrants, 
 fund may, without limit, fund is “non-diversified,” ADRs, and GDRs. This policy 
 emphasize investments in which means it may invest may be changed only after 
 a particular type of security a greater percentage of its 60 days’ notice to share- 
 (i.e., in a particular part of assets in fewer issuers than holders. 
 the capital structure) at a “diversified” fund.  
 various points during a  The fund is “non- 
 credit cycle. This may mean The fund expects to invest diversified,” which means 
 that the fund may invest in leveraged companies, it may invest a greater 
 only modestly, or not at all, which employ significant percentage of its assets in 
 in fixed-income or equity leverage in their capital fewer issuers than a “diversi- 
 securities at any given time. structure through borrowing fied” fund. The fund expects 
 In recent years, a significant from banks or other lenders to concentrate its invest- 
 majority of the fund’s invest- or through issuing fixed- ments in a limited number 
 ments have consisted of income, convertible or of issuers. 
 equity securities. preferred equity securities,  
  and whose fixed income 
 The fund expects to invest securities are often rated  
 in leveraged companies, below-investment-grade  
 which employ significant (sometimes referred to as  
 leverage in their capital “junk bonds”).  
 structure through borrowing   
 from banks or other lenders The fund may also invest  
 or through issuing fixed- in companies that are not  
 income, convertible or leveraged.  
 preferred equity securities,   
 and whose fixed income   
 securities are often rated   
 below-investment-grade   
 (sometimes referred to as   
 “junk bonds”).   

 

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Putnam Capital  Putnam Equity  Putnam Focused  
 Spectrum Fund  Spectrum Fund   Equity Fund   
The fund may also invest in The fund may consider,  
fixed income securities of among other factors, a  
other issuers, in securitized company’s valuation,  
debt instruments (such financial strength, growth  
as mortgage- and asset- potential, competitive posi-  
backed securities), and in tion in its industry, projected  
companies that are not future earnings, cash  
leveraged. flows and dividends when  
 deciding whether to buy or  
The fund may consider, sell investments. The fund  
among other factors, a may also engage in short  
company’s valuation, sales of securities.  
financial strength, growth   
potential, competitive posi- The fund may invest in secu-  
tion in its industry, projected rities that are purchased in  
future earnings, cash private placements, which  
flows and dividends when are illiquid because they are  
deciding whether to buy subject to restrictions on  
or sell equity investments, resale.  
and, among other factors,   
credit, interest rate and   
prepayment risks, as well as   
general market conditions,   
when deciding whether   
to buy or sell fixed income   
investments. The fund may   
also engage in short sales of   
securities.   
    
The fund may invest in secu-   
rities that are purchased in   
private placements, which   
are illiquid because they are   
subject to restrictions on   
 resale.   

 

The following table provides information about the funds’ investments, as of December 31, 2019, in companies of various market capitalizations. The capitalization ranges in the table are intended to reflect approximate capitalization ranges for small, midsize, and large company stocks, as currently assessed by Putnam Management. The sizes (and identities) of these companies, and thus the ranges used to identify small, midsize and large companies, will fluctuate over time and with market conditions.

 

    
 Investments in Investments in Investments in 
 Small Companies Midsize Companies Large Companies 
 (approximately (approximately (approximately more 
 $3.7 billion or less) $3.7 billion – $17 billion) than $17 billion) 
  % of net  % of net  % of net 
 millions assets millions assets millions assets 
Putnam Capital       
Spectrum Fund $16.6 2.8% $151.0 26.0% $253.5 43.6% 
Putnam Equity       
Spectrum Fund $17.0 4.8% $91.9 25.9% $132.0 37.2% 

 

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 Investments in Investments in Investments in 
 Small Companies Midsize Companies Large Companies 
 (approximately (approximately (approximately more 
 $3.7 billion or less) $3.7 billion – $17 billion) than $17 billion) 
Putnam Focused       
Equity Fund $3.6 2.0% $15.8 8.8% $157.3 87.6% 

 

Investment Policies and Restrictions

As described above, each Acquired Fund pursues similar investment strategies to those of Putnam Focused Equity Fund. The funds also have identical fundamental investment restrictions. Putnam Focused Equity also has the following non-fundamental investment restriction, which the Acquired Funds do not have:

The fund will not acquire any securities of registered open-end investment companies or registered unit investment trusts in reliance on Sections 12(d)(1)(F) or (G) of the Investment Company Act of 1940, as amended.

5. Is the approval or closing of the merger of each Acquired Fund conditioned on the approval or closing of the merger of the other Acquired Fund?

No. The approval or closing of the proposed merger of each Acquired Fund is not conditioned on the approval or closing of the proposed merger of the other Acquired Fund. Each proposed merger is subject to certain closing conditions that must be satisfied or waived in order for the merger to be completed. Although Putnam Management believes that it is unlikely, it is possible that the merger of one Acquired Fund is approved and closes while the merger of the other Acquired Fund is either not approved or does not close. Unless otherwise stated, the information on the estimated expenses of the combined fund presented in this prospectus assumes that both mergers are approved and completed.

6. How do the management fees and other expenses of the funds compare, and what are they estimated to be following the proposed mergers?

Acquired Fund shareholders are expected to experience a higher total expense ratio upon the closing of the proposed merger of their fund with and into Putnam Focused Equity Fund, solely due to the fact that the Acquired Funds’ performance fee adjustments would not apply to Putnam Focused Equity Fund. These performance adjustments were negative as of November 30, 2019. Since 2017, these negative performance fee adjustments have resulted in Putnam Management receiving no management fees for managing the Acquired Funds and paying approximately $5.0 million to Putnam Capital Spectrum Fund and $3.4 million to Putnam Equity Spectrum Fund. The actual amount of any future performance adjustment, however, would depend on each Acquired Fund’s future performance.

Each fund pays a base management fee that incorporates asset-level discounts based on the monthly average of the aggregate net assets of all open-end funds sponsored by Putnam Management (excluding net assets of funds investing in, or invested in by, other Putnam funds to the extent necessary to avoid “double counting” of those assets). At every asset level, Putnam Focused Equity Fund, the acquiring fund, pays a lower management

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fee as a percentage of net assets than the base management fee as a percentage of net assets paid by Putnam Capital Spectrum Fund and Putnam Equity Spectrum Fund.

The monthly base management fee described above for Putnam Capital Spectrum Fund and Putnam Equity Spectrum Fund is increased or reduced by a performance adjustment (as discussed further below, the performance adjustment for each fund is increased or reduced based on the fund’s performance versus a specific benchmark; in the case of Putnam Capital Spectrum Fund, the Capital Spectrum Blended Index (defined below), and in the case of Putnam Equity Spectrum Fund, the S&P 500 Index). Putnam Focused Equity Fund’s management fee does not have a performance adjustment.

The amount of the performance adjustment for each Acquired Fund is calculated monthly based on a performance adjustment rate. For Putnam Capital Spectrum Fund, the performance adjustment rate is equal to 0.04 multiplied by the difference between the fund’s annualized performance (measured by the fund’s class A shares) and the annualized performance of the Capital Spectrum Blended Index, an unmanaged index administered by Putnam Management, 50% of which is the S&P 500 Index and 50% of which is the JPMorgan Developed High Yield Index, each measured over the performance period; provided that the performance adjustment rate for the fund may not exceed 0.32% or be less than –0.32%. For Putnam Equity Spectrum Fund, the performance adjustment rate is equal to 0.04 multiplied by the difference between the fund’s annualized performance (measured by the fund’s class A shares) and the annualized performance of the S&P 500 Index, each measured over the performance period; provided that the performance adjustment rate for the fund may not exceed 0.40% or be less than –0.40%. The performance period for each of Putnam Equity Spectrum Fund and Putnam Capital Spectrum Fund is the most recent thirty-six month period. The performance adjustment rate is multiplied by the fund’s average net assets over the performance period, divided by twelve, and added to, or subtracted from, the base fee for that month. In the absence of a merger, each Acquired Fund’s management fee going forward would depend on the Acquired Fund’s future performance. Shareholders of Putnam Capital Spectrum Fund and Putnam Equity Spectrum Fund would pay more in management fees by investing in Putnam Focused Equity Fund than by investing in their Acquired Fund if their Acquired Fund underperforms its benchmark index by an amount sufficient to reduce the Acquired Fund’s management fee below the rate currently charged to Putnam Focused Equity Fund. Conversely, shareholders of Putnam Capital Spectrum Fund and Putnam Equity Spectrum Fund would pay less in management fees by investing in Putnam Focused Equity Fund if their applicable Acquired Fund outperforms its benchmark index or underperforms its benchmark index by an amount insufficient to decrease the Acquired Fund’s management fee below the rate currently charged to Putnam Focused Equity Fund. Nevertheless, absent significant over-performance during the next three years against the applicable performance benchmark, each Acquired Fund, in the absence of the merger, would likely continue to be subject to negative performance adjustments for the next three years due to the inclusion of historical periods of significant underperformance in the performance adjustment calculation.

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As of November 30, 2019, Putnam Focused Equity Fund had an effective management fee rate of 0.62%. Putnam Capital Spectrum Fund had an effective management fee rate of –0.79% after taking into account a negative performance adjustment of 1.51% (the fund’s management fee rate prior to the application of the performance adjustment was 0.72%). Putnam Equity Spectrum Fund had an effective management fee rate of –0.37% after taking into account a negative performance adjustment of 1.09% (the fund’s management fee rate prior to the application of the performance adjustment was 0.72%). Upon the closing of both proposed mergers, Putnam Management expects the management fee rate of the combined fund to be 0.62%.

As of November 30, 2019, the total expenses of Putnam Capital Spectrum Fund, Putnam Equity Spectrum Fund, and Putnam Focused Equity Fund, not including any payments under Rule 12b-1 distribution and service plans, were –0.49%, –0.06% and 1.01%, respectively. The combined fund is expected to pay 0.87% in total expenses (not including any payments under Rule 12b-1 distribution and service plans, which does not reflect non-recurring expenses related to the mergers. If these non-recurring expenses had been reflected, the estimated total (non 12b-1) annual fund operating expenses would be 0.88%.

For more detailed information about fees and expenses, please see “Information about the Proposed Mergers — Fees and Expenses.”

7. How does the investment performance of each fund compare?

The performance information below gives some indication of the risks associated with an investment in each fund by showing each fund’s performance year to year and over time. The bar chart does not reflect the impact of sales charges. If it did, performance would be lower. Please remember that past performance is not necessarily an indication of future results and that each fund is managed by a different portfolio management team. The current portfolio manager for each fund is as follows1:

   
 Portfolio manager Joined fund 
Putnam Capital Spectrum Fund Jacquelyne Cavanaugh 2017 
Putnam Equity Spectrum Fund Jacquelyne Cavanaugh 2017 
Putnam Focused Equity Fund Daniel Schiff 2016 

 

Following the closing of the mergers, the combined fund will be managed by Mr. Schiff, Ms. Cavanaugh, and Walter Scully, a portfolio manager for certain other Putnam funds.

The historical performance information presented below for Putnam Capital Spectrum Fund, Putnam Equity Spectrum Fund, and Putnam Focused Equity Fund includes periods during which the funds were managed by different portfolio management teams. Before June 24, 2019, Putnam Focused Equity Fund, the acquiring fund, was managed with a

1 David Glancy served as portfolio manager of Putnam Capital Spectrum Fund and Putnam Equity Spectrum Fund from each fund’s inception through December 19, 2019.

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materially different investment strategy and may have achieved materially different performance results under its current investment strategy from that shown for periods before this date. Monthly performance figures for each fund are available at putnam.com.

The chart shows year-to-year changes in the net asset value performance of each fund’s class A shares, before sales charges.


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During the periods shown in the bar chart, Putnam Focused Equity Fund’s highest return for a quarter was 19.87% (quarter ended 9/30/10) and the lowest return for a quarter was –28.22% (quarter ended 9/30/11). During the periods shown in the bar chart, Putnam Capital Spectrum Fund’s highest return for a quarter was 14.90% (quarter ended 3/31/12) and the lowest return for a quarter was –22.08% (quarter ended 12/31/18). During the periods shown in the bar chart, Putnam Equity Spectrum Fund’s highest return for a quarter was 17.31% (quarter ended 3/31/12) and the lowest return for a quarter was –21.73% (quarter ended 12/31/18).

    
Average Annual Total Returns    
After Sales Charges    
(for periods ended 12/31/19) 1 year 5 years 10 years 
Putnam Focused Equity Fund    
Class A (before taxes) 22.11% 9.41% 12.27% 
Class A (after taxes on distributions) 21.50% 8.16% 10.32% 
Class A (after taxes on distributions and sale of    
fund shares) 13.53% 7.10% 9.36% 
Class B (before taxes) 23.57% 9.60% 12.28% 
Class C (before taxes) 27.58% 9.88% 12.10% 
Class R (before taxes) 29.20% 10.44% 12.69% 
Class R6 (before taxes)* 30.12% 11.04% 13.25% 
Class Y (before taxes) 29.80% 10.98% 13.22% 
S&P 500 Index (no deduction for fees, expenses    
or taxes)** 31.49% 11.70% 13.56% 
MSCI World Industrials (ND)-S&P 500    
Linked Benchmark (no deduction for fees,    
expenses or taxes)*** 31.95% 9.32% 10.53% 
Average Annual Total Returns    
After Sales Charges    
(for periods ended 12/31/19) 1 year 5 years 10 years 
Putnam Capital Spectrum Fund    
Class A (before taxes) 14.81% –3.19% 7.80% 
Class A (after taxes on distributions) 9.78% –4.48% 6.57% 
Class A (after taxes on distributions and sale of    
fund shares) 11.78% –2.45% 6.13% 
Class B (before taxes) 15.90% –3.07% 7.78% 
Class C (before taxes) 19.92% –2.77% 7.63% 
Class R (before taxes) 21.46% –2.29% 8.17% 
Class Y (before taxes) 22.11% –1.79% 8.71% 
Capital Spectrum Blended Index (no    
deduction for fees, expenses or taxes)**** 22.93% 9.20% 10.94% 

 

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Average Annual Total Returns    
After Sales Charges    
(for periods ended 12/31/19) 1 year 5 years 10 years 
Putnam Equity Spectrum Fund    
Class A (before taxes) 13.93% –1.94% 8.84% 
Class A (after taxes on distributions) 13.93% –2.35% 8.21% 
Class A (after taxes on distributions and sale of    
fund shares) 8.25% –1.52% 7.10% 
Class B (before taxes) 14.97% –1.87% 8.83% 
Class C (before taxes) 18.98% –1.51% 8.67% 
Class R (before taxes) 20.58% –1.02% 9.21% 
Class Y (before taxes) 21.18% –0.52% 9.76% 
S&P 500 Index (no deduction for fees,    
expenses or taxes) 31.49% 11.70% 13.56% 

 

* Performance for class R6 shares prior to their inception (5/22/18) is derived from the historical performance of class Y shares and has not been adjusted for the lower investor servicing fees applicable to class R6 shares; had it, returns would have been higher.

** As of June 24, 2019, the S&P 500 Index (an unmanaged index of common stock performance) replaced the MSCI World Industrials Index (ND) (a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets in the industrials sector) as the benchmark for this fund because, in Putnam Management’s opinion, the securities tracked by the S&P 500 Index more accurately reflect the types of securities that generally will be held by the fund. The average annual total returns of the MSCI World Industrials Index (ND) for the one-year, five-year, and ten-year periods ended on December 31, 2019 were 27.77%, 8.61%, and 10.17%, respectively.

*** The MSCI World Industrials (ND)-S&P 500 Linked Benchmark represents performance of the MSCI World Industrials Index (ND) from the inception date of the fund, December 18, 2008, through June 23, 2019 and performance of the S&P 500 Index from June 24, 2019 forward.

**** The Capital Spectrum Blended Index is an unmanaged index administered by Putnam Management, 50% of which is the S&P 500 Index and 50% of which is the JPMorgan Developed High Yield Index.

Class B share performance reflects conversion to class A shares after eight years.

After-tax returns reflect the historical highest individual federal marginal 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. These after-tax returns do not apply if you hold your fund shares through a 401(k) plan, an individualized retirement account (“IRA”), or another tax-advantaged arrangement.

8. Will my dividends be affected by the proposed merger of my fund into Putnam Focused Equity Fund?

Each fund normally distributes any net investment income and any net realized capital gains annually. These distributions will be taxed as ordinary income or as capital gains, unless the shares are held through a qualified retirement plan or other tax-advantaged arrangement. As each fund maintains the same distribution practices, other than the payment of a dividend as a result of the closing of the Acquired Funds’ taxable years in connection with the merger as described below, Putnam Management does not expect

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that Acquired Fund shareholders will see any material change in the dividends they receive as a result of the mergers, although there can be no assurance that this will be the case.

9. What are the federal income tax consequences of each proposed merger?

Each proposed merger is expected to be a tax-free reorganization for federal income tax purposes. Accordingly, no gain or loss is expected to be recognized by either the Acquired Funds or their shareholders as a direct result of either proposed merger, and the tax basis and holding period of a shareholder’s Acquired Fund shares are expected to carry over to the Merger Shares the shareholder receives in the merger of its fund with and into Putnam Focused Equity Fund. At any time before the consummation of the relevant merger, shareholders may redeem Acquired Fund shares, likely resulting in recognition of gain or loss to such shareholders for federal income tax purposes, except in the case of shares held through a qualified retirement plan or other tax-advantaged arrangement.

Independent of the mergers and in the ordinary course of managing the Funds, Putnam Management expects that Putnam Capital Spectrum Fund’s and Putnam Equity Spectrum Fund’s portfolio manager will sell a significant percentage of each Acquired Fund’s currently held securities and significantly reduce each Acquired Fund’s cash position and invest that cash and the proceeds from the sales in accordance with each Acquired Fund’s investment guidelines. In addition, if the proposed mergers are approved, Putnam Management expects that, following the approval, the portfolio manager will sell additional securities to more closely align each Acquired Fund’s portfolio with the portfolio of Putnam Focused Equity Fund, the acquiring fund. Specifically, Putnam Management expects that a significant portion of Putnam Capital Spectrum Fund’s and Putnam Equity Spectrum Fund’s holdings will be sold before the mergers. This is expected to include the sale of all non-cash fixed income securities, convertible preferred stocks, exchange traded funds (“ETFs”), and a substantial reduction or complete sale of a significant number of common stocks held by Putnam Capital Spectrum Fund and Putnam Equity Spectrum Fund. Based on the Acquired Funds’ portfolios as of December 31, 2019, Putnam Management currently anticipates that the Acquired Funds will dispose of approximately the following percentages of their portfolio holdings in connection with the mergers (including both ordinary course and portfolio realignment sales before the mergers and a reduction in each Acquired Fund’s cash position before and shortly following consummation of the mergers); however, these percentages are estimates and the funds’ actual portfolio realignment may differ:

• Putnam Capital Spectrum Fund – 80% of the portfolio

• Putnam Equity Spectrum Fund – 82% of the portfolio

Dispositions of portfolio holdings result in brokerage commissions and other transaction costs, and may result in the realization of capital gains that will be distributed to shareholders as taxable distributions after reduction by any available capital losses. In the

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case of sales taking place before the date of the proposed mergers, any net capital gains recognized in these sales will be distributed to shareholders of the applicable Acquired Fund as capital gain dividends (to the extent of net realized long-term capital gains over net-realized short-term capital losses) and/or ordinary dividends (to the extent of net realized short-term capital gains over net realized long-term capital losses) during or with respect to the year of sale. If all of the anticipated sales (including both ordinary course sales and sales in connection with the proposed mergers) had occurred on December 31, 2019, Putnam Capital Spectrum Fund would have had net realized capital gains of $73,642,865 ($3.25 per share). Putnam Equity Spectrum Fund would not have had any net realized capital gains as a result of such sales.

However, the actual amount of capital gains realized as a result of any sales will depend on the facts and circumstances at the time of the sales. Any net capital gain distribution would be taxable to shareholders, unless the shares are held through a qualified retirement plan or other tax-advantaged arrangement.

Putnam Capital Spectrum Fund is expected to realize net capital gains with respect to its anticipated portfolio dispositions. As a result, Putnam Management currently anticipates that the fund’s portfolio dispositions will result in increased taxable distributions to shareholders of Putnam Capital Spectrum Fund before the merger. However, the effects of any disposition of portfolio holdings will depend on the facts and circumstances at the time of the disposition, and therefore it is possible that these dispositions might not result in the realization of capital gains that would be distributed to shareholders of Putnam Capital Spectrum Fund as taxable distributions.

Putnam Equity Spectrum Fund is expected to have net capital losses with respect to its anticipated portfolio dispositions, after taking into account capital loss carryforwards. As a result, Putnam Management does not currently anticipate that the fund’s portfolio dispositions will result in increased taxable distributions to shareholders of Putnam Equity Spectrum Fund before the merger. However, the effects of any disposition of portfolio holdings will depend on the facts and circumstances at the time of the disposition, and therefore it is possible that such dispositions could result in the realization of capital gains that would be distributed to shareholders of Putnam Equity Spectrum Fund as taxable distributions.

If the sales of each Acquired Fund’s securities had occurred on December 31, 2019, Putnam Management estimates that the Funds would have paid the following amounts in brokerage commissions (brokerage commissions paid by each Acquired Fund in connection with the merger may be higher or lower than this estimate):

• Putnam Capital Spectrum Fund: $110,000 in brokerage commissions on those sales (0.02% of total fund)

• Putnam Equity Spectrum Fund: $65,000 in brokerage commissions on those sales (0.02% of total fund)

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If any sales take place after the date of the proposed mergers, any net capital gains recognized in these sales will be distributed to shareholders of the combined fund and will likewise be taxable in the manner described above.

Each proposed merger will end the tax year of the applicable Acquired Fund. Prior to each merger, the applicable Acquired Fund will distribute to its shareholders income and capital gains realized during the short tax year ending on the date of the merger, after reduction by any available capital losses. Had the mergers not occurred, each Acquired Fund would have paid distributions by the end of their regular tax year. Each merger thus will accelerate distributions to shareholders from the applicable Acquired Fund for the fund’s short tax year ending on the date of such merger. The tax year-end distributions will be taxable (unless the shares are held through a qualified retirement plan or other tax-advantaged arrangement) and will include any capital gains resulting from portfolio turnover before the consummation of the applicable merger (and not offset by capital losses) that were not previously distributed. Shareholders of an Acquired Fund may also receive distributions of income and capital gains in connection with the tax year end of the combined fund. Such tax year-end distributions will likewise be taxable (unless the shares are held through a qualified retirement plan or other tax-advantaged arrangement) and will include any capital gains resulting from portfolio turnover after the consummation of the mergers (and not offset by capital losses) that were not previously distributed.

Certain other tax consequences are discussed below under “Information about the Proposed Mergers — Federal Income Tax Consequences.”

10. Is there any difference in the procedures for purchasing, redeeming, and exchanging shares of the three funds?

No. The procedures for purchasing and redeeming shares of each fund, and for exchanging shares of each fund for shares of other Putnam funds, are identical.

Each of the Acquired Funds and Putnam Focused Equity Fund make a continuous public offering of their shares. Each Acquired Fund currently offers five classes of shares. Putnam Focused Equity Fund currently offers six classes of shares. Shares of each fund may be purchased either through investment dealers that have sales agreements with Putnam Retail Management Limited Partnership (“Putnam Retail Management”) or directly through Putnam Retail Management at prices based on net asset value, plus varying sales charges, depending on the class and dollar value of shares purchased. Reinvestment of distributions by the funds is made at net asset value for all classes of shares.

Shares of each fund may be redeemed (in essence, sold to the fund) on any day the New York Stock Exchange (“NYSE”) is open at their net asset value next determined after receipt

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by the fund, either directly or through an investment dealer, of a properly completed redemption request, less any applicable deferred sales charge.

Each fund’s shareholders can generally exchange their shares for shares of the same class of another Putnam fund at net asset value. Not all Putnam funds offer all classes of shares or are open to new investors. Each fund reserves the right to revise or terminate the exchange privilege, limit the amount or number of exchanges, or reject any exchange.

Please see “How to sell or exchange fund shares” for information about redeeming or exchanging certificated shares.

11. How will I be notified of the outcome of the vote?

If the proposed merger of your fund into Putnam Focused Equity Fund is approved by shareholders, you will receive confirmation after the reorganization is completed, indicating your new account number and the number of Putnam Focused Equity Fund shares you are receiving. If the proposed merger is not approved by shareholders, you will be notified in the next shareholder report of your fund. If the proposed merger is not approved by shareholders, Putnam Focused Equity Fund and your fund will continue to operate as separate funds in the near term, while the Trustees of the fund consider what course of action is in the best interest of the funds and their shareholders, which could include liquidation of your fund.

12. Will the number of shares I own change after the merger of my fund with and into Putnam Focused Equity Fund?

Yes, the number of shares you own will change, but the total value of the shares of Putnam Focused Equity Fund you receive will equal the total value of the shares of the Acquired Fund that you hold at the time of the merger. Even though the net asset value per share of each fund is different, the total net asset value of your holdings at the time of the merger of your fund into Putnam Focused Equity Fund will not change as a result of the merger.

13. What shareholder vote is required to approve the proposed mergers?

Approval of each proposed merger will require the “yes” vote at the meeting of the applicable Acquired Fund’s shareholders or any postponement or adjournment thereof (in each case, a “Meeting”) of a majority of the outstanding voting securities of the applicable Acquired Fund, as defined in the 1940 Act. A vote of a majority of the outstanding voting securities of the applicable Acquired Fund is defined in the 1940 Act as the affirmative vote of the lesser of (a) 67% or more of the voting securities of the Acquired Fund that are present or represented by proxy at the Meeting, if the holders of more than 50% of the outstanding voting securities of the Acquired Fund are present or represented by proxy at the Meeting; or (b) more than 50% of the outstanding voting securities of the Acquired Fund.

14. How do I vote my shares?

You can vote in any one of four ways:

• Over the Internet via the website listed on your proxy card;

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• By telephone, with a toll-free call to the number listed on your proxy card;

• By mail, by sending the enclosed proxy card, signed and dated, to us in the enclosed envelope; or

• In person, by attending the Meeting.

We encourage you to vote, following the instructions that appear on your proxy card. Whichever method you choose, please take the time to read the full text of the prospectus/proxy statement before you vote.

15. What are the costs associated with the mergers?

The costs associated with the proposed mergers are estimated to be $1,039,700. These fees and expenses, representing legal and accounting expenses, portfolio transfer taxes (if any), the costs of printing and mailing this prospectus/proxy statement, proxy solicitation costs, SEC filing fees, and other similar expenses incurred in connection with the consummation of the proposed mergers, will be allocated evenly between the three funds, except that relevant proxy solicitation costs will be allocated to the applicable Acquired Fund and that SEC filing fees (if any) will be allocated between the three funds pro rata based on fund assets. Because each fund is expected to benefit from the mergers, Putnam Management has determined that the allocation described above is a fair and objective manner of allocating the merger expenses. However, Putnam Management has voluntarily agreed to pay the legal and accounting expenses, the costs of printing and mailing this prospectus/proxy statement, proxy solicitation costs, and SEC filing fees allocated to each Acquired Fund. In addition, as a result of a contractual expense limitation of 20 basis points on so-called “other expenses” (i.e., all expenses exclusive of management fees, distribution fees, investor servicing fees, investment-related expenses, interest, taxes, brokerage commissions, acquired fund fees and expenses and extraordinary expenses) applicable to Putnam Focused Equity Fund, Putnam Management will bear $104,033 of the costs allocated to Putnam Focused Equity Fund. Thus, an estimated $941,005 will be paid by Putnam Management, an estimated $98,695 will be paid by Putnam Focused Equity Fund, $0 will be paid by Putnam Capital Spectrum Fund, and $0 will be paid by Putnam Equity Spectrum Fund. Of the total fees and expenses associated with the proposed mergers, if not for the expense limitation and voluntary payment described above, an estimated $202,728 would be paid by Putnam Focused Equity Fund, an estimated $477,936 would be paid by Putnam Capital Spectrum Fund, and an estimated $359,036 would be paid by Putnam Equity Spectrum Fund.

II. Risk Factors

What are the principal risks of Putnam Focused Equity Fund, and how do they compare with those of Putnam Capital Spectrum Fund and Putnam Equity Spectrum Fund?

Because each Acquired Fund has an identical or similar investment objective and similar investment strategies to Putnam Focused Equity Fund, the acquiring fund, the principal

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risks of an investment in Putnam Focused Equity Fund are similar to the risks of an investment in Putnam Capital Spectrum Fund or Putnam Equity Spectrum Fund.

The main risks that could adversely affect the value of Putnam Focused Equity Fund’s shares and the total return on an investment in Putnam Focused Equity Fund include:

> the value of investments in the fund’s portfolio may fall or fail to rise over extended periods of time for a variety of reasons, including general economic, political or financial market conditions, investor sentiment and market perceptions, government actions, geopolitical events or changes, and factors related to a specific issuer, geography, industry or sector;

> the risk that these and other factors may lead to increased volatility and reduced liquidity in the fund’s portfolio holdings;

> the risk that growth stocks may be more susceptible to earnings disappointments, and value stocks may fail to rebound;

> the potential for these risks to be generally greater for small and midsize companies;

> the fund will be more susceptible to these risks than other funds because it concentrates its investments in a limited number of issuers or sectors, and the fund may perform poorly as a result of adverse developments affecting those issuers or sectors;

> the risk that, as a non-diversified fund, the fund invests in fewer issuers and is more vulnerable than a more broadly diversified fund to fluctuations in the values of the securities it holds.

You can lose money by investing in Putnam Focused Equity Fund. The fund may not achieve its objective and is not intended to be a complete investment program. An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.

What are the funds’ principal investment strategies and related risks?

As noted above, both Putnam Capital Spectrum Fund and Putnam Equity Spectrum Fund have identical or similar investment objectives to Putnam Focused Equity Fund, the acquiring fund, with Putnam Equity Spectrum Fund and Putnam Focused Equity Fund seeking capital appreciation and Putnam Capital Spectrum Fund seeking total return. Both Putnam Capital Spectrum Fund and Putnam Equity Spectrum Fund have similar investment strategies to Putnam Focused Equity Fund, as all three funds employ an investment strategy focused on investing in a limited number of issuers, however, there are some differences between how the funds invest. All three funds invest in equity securities, with Putnam Equity Spectrum Fund and Putnam Capital Spectrum Fund investing in equity securities of companies of any size and Putnam Focused Equity Fund investing mainly in equity securities of large and midsize companies. Each of Putnam Equity Spectrum Fund and Putnam Focused Equity Fund invests, under normal circumstances, at least 80% of its net assets in equity investments, including common stocks, preferred stocks, convertible securities, and warrants. Putnam Focused Equity Fund, however, may also consider investments in ADRs and GDRs towards its 80% investment

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policy. Putnam Capital Spectrum Fund may also invest to a significant extent in fixed-income securities, although in recent years that has not been the case. Both Putnam Capital Spectrum Fund and Putnam Equity Spectrum Fund expect to invest in companies that employ significant leverage in their capital structure and may engage in short sales of securities, while Putnam Focused Equity Fund does not have a stated investment strategy related to leveraged companies or short sales of securities.

The following strategies and risks apply to each of the funds unless otherwise noted.

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 other companies in the same industry or in a number of different industries, such as increases in production costs. From time to time, a fund may invest a significant portion of its assets in companies in one or more related industries or sectors, which would make the fund more vulnerable to adverse developments affecting those companies, industries or sectors.

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.

(Putnam Capital Spectrum Fund and Putnam Equity Spectrum Fund only) Because the funds currently invest significantly in certain companies in the communication services and health care sectors, the funds may perform poorly as a result of adverse developments affecting those companies or sectors. Communication services companies can be adversely affected by, among other things, intense competition, changes in government regulation, failure or inadequacy of information technology infrastructure, changing consumer preferences and rapid obsolescence of their products and services. In addition, companies holding communication licenses and related assets may be subject to regulatory commitments, the need for additional investments or partnerships to commercialize the licenses and fluctuations in the value of the licenses. Companies in the health care sector may be adversely affected by technological advances that make existing products or services obsolete, changes in regulatory approval policies for drugs, medical devices or procedures, and changes in governmental and private payment systems. Putnam Capital Spectrum Fund and Putnam Equity Spectrum Fund may focus their investments in other sectors in the future, in which case they would be exposed to risks relating to those sectors.

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Growth stocks — Stocks of companies Putnam Management believes are fast-growing may trade at a higher multiple of current earnings than other stocks. The values of these stocks may be more sensitive to changes in current or expected earnings than the values of other stocks. If Putnam Management’s assessment of the prospects for a company’s earnings growth is wrong, or if Putnam Management’s 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 may not approach the value that Putnam Management has placed on it. In addition, growth stocks, at times, may not perform as well as value stocks or the stock market in general, and may be out of favor with investors for varying periods of time.

Value stocks — Companies whose stocks Putnam Management believes are undervalued by the market may have experienced adverse business developments or may be subject to special risks that have caused their stocks to be out of favor. If Putnam Management’s assessment of a company’s prospects is wrong, or if other investors do not similarly recognize the value of the company, then the price of the company’s stock may fall or may not approach the value that Putnam Management has placed on it. In addition, value stocks, at times, may not perform as well as growth stocks or the stock market in general, and may be out of favor with investors for varying periods of time.

Small and midsize 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, lack profitability or depend on a small management group. Stocks of these companies often trade in smaller volumes and their prices may fluctuate more than stocks of larger companies. Stocks of small and midsize companies may therefore be more vulnerable to adverse developments than those of larger companies. In addition, stocks of small and midsize companies, at times, may not perform as well as stocks of larger companies or the stock market in general, and may be out of favor with investors for varying periods of time. Small companies in foreign countries could be relatively smaller than those in the United States.

Leveraged companies. (Putnam Capital Spectrum Fund and Putnam Equity Spectrum Fund only) Securities of leveraged companies tend to be more sensitive to issuer, political, market and economic developments than the market as a whole and the securities of other types of companies. A decrease in the credit quality of a highly leveraged company can lead to a significant decrease in the value of the company’s securities. Highly leveraged companies can have limited access to additional capital, which can limit their ability to capitalize on attractive business opportunities and make it more difficult for them to weather challenging business environments. Companies with lower-quality debt or highly leveraged capital structures may be undergoing difficult business circumstances. These companies may face a greater risk of liquidation, reorganization or bankruptcy than companies without lower-quality debt or with lower levels of leverage. In the event of liquidation, reorganization or bankruptcy, a company’s creditors generally take precedence over the company’s stockholders, which makes recovery of those stockholders’ investment relatively less likely.

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Other investment companies. (Putnam Capital Spectrum Fund and Putnam Equity Spectrum Fund only) The fund may invest in securities of other investment companies, including ETFs, shares of open- and closed-end investment companies and unit investment trusts. Securities of other investment companies represent interests in collective investment portfolios that, in turn, invest directly in underlying instruments. The fund may invest in other investment companies when it has more uninvested cash than Putnam Management believes is advisable, when it receives cash collateral from securities lending arrangements, when there is a shortage of direct investments available, or when Putnam Management believes that investment companies offer attractive values. Investing in investment companies involves substantially the same risks as investing directly in the underlying instruments, but also involves expenses at the investment company-level, such as portfolio management fees and operating expenses. These expenses are in addition to the fees and expenses of the fund itself, which may lead to additional expenses while the fund owns another investment company’s shares.

Preferred stocks. Preferred stock generally pays dividends at a specified rate. Like common stock, the value of preferred stock may fluctuate in response to factors affecting the issuer, the issuer’s industry, and the financial markets generally. Preferred stock may also be subject to interest rate risk and other risks common to debt securities, and it ordinarily does not carry voting rights. Preferred stock has preference over common stock in the payment of dividends and the liquidation of assets, but it is junior to the debt securities of the issuer in those respects.

Convertible securities. Convertible securities include bonds, preferred stocks and other instruments that pay interest or dividends and that can be converted into or exchanged for common stocks or other equity securities, or equivalent value, at a particular price or rate (a “conversion price”). Convertible securities generally have less potential for gain or loss than common stocks, but may have more potential for gain or loss than debt securities. In general, a convertible security performs more like a stock when the underlying stock’s price is near or higher than the conversion price (because it is assumed that it will be converted into the stock) and more like a bond when the underlying stock’s price is lower than the conversion price (because it is assumed that it will not be converted). Convertible securities tend to provide higher yields than common stocks. However, a higher yield may not protect investors against the risk of loss or adequately mitigate any loss associated with a decline in the price of a convertible security.

Floating rate loans. (Putnam Capital Spectrum Fund only) Floating rate loans are debt obligations with interest rates that adjust or “float” periodically (normally on a monthly or quarterly basis) based on a generally recognized base rate, such as the London Inter-Bank Offered Rate or the prime rate offered by one or more major U.S. banks. While most floating rate loans are below-investment-grade in quality, many also are senior in rank in the event of bankruptcy to most other securities of the borrower, such as common stock or public bonds. Floating rate loans are also normally secured by specific collateral or

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assets of the borrower so that the holders of the loans will have a priority claim on those assets in the event of default or bankruptcy of the issuer.

Floating rate loans generally are less sensitive to interest rate changes than obligations with fixed interest rates but may decline in value if their interest rates do not rise as much, or as quickly, as interest rates in general. Conversely, floating rate instruments will not generally increase in value if interest rates decline. Changes in interest rates will also affect the amount of interest income the fund earns on its floating rate investments. Most floating rate loans allow for prepayment of principal without penalty. If a borrower prepays a loan, Putnam Management might have to reinvest the proceeds in an investment that may have lower yields than the yield on the prepaid loan or might not be able to take advantage of potential gains from increases in the credit quality of the issuer.

The value of collateral, if any, securing a floating rate loan can decline, and may be insufficient to meet the borrower’s obligations or difficult to liquidate. In addition, the fund’s access to collateral may be limited by bankruptcy or other insolvency proceedings. Floating rate loans may not be fully collateralized and may decline in value. Loans may not be considered “securities,” and it is possible that the fund may not be entitled to rely on anti-fraud and other protections under the federal securities laws when it purchases loans.

Although the market for the types of floating rate loans in which the fund invests has become increasingly liquid over time, this market is still developing, and there can be no assurance that adverse developments with respect to this market or particular borrowers will not prevent the fund from selling these loans at their market values when we consider such a sale desirable. In addition, the settlement period (the period between the execution of the trade and the delivery of cash to the purchaser) for floating rate loan transactions may be significantly longer than the settlement period for other investments, and in some cases longer than seven days. Requirements to obtain consent of borrower and/or agent can delay or impede the fund’s ability to sell the floating rate loans and can adversely affect the price that can be obtained. It is possible that sale proceeds from floating rate loan transactions will not be available to meet redemption obligations.

Interest rate risk. (Putnam Capital Spectrum Fund only) The values of bonds and other debt instruments usually rise and fall in response to changes in interest rates. Declining interest rates generally increase the value of existing debt instruments, and rising interest rates generally decrease the value of existing debt instruments. Changes in a debt instrument’s value usually will not affect the amount of interest income paid to the fund, but will affect the value of the fund’s shares. Interest rate risk is generally greater for investments with longer maturities.

Some investments give the issuer the option to call or redeem an investment before its maturity date. If an issuer calls or redeems an investment during a time of declining interest rates, Putnam Management might have to reinvest the proceeds in an investment offering a lower yield, and therefore the fund might not benefit from any increase in value as a result of declining interest rates.

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Credit risk. (Putnam Capital Spectrum Fund only) Investors normally expect to be compensated in proportion to the risk they are assuming. Thus, debt of issuers with poor credit prospects usually offers higher yields than debt of issuers with more secure credit. Higher-rated investments generally have lower credit risk.

Putnam Management may invest without limit in higher-yield, higher-risk debt investments that are rated below BBB or its equivalent at the time of purchase by each nationally recognized securities rating agency rating such investments, or are unrated investments that Putnam Management believes are of comparable quality. These investments may include those in the lowest rating category of the rating agency and unrated investments that Putnam Management believes are of comparable quality. Putnam Management will not necessarily sell an investment if its rating is reduced (or increased) after buying it.

Investments rated below BBB or its equivalent are below-investment-grade in quality. This rating reflects a greater possibility that the issuers may be unable to make timely payments of interest and principal and thus default. If this happens, or is perceived as likely to happen, the values of those investments will usually be more volatile and are likely to fall. A default or expected default could also make it difficult for us to sell the investments at prices approximating the values previously placed on them. Lower-rated debt usually has a more limited market than higher-rated debt, which may at times make it difficult for us to buy or sell certain debt instruments or to establish their fair values. Credit risk is generally greater for zero- coupon bonds and other investments that are issued at less than their face value and that are required to make interest payments only at maturity rather than at intervals during the life of the investment.

Credit ratings are based largely on the issuer’s historical financial condition and the rating agencies’ investment analysis at the time of rating. The rating assigned to any particular investment does not necessarily reflect the issuer’s current financial condition, and does not reflect an assessment of the investment’s volatility or liquidity. Although Putnam Management considers credit ratings in making investment decisions, Putnam Management performs its own investment analysis and do not rely only on ratings assigned by the rating agencies. Putnam Management’s success in achieving the fund’s goal may depend more on its own credit analysis when it buys lower rated debt than when it buys investment-grade debt. Putnam Management may have to participate in legal proceedings involving the issuer or take possession of and manage assets that secure the issuer’s obligations. This could increase the fund’s operating expenses and decrease its net asset value.

Although investment-grade investments generally have lower credit risk, they may share some of the risks of lower-rated investments.

Mortgage-backed securities may be subject to the risk that underlying borrowers will be unable to meet their obligations.

Prepayment risk. (Putnam Capital Spectrum Fund only) Traditional debt investments typically pay a fixed rate of interest until maturity, when the entire principal amount is

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due. By contrast, payments on mortgage-backed investments and floating rate loans typically include both interest and partial payment of principal. Principal may also be prepaid voluntarily, or as a result of refinancing or foreclosure. Putnam Management may have to invest the proceeds from prepaid investments in other investments with less attractive terms and yields. Compared to debt that cannot be prepaid, mortgage-backed investments are less likely to increase in value during periods of declining interest rates and have a higher risk of decline in value during periods of rising interest rates. Such investments may increase the volatility of the fund. Some mortgage-backed investments receive only the interest portion or the principal portion of payments on the underlying mortgages. The yields and values of these investments are extremely sensitive to changes in interest rates and in the rate of principal payments on the underlying mortgages. The market for these investments may be volatile and limited, which may make them difficult to buy or sell. 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. Asset-backed securities are subject to risks similar to those of mortgage-backed securities.

Foreign investments. (Putnam Focused Equity Fund only) Putnam Management may invest in foreign investments, although they do not represent a primary focus of Putnam Focused Equity Fund. 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 Putnam Management 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, which typically have less developed legal and financial systems.

Some 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.

Depositary receipts. (Putnam Focused Equity Fund only) Putnam Management may invest in American Depositary Receipts (ADRs) and Global Depositary Receipts (GDRs), which represent interests in a company’s securities that have been deposited with a bank or trust and that trade on an exchange or over-the-counter (OTC). For ADRs, the depository is typically a U.S. financial institution and the underlying securities are issued by a non-U.S. entity. For GDRs, the depository may be a U.S. or non-U.S. entity and the underlying securities may be issued by a U.S. or non-U.S. entity. Although the issuing bank or trust company may impose charges for the collection of dividends and the conversion of such securities into the underlying securities, there are generally no fees imposed on the purchase or sale of these securities, other than transaction fees ordinarily involved with trading stock. Such securities may be less liquid or may trade at lower prices than

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the underlying securities of the issuer. Additionally, the issuers of securities underlying depositary receipts may not be obligated to timely disclose information that is considered material under the securities laws of the United States. Therefore, less information may be available regarding these issuers than about the issuers of other securities and the market value of the depositary receipts may only reflect such limited information.

Derivatives. Putnam Management may engage in a variety of transactions involving derivatives, such as forward contracts, futures, options, rights, structured securities, warrants, and swap contracts, although they do not represent a primary focus of the funds. 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. Putnam Management may make use of “short” derivatives positions, the values of which typically move in the opposite direction from the price of the underlying investment, pool of investments, index or currency. Putnam Management may use derivatives both for hedging and non-hedging purposes, including as a substitute for a direct investment in the securities of one or more issuers. However, Putnam Management may also choose not to use derivatives based on its 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 its ability to manage these sophisticated instruments. Some derivatives are “leveraged,” which means they provide a fund with investment exposure greater than the value of a fund’s investment in the derivatives. As a result, these derivatives may magnify or otherwise increase investment losses to a fund. The risk of loss from certain short derivatives positions is theoretically unlimited. The value 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 the potential inability to terminate or sell derivatives positions. A liquid secondary market may not always exist for a fund’s derivatives positions. 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 derivatives transaction will not meet its obligations. For further information about additional types and risks of derivatives and the funds’ Asset Segregation Policies, see Miscellaneous Investments, Investment Practices and Risks in the applicable fund’s statement of additional information (“SAI”).

Liquidity and illiquid investments. Each fund may invest up to 15% of its assets in illiquid investments, which may be considered speculative and which may be difficult to sell. The sale of many of these investments is prohibited or limited by law or contract. Some investments may be difficult to value for purposes of determining a fund’s net asset value. Putnam Management may not be able to sell a fund’s investments when it considers it desirable to do so, or it may be able to sell them only at less than their

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value. The larger size of certain of a fund’s holdings and the lack of liquidity in securities markets may limit Putnam Management’s ability to sell those securities, or to sell them at appropriate prices, thereby negatively impacting the fund.

Short sales. (Putnam Capital Spectrum Fund and Putnam Equity Spectrum Fund only). A fund may engage in short sales, which are transactions in which a fund sells a security it does not own to a third party by borrowing the security in anticipation of purchasing the same security at the market price on a later date to close out the short position. The price a fund pays at the later date may be more or less than the price at which the fund sold the security. If the price of the security sold short increases between the time of the short sale and the time a fund replaces the borrowed security, the fund will incur a loss which is theoretically unlimited. A fund’s investment strategy of reinvesting proceeds received from selling securities short may effectively create leverage, which can amplify the effects of market volatility on the fund’s share price and make the fund’s returns more volatile. This is because leverage tends to magnify the effect of any increase or decrease in the value of a fund’s portfolio securities. The use of leverage may also cause a fund to liquidate portfolio positions when it would not be advantageous to do so in order to satisfy its obligations.

Market risk. The value of investments in a fund’s portfolio may fall or fail to rise over extended periods of time for a variety of reasons, including general economic, political or financial market conditions, investor sentiment and market perceptions (including perceptions about monetary policy, interest rates or the risk of default), government actions (including protectionist measures, intervention in the financial markets or other regulation, and changes in fiscal, monetary or tax policies), geopolitical events or changes (including natural disasters, terrorism and war), and factors related to a specific issuer, asset class, geography, industry or sector. Foreign financial markets have their own market risks, and they may be more or less volatile than U.S. markets and may move in different directions. During a general downturn in financial markets, multiple asset classes may decline in value simultaneously. These and other factors may lead to increased volatility and reduced liquidity in a fund’s portfolio holdings, particularly for larger investments. During those periods, a fund may experience high levels of shareholder redemptions, and may have to sell securities at times when it would otherwise not do so, and at unfavorable prices.

Other investments. In addition to the main investment strategies described above, a fund may make other types of investments, such as, in the case of Putnam Equity Spectrum Fund and Putnam Focused Equity Fund, investments in debt instruments. A fund may also loan its portfolio securities to earn income. These practices may be subject to other risks, as described under Miscellaneous Investments, Investment Practices and Risks in the applicable fund’s SAI.

Temporary defensive strategies. In response to adverse market, economic, political or other conditions, Putnam Management may take temporary defensive positions, such as investing some or all of a fund’s assets in cash and cash equivalents, that differ from

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the fund’s usual investment strategies. However, Putnam Management may choose not to use these temporary defensive 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. Additionally, while temporary defensive strategies are mainly designed to limit losses, such strategies may not work as intended.

Changes in policies. The Trustees may change the funds’ goals, investment strategies and other policies set forth in this prospectus/proxy statement without shareholder approval, except as otherwise provided in the applicable fund’s prospectus or SAI.

Portfolio turnover rate. A fund’s portfolio turnover rate measures how frequently the fund buys and sells investments. A portfolio turnover rate of 100%, for example, would mean that the fund sold and replaced securities valued at 100% of the fund’s assets within a one-year period. From time to time the fund may engage in frequent trading. Funds with high turnover may be more likely to realize capital gains that must be distributed to shareholders as taxable income. High turnover may also cause a fund to pay more brokerage commissions and other transaction costs, which may detract from performance. The fund’s portfolio turnover rate and the amount of brokerage commissions it pays will vary over time based on market conditions.

These costs, which are not reflected in annual fund operating expenses or the above example, affect fund performance. Putnam Capital Spectrum Fund’s turnover rate was 35% for its most recent fiscal year and Putnam Equity Spectrum Fund’s turnover rate was 34% for its most recent fiscal year. Putnam Focused Equity Fund’s turnover rate was 229% for its most recent fiscal year due in part to the fund’s investment strategy change effective as of June 24, 2019.

III. Information about the Proposed Mergers

General. The shareholders of each of Putnam Capital Spectrum Fund and Putnam Equity Spectrum Fund are being asked to approve a proposed merger between their fund and Putnam Focused Equity Fund pursuant to an Agreement and Plan of Reorganization (the “Plan”). A form of the Plan is attached to this prospectus/proxy statement as Appendix A.

Although the term “merger” is used for ease of reference, each transaction is structured as a transfer of all of the assets of an Acquired Fund to Putnam Focused Equity Fund in exchange for the assumption by Putnam Focused Equity Fund of all of the liabilities of the Acquired Fund and for the issuance and delivery to the Acquired Fund of shares of Putnam Focused Equity Fund (the Merger Shares) equal in aggregate net asset value to the value of the assets transferred to Putnam Focused Equity Fund net of the liabilities assumed by Putnam Focused Equity Fund.

After receipt of the Merger Shares, each Acquired Fund will distribute its Merger Shares to its shareholders, in proportion to their existing shareholdings, in complete liquidation of

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the Acquired Fund, and the legal existence of the Acquired Fund will be terminated. Each Acquired Fund shareholder will receive a number of full and fractional Merger Shares equal in value at the date of the exchange to the aggregate value of the shareholder’s Acquired Fund shares.

Before the date of the merger, each Acquired Fund will declare a distribution to shareholders that will have the effect of distributing to shareholders all of its remaining investment company taxable income (computed without regard to the deduction for dividends paid) and net realized capital gains, if any, through the date of the transfer.

The Trustees have voted to approve the proposed mergers and to recommend that shareholders of each Acquired Fund also approve the relevant proposed merger. The actions contemplated by the Plan and the related matters described therein will be consummated only if approved by the holders of a majority of the outstanding voting securities of the applicable Acquired Fund, as defined in the 1940 Act. A vote of a majority of the outstanding voting securities of the applicable Acquired Fund is defined in the 1940 Act as the affirmative vote of the lesser of (a) 67% or more of the voting securities of the Acquired Fund that are present or represented by proxy at the Meeting, if the holders of more than 50% of the outstanding voting securities of the Acquired Fund are present or represented by proxy at the Meeting; or (b) more than 50% of the outstanding voting securities of the Acquired Fund.

If the shareholders approve the proposed mergers, Putnam Management currently expects that Putnam Capital Spectrum Fund and Putnam Equity Spectrum Fund likely will sell certain portfolio holdings prior to the mergers. These sales, which are anticipated to commence in April 2020 and will not occur unless and until shareholders of the applicable Acquired Fund approve its proposed merger, would result in brokerage commissions and other transaction costs, and may result in the realization of capital gains that would be distributed to shareholders as taxable distributions after reduction by any available capital losses. Please see “Federal Income Tax Consequences” for information about the expected tax consequences of the proposed mergers.

Following the mergers, Putnam Management anticipates that Putnam Focused Equity Fund is expected to incur brokerage commissions and other transaction costs in connection with reinvesting the proceeds of Putnam Capital Spectrum Fund’s and Putnam Equity Spectrum Fund’s dispositions. These anticipated transaction costs do not alter Putnam Management’s view that the proposed mergers are in the best interests of each fund’s shareholders.

In the event that a proposed merger does not receive the required shareholder approval, the relevant Acquired Fund will continue to be managed in the near term as a separate fund in accordance with its current investment objectives and policies, and the Trustees would consider such alternatives as may be in the best interests of the Acquired Fund’s and Putnam Focused Equity Fund’s shareholders, which could include liquidation of the Acquired Fund.

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Fees and Expenses. The following tables describe the fees and expenses you may pay if you buy and hold shares of the funds and the annual operating expenses for each fund. The following tables also describe the pro forma expenses of Putnam Focused Equity Fund assuming only the merger of Putnam Capital Spectrum Fund into Putnam Focused Equity Fund is consummated, only the merger of Putnam Equity Spectrum Fund into Putnam Focused Equity Fund is consummated, and assuming both mergers are consummated. The pro forma expenses for Putnam Focused Equity Fund are based on the pro forma combined assets of the merging funds in each scenario as of November 30, 2019. Please see “Information about the Proposed Mergers – Trustees’ Considerations Relating to the Proposed Mergers” for information about the expenses of each proposed merger. The shareholder fees (fees paid directly from your investment) are the same for each fund and will not change as a result of the mergers. Annual fund operating expenses (expenses that are deducted from fund assets) are described in the table below, and, as shown, the annual fund operating expenses of the combined fund are expected to be higher than the current annual fund operating expenses of each Acquired Fund. With respect to Putnam Focused Equity Fund shareholders, the lower expense ratios will be achieved only after the costs of the mergers have been paid.

You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $50,000 in Putnam funds. More information about these and other discounts is available from your financial advisor and in How do I buy fund shares? beginning on page 14 of the Putnam Focused Equity Fund prospectus, page 25 of the combined prospectus for each of the Acquired Funds, in Appendix B to this prospectus/proxy statement, and in How to buy shares beginning on page II-1 of each fund’s SAI.

Shareholder Fees (fees paid directly from your investment)

 
 Class A Class B Class C Class R Class R6 Class Y 
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of the offering price) 
Putnam Capital       
Spectrum Fund 5.75% NONE NONE NONE N/A NONE 
Putnam Equity Spectrum Fund 5.75% NONE NONE NONE N/A NONE 
Putnam Focused Equity Fund 5.75% NONE NONE NONE NONE NONE 
 Class A Class B Class C Class R Class R6 Class Y 
Maximum Deferred Sales Charge (Load) (as a percentage of the original purchase price or 
redemption proceeds, whichever is lower)     
Putnam Capital       
Spectrum Fund 1.00% (a) 5.00% (b) 1.00% (c) NONE N/A NONE 
Putnam Equity Spectrum Fund 1.00% (a) 5.00% (b) 1.00% (c) NONE N/A NONE 
Putnam Focused Equity Fund 1.00% (a) 5.00% (b) 1.00% (c) NONE NONE NONE 

 

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Annual Fund Operating Expenses (expenses you pay each year as a percentage of the value of your investment)

 
 Manage- Distribution and  Total annual fund 
 ment fees service (12b-1) Fees Other expenses operating expenses 
Putnam Capital Spectrum Fund    
Class A –0.79%(d) 0.25% 0.30% –0.24% 
Class B –0.79%(d) 1.00% 0.30% 0.51% 
Class C –0.79%(d) 1.00% 0.30% 0.51% 
Class R –0.79%(d) 0.50% 0.30% 0.01% 
Class Y –0.79%(d) N/A 0.30% –0.49% 
Putnam Equity Spectrum Fund    
Class A –0.37%(e) 0.25% 0.31% 0.19% 
Class B –0.37%(e) 1.00% 0.31% 0.94% 
Class C –0.37%(e) 1.00% 0.31% 0.94% 
Class R –0.37%(e) 0.50% 0.31% 0.44% 
Class Y –0.37%(e) N/A 0.31% –0.06% 
Putnam Focused Equity Fund    
Class A 0.62% 0.25% 0.39% 1.26% 
Class B 0.62% 1.00% 0.39% 2.01% 
Class C 0.62% 1.00% 0.39% 2.01% 
Class R 0.62% 0.50% 0.39% 1.51% 
Class R6 0.62% N/A 0.19% 0.81% 
Class Y 0.62% N/A 0.39% 1.01% 
Putnam Focused Equity Fund (pro forma assuming both Acquired Funds are merged into 
Putnam Focused Equity Fund)    
Class A 0.62% 0.25% 0.25% 1.12%* 
Class B 0.62% 1.00% 0.25% 1.87%* 
Class C 0.62% 1.00% 0.25% 1.87%* 
Class R 0.62% 0.50% 0.25% 1.37%* 
Class R6 0.62% N/A 0.10% 0.72%* 
Class Y 0.62% N/A 0.25% 0.87%* 
Putnam Focused Equity Fund (pro forma assuming only Putnam Capital Spectrum Fund is 
merged into Putnam Focused Equity Fund)   
Class A 0.62% 0.25% 0.26% 1.13%* 
Class B 0.62% 1.00% 0.26% 1.88%* 
Class C 0.62% 1.00% 0.26% 1.88%* 
Class R 0.62% 0.50% 0.26% 1.38%* 
Class R6 0.62% N/A 0.11% 0.73%* 
Class Y 0.62% N/A 0.26% 0.88%* 

 

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 Manage- Distribution and  Total annual fund 
 ment fees service (12b-1) Fees Other expenses operating expenses 
Putnam Focused Equity Fund (pro forma assuming only Putnam Equity Spectrum Fund is 
merged into Putnam Focused Equity Fund)   
Class A 0.62% 0.25% 0.28% 1.15%* 
Class B 0.62% 1.00% 0.28% 1.90%* 
Class C 0.62% 1.00% 0.28% 1.90%* 
Class R 0.62% 0.50% 0.28% 1.40%* 
Class R6 0.62% N/A 0.12% 0.74%* 
Class Y 0.62% N/A 0.28% 0.90%* 

 

(a) Applies only to certain redemptions of shares bought with no initial sales charge.

(b) This charge is phased out over six years.

(c) This charge is eliminated after one year.

(d) Management fees reflect a negative performance adjustment. The fund’s base management fee is subject to adjustment, up or down, based on the fund’s performance relative to the performance of a 50/50 blend (balanced daily) of the S&P 500 Index and JPMorgan Developed High Yield Index. Management fees for the period ended November 30, 2019 are negative because the fund’s negative performance adjustment exceeded the fund’s base management fee. For the most recent fiscal year, the fund’s base management fee prior to any performance adjustment was 0.72%.

(e) Management fees reflect a negative performance adjustment. The fund’s base management fee is subject to adjustment, up or down, based on the fund’s performance relative to the performance of the S&P 500 Index. Management fees for the period ended November 30, 2019 are negative because the fund’s negative performance adjustment exceeded the fund’s base management fee. For the most recent fiscal year, the fund’s base management fee prior to any performance adjustment was 0.72%.

* Does not reflect non-recurring expenses related to the merger. If these expenses had been reflected, pro forma other expenses and total annual fund operating expenses would have been higher by 0.01%.

The tables are provided to help you understand the expenses of investing in the funds and your share of the operating expenses that each fund incurs and that Putnam Management expects the combined fund to incur in the first year following the proposed mergers.

Examples

The following hypothetical examples are intended to help you compare the cost of investing in the funds involved in the proposed mergers with the cost of investing in other funds. It assumes that you invest $10,000 in a fund for the time periods indicated and then, except as indicated, redeem all your shares at the end of those periods. It assumes a 5% return on your investment each year and that each fund’s operating expenses remain the same. Your actual costs may be higher or lower.

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 1 year 3 years 5 years 10 years 
Putnam Capital Spectrum Fund     
Class A $552 $502 $446 $280 
Class B $552 $464 $485 $417 
Class B (no redemption) $52 $164 $285 $417 
Class C $152 $164 $285 $640 
Class C (no redemption) $52 $164 $285 $640 
Class R $1 $3 $6 $13 
Class Y $(50) $(159) $(281) $(648) 
 1 year 3 years 5 years 10 years 
Putnam Equity Spectrum Fund     
Class A $593 $633 $676 $804 
Class B $596 $600 $720 $940 
Class B (no redemption) $96 $300 $520 $940 
Class C $196 $300 $520 $1,155 
Class C (no redemption) $96 $300 $520 $1,155 
Class R $45 $141 $246 $555 
Class Y $(6) $(19) $(34) $(78) 
 1 year 3 years 5 years 10 years 
Putnam Focused Equity Fund     
Class A $696 $952 $1,227 $2,010 
Class B $704 $930 $1,283 $2,144 
Class B (no redemption) $204 $630 $1,083 $2,144 
Class C $304 $630 $1,083 $2,338 
Class C (no redemption) $204 $630 $1,083 $2,338 
Class R $154 $477 $824 $1,802 
Class R6 $83 $259 $450 $1,002 
Class Y $103 $322 $558 $1,236 
 1 year 3 years 5 years 10 years 
Putnam Focused Equity Fund (pro     
forma assuming both Acquired Funds     
are merged into Putnam Focused     
Equity Fund)     
Class A $683 $911 $1,156 $1,860 
Class B $690 $888 $1,211 $1,995 
Class B (no redemption) $190 $588 $1,011 $1,995 
Class C $290 $588 $1,011 $2,190 
Class C (no redemption) $190 $588 $1,011 $2,190 
Class R $139 $434 $750 $1,646 
Class R6 $74 $230 $401 $894 
Class Y $89 $278 $482 $1,073 

 

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 1 year 3 years 5 years 10 years 
Putnam Focused Equity Fund (pro     
forma assuming only Putnam Capital     
Spectrum Fund is merged into     
Putnam Focused Equity Fund)     
Class A $684 $913 $1,161 $1,871 
Class B $691 $891 $1,216 $2,005 
Class B (no redemption) $191 $591 $1,016 $2,005 
Class C $291 $591 $1,016 $2,201 
Class C (no redemption) $191 $591 $1,016 $2,201 
Class R $140 $437 $755 $1,657 
Class R6 $75 $233 $406 $906 
Class Y $90 $281 $488 $1,084 
 1 year 3 years 5 years 10 years 
Putnam Focused Equity Fund (pro     
forma assuming only Putnam Equity     
Spectrum Fund is merged into     
Putnam Focused Equity Fund)     
Class A $685 $919 $1,172 $1,892 
Class B $693 $897 $1,226 $2,027 
Class B (no redemption) $193 $597 $1,026 $2,027 
Class C $293 $597 $1,026 $2,222 
Class C (no redemption) $193 $597 $1,026 $2,222 
Class R $143 $443 $766 $1,680 
Class R6 $76 $237 $411 $918 
Class Y $92 $287 $498 $1,108 

 

Trustees’ Considerations Relating to the Proposed Mergers. The Trustees of The Putnam Funds, who serve as Trustees of each of the funds involved in the proposed mergers, have carefully considered the anticipated benefits and costs of each proposed merger from the perspective of each fund. Following their review, the Trustees, including the Independent Trustees, determined that each proposed merger of an Acquired Fund with and into Putnam Focused Equity Fund would be in the best interests of each fund and its shareholders and that the interests of existing shareholders of each fund would not be diluted by the proposed mergers. The Trustees approved the proposed mergers and the Plan, and recommend approval by the shareholders of each Acquired Fund.

Putnam Management’s evaluation of the future prospects for the Acquired Funds. Putnam Management informed the Trustees of the Acquired Funds that, given the unfavorable commercial prospects for the Acquired Funds (i.e., a lower likelihood that either Acquired Fund would be placed on additional broker-dealer platforms for future sale) and the likely significant ongoing financial commitment as a result of the negative performance fee adjustments, it did not view the continued operation of the Acquired Funds as a sustainable long-term financial arrangement. In light of this, the Trustees focused on two principal options for the Acquired Funds: merging the Acquired Funds (in this case with Putnam Focused Equity Fund) or liquidating the Acquired Funds.

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Investment matters. In evaluating the proposed mergers, the Trustees analyzed the investment rationale articulated by Putnam Management for the proposed mergers. The Trustees considered that the funds have identical or similar investment objectives, with Putnam Equity Spectrum Fund and Putnam Focused Equity Fund seeking capital appreciation and Putnam Capital Spectrum Fund seeking total return. They noted that each fund invests in equity securities, with Putnam Equity Spectrum Fund and Putnam Capital Spectrum Fund investing in equity securities of companies of any size and Putnam Focused Equity Fund investing mainly in equity securities of large and midsize companies. The Trustees noted that Putnam Equity Spectrum Fund and Putnam Focused Equity Fund each invests, under normal circumstances, at least 80% of its net assets in equity investments and, following the proposed mergers, shareholders of Putnam Equity Spectrum Fund and Putnam Capital Spectrum Fund would still be invested in a non-diversified fund that employs an investment strategy focused on investing in a limited number of issuers and invests a significant portion of its assets in equity investments. The Trustees also noted that, while Putnam Capital Spectrum Fund may also invest to a significant extent in fixed-income securities and Putnam Focused Equity Fund does not have this flexibility, in recent years, Putnam Capital Spectrum Fund has not invested significantly in fixed-income securities.

The Trustees considered Putnam Management’s representation that, following the proposed mergers, shareholders of each Acquired Fund would be invested in a larger fund with a higher total expense ratio solely due to the fact that the Acquired Funds’ negative performance fee adjustments would not apply to Putnam Focused Equity Fund, although the actual amount of any future performance adjustment would depend on each Acquired Fund’s future performance. The Trustees also considered that shareholders of each fund involved in the mergers may benefit from the possibility of additional economies of scale through the spreading of certain expenses across a larger asset base, although it was not expected that any potential economies of scale, should they be realized in the future, would approximate the amount of the negative performance fee adjustments. The Trustees also considered Putnam Management’s representation that, following the proposed mergers, shareholders of Putnam Focused Equity Fund were projected to experience a lower total expense ratio. The Trustees noted Putnam Management’s belief that a combined fund would have improved commercial and scale opportunities at broker-dealers and that Putnam Capital Spectrum Fund’s and Putnam Equity Spectrum Fund’s shareholders may benefit from improved performance due to the employment of Putnam Focused Equity Fund’s investment strategy over the long term.

Performance. The Trustees reviewed the historical investment performance of each fund and observed that for the one-, three-, and five- year periods ended September 30, 2019, Putnam Focused Equity Fund’s total return at net asset value was higher than the total return of Putnam Capital Spectrum Fund and Putnam Equity Spectrum Fund. Regarding the performance of Putnam Focused Equity Fund, the Trustees considered Putnam Management’s acknowledgement that there were limitations on the comparability of the Fund’s performance prior to June 24, 2019 given that the performance for those periods

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related to the performance of Putnam Global Industrials Fund, which was repositioned as Putnam Focused Equity Fund on June 24, 2019 and was operated with a different investment strategy than Putnam Focused Equity Fund. The Trustees noted, however, that Putnam Focused Equity Fund had relatively stronger investment performance than each of the Acquired Funds from the date of the repositioning through November 30, 2019, and that Daniel Schiff, the portfolio manager for Putnam Focused Equity Fund, also served as portfolio manager of Putnam Global Industrials Fund from 2016 until the fund’s repositioning on June 24, 2019 (and continued to serve as portfolio manager of the repositioned fund after that date).

Ongoing fund expenses. The Trustees noted that each fund pays management fees that incorporate asset-level breakpoints based on the size of all Putnam open-end mutual fund net assets (excluding net assets of funds that are invested in, or that are invested in by, other Putnam funds to the extent necessary to avoid “double counting” of those assets).

The Trustees noted that, at every asset level, Putnam Focused Equity Fund pays a lower management fee as a percentage of net assets than the base management fee as a percentage of net assets paid by Putnam Capital Spectrum Fund and Putnam Equity Spectrum Fund. In addition, the Trustees also considered that Putnam Capital Spectrum Fund’s and Putnam Equity Spectrum Fund’s management fees are subject to a performance adjustment that can range from +0.32% to -0.32% and +0.40% to -0.40%, respectively, and that Putnam Focused Equity Fund’s management fee is not subject to any performance adjustment. Therefore, the Trustees noted, shareholders of Putnam Capital Spectrum Fund and Putnam Equity Spectrum Fund would pay more in management fees by investing in Putnam Focused Equity Fund than by investing in their Acquired Fund if their Acquired Fund underperforms its benchmark index by an amount sufficient to reduce the Acquired Fund’s management fee below the rate currently charged to Putnam Focused Equity Fund. Conversely, the Trustees considered that shareholders of Putnam Capital Spectrum Fund and Putnam Equity Spectrum Fund would pay less in management fees by investing in Putnam Focused Equity Fund if their applicable Acquired Fund outperforms its benchmark index or underperforms its benchmark index by an amount insufficient to decrease the Acquired Fund’s management fee below the rate currently charged to Putnam Focused Equity Fund. Nevertheless, the Trustees noted that, absent significant over-performance during the next three years against the applicable performance benchmark, each Acquired Fund, in the absence of the merger, would likely continue to be subject to negative performance adjustments for the next three years due to the inclusion of historical periods of significant underperformance in the performance adjustment calculation.

Putnam Management informed the Trustees that, assuming the mergers occur, the combined Putnam Focused Equity Fund is expected to have a higher total expense ratio than the current total expense ratios for Putnam Capital Spectrum Fund and Putnam Equity Spectrum Fund. The Trustees considered Putnam Management’s representation that the expected higher expense ratio for the combined fund as compared to the

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Acquired Funds’ current expense ratios as of November 30, 2019 was solely the result of the fact that the Acquired Funds’ negative performance fee adjustments would not apply to Putnam Focused Equity Fund. Separately for each Acquired Fund and Putnam Focused Equity Fund, the Trustees reviewed the increase in annual fund operating expenses that Acquired Fund shareholders were expected to experience as shareholders of the combined Putnam Focused Equity Fund and the decrease in annual fund operating expenses that Putnam Focused Equity Fund shareholders were expected to experience following the proposed mergers, based on Putnam Management’s unaudited estimates of each fund’s expense ratio as of November 30, 2019 and the expected pro forma expense ratio based on the combined assets of the Acquired Fund and Putnam Focused Equity Fund as of the same date.

Additional information that the Trustees considered is presented in “Questions and Answers Regarding the Proposed Mergers—6. How do the management fees and other expenses of the funds compare, and what are they estimated to be following the proposed mergers?” and in “Information about the Proposed Mergers—Fees and Expenses.”

Tax matters. The Trustees also considered the tax effects of the proposed mergers. The Trustees took into account the fact that, although this result is not free from doubt, each proposed merger is expected to be a tax-free transaction for federal income tax purposes. The Trustees noted that this result would likely be more favorable to many shareholders than a liquidation, which would not be a tax-free transaction and therefore could give rise to taxable capital gains. They also took into account other anticipated tax effects of the proposed mergers, including the consequences that the blending of existing tax attributes of the three funds would have on taxable shareholders. These and other federal income tax consequences are discussed below under the heading “Federal Income Tax Consequences.”

Costs of the proposed mergers. The Trustees took into account the expected costs of the proposed mergers, including proxy solicitation costs, accounting fees, and legal fees. The Trustees weighed these costs against the expected benefits of the proposed mergers. The Trustees considered Putnam Management’s recommendation that, since each fund is expected to benefit from the proposed mergers, legal and accounting expenses, as well as the cost of printing and mailing this prospectus/proxy statement, should be allocated evenly among the Acquired Funds and Putnam Focused Equity Fund. In addition, the Trustees considered Putnam Management’s recommendation that proxy solicitation costs should be allocated to the Acquired Funds and that SEC filing fees (if any) should be allocated between the three funds pro rata based on fund assets. The Trustees also considered that each Acquired Fund will bear the transaction costs associated with disposing of certain of its securities prior to the merger. The Trustees considered that, as a result of a contractual expense limitation of 20 basis points on so-called “other expenses” (i.e., all expenses exclusive of management fees, distribution fees, investor servicing fees, investment-related expenses, interest, taxes, brokerage commissions, acquired fund fees and expenses and extraordinary expenses) applicable to Putnam Focused Equity

43 

 



Fund, Putnam Management would bear $104,033 of the costs allocated to Putnam Focused Equity Fund. The Trustees also considered that Putnam Management voluntarily agreed to pay the legal and accounting expenses, the costs of printing and mailing this prospectus/proxy statement, proxy solicitation costs, and SEC filing fees allocated to each Acquired Fund. Accordingly, the funds are expected to bear costs in the following approximate amounts:

 Putnam Capital Putnam Equity Putnam Focused Equity 
Expenses Spectrum Fund Spectrum Fund Fund 
Proxy Solicitation $226,132 $135,974 $0 
Printing and Mailing    
Prospectus/Proxy Statement $52,183 $52,183 $52,183 
Legal $100,000 $100,000 $100,000 
Accounting/Audit $30,833 $30,833 $30,833 
SEC Filing $68,788 $40,046 $19,712 
Total Expenses (Before    
Reimbursement) $477,936 $359,036 $202,728 
Reimbursement through    
Expense Subsidies $(477,936) $(359,036) $(104,033) 
Total Expenses    
(After Reimbursement) $0 $0 $98,695 
Net Assets (at 11/30/19) $626 million $364 million $179 million 
Total Expenses (as a % of Net    
Assets at 11/30/19) -% -% 0.05% 

 

Other factors. The Trustees also took into account a number of other factors, including: (1) the classification and relative performance information for each fund by independent research firms such as Thomson Reuters Lipper; (2) the performance history of each fund as compared to its benchmark index; (3) the volatility of each fund’s portfolio; (4) the net assets of each fund; (5) the possibility that the combined fund may attract more attention and support from broker dealer platforms; (6) the possibility of additional economies of scale or reduced diseconomies of scale; and (7) the terms of the Plan.

Agreement and Plan of Reorganization. Each proposed merger will be governed by the Plan, a copy of which is attached as Appendix A. The following discussion of the Plan is a summary provided for your reference only. Please read the Agreement in its entirety in Appendix A.

The Plan provides that Putnam Focused Equity Fund will acquire all of the assets of each Acquired Fund in exchange for the assumption by Putnam Focused Equity Fund of all of the liabilities of each Acquired Fund and for the issuance of full and fractional Merger Shares of each class equal in value to the value of the transferred assets attributable to shares of the corresponding class of each Acquired Fund net of assumed liabilities attributable to the class of each Acquired Fund. Valuations for the proposed mergers will be determined at 4:00 p.m., Eastern Time, on April 24, 2020, or such earlier or later time or date as may be agreed upon by the parties (the “Valuation Time”). The Merger Shares will be issued on the business day (the “Exchange Date”) following the Valuation Time.

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Putnam Focused Equity Fund, the acquiring fund, will issue the Merger Shares to each Acquired Fund, registered in the Acquired Fund’s name. Immediately following its receipt of the Merger Shares on the Exchange Date, each Acquired Fund will distribute the full and fractional Merger Shares of each class, pro rata, to its shareholders of that class of record as of the close of business on the Exchange Date. Putnam Focused Equity Fund will then, in accordance with written instructions furnished by the Acquired Fund, reregister the Merger Shares in the names of the shareholders of the Acquiring Fund in an amount representing the number of full and fractional Merger Shares of each class due the shareholder. As a result of each proposed merger, each shareholder of an Acquired Fund will receive a number of Merger Shares of each class equal in aggregate value at the Exchange Date to the value of Acquired Fund shares of the corresponding class held by the shareholder.

The consummation of each proposed merger is subject to the conditions set forth in the Plan. The Plan may be terminated and each proposed merger abandoned at any time before the Exchange Date (before or after the approval by shareholders of the applicable Acquired Fund) by mutual consent of Putnam Focused Equity Fund and the applicable Acquired Fund or, if any condition set forth in the Plan has not been fulfilled and has not been waived by the party entitled to its benefits, by that party. The approval or consummation of the merger of each Acquired Fund is not conditioned on the approval or consummation of the merger of any other Acquired Fund.

If shareholders of an Acquired Fund approve the relevant proposed merger, the Acquired Fund will liquidate any of its portfolio securities that Putnam Focused Equity Fund indicates it does not wish to acquire. The Plan provides that these liquidations will be substantially completed before the Exchange Date, unless the Acquired Fund and Putnam Focused Equity Fund agree otherwise. The shareholders of the Acquired Fund will bear the applicable portfolio trading costs associated with these liquidations to the extent that the liquidations are completed before the Exchange Date. To the extent that the liquidations are not completed by the Exchange Date, shareholders of the combined fund will bear these costs.

The fees and expenses associated with the proposed mergers are estimated to be $1,039,700. These fees and expenses, representing legal and accounting expenses, portfolio transfer taxes (if any), the costs of printing and mailing this prospectus/proxy statement, proxy solicitation costs, SEC filing fees, and other similar expenses incurred in connection with the consummation of the proposed mergers, will be allocated evenly between the three funds, except that relevant proxy solicitation costs will be borne by the applicable Acquired Fund and that SEC filing fees (if any) will be allocated between the three funds pro rata based on fund assets. Because each fund is expected to benefit from the mergers, Putnam Management has determined that the allocation described above is a fair and objective manner of allocating the merger expenses. However, Putnam Management has voluntarily agreed to pay the legal and accounting expenses, the costs of printing and mailing this prospectus/proxy statement, proxy solicitation costs, and SEC filing fees allocated to each Acquired Fund. In addition, as a result of a contractual expense

45 

 



limitation of 20 basis points on so-called “other expenses” (i.e., all expenses exclusive of management fees, distribution fees, investor servicing fees, investment-related expenses, interest, taxes, brokerage commissions, acquired fund fees and expenses and extraordinary expenses) applicable Putnam Focused Equity Fund, Putnam Management will bear $104,033 of the costs allocated to Putnam Focused Equity Fund. Thus, an estimated $941,005 will be paid by Putnam Management, an estimated $98,695 will be paid by Putnam Focused Equity Fund, $0 will be paid by Putnam Capital Spectrum Fund, and $0 will be paid by Putnam Equity Spectrum Fund. Of the total fees and expenses associated with the proposed mergers, if not for the expense limitation and voluntary payment described above, an estimated $202,728 would be paid by Putnam Focused Equity Fund, an estimated $477,936 would be paid by Putnam Capital Spectrum Fund, and an estimated $359,036 would be paid by Putnam Equity Spectrum Fund. However, to the extent that any payment by any fund of such fees or expenses would result in the disqualification of Putnam Focused Equity Fund, Putnam Capital Spectrum Fund, or Putnam Equity Spectrum Fund as a “regulated investment company” within the meaning of Section 851 of the Internal Revenue Code of 1986, as amended (the “Code”), such fees and expenses will be paid directly by the party incurring them.

Description of the Merger Shares. The Merger Shares are class A, class B, class C, class R and class Y shares of Putnam Focused Equity Fund. Each class of Merger Shares has identical characteristics to shares of the corresponding class of each Acquired Fund. Acquired Fund shareholders receiving Merger Shares will not pay an initial sales charge on the shares. Your Merger Shares will be subject to a contingent deferred sales charge to the same extent that your Acquired Fund shares were subject to such a charge. In other words, your Merger Shares will be treated as having been purchased on the date you purchased your Acquired Fund shares and for the price you originally paid, potentially subject to certain adjustments. For purposes of determining the conversion date of the class B Merger Shares into class A shares of Putnam Focused Equity Fund, the Merger Shares will be treated as having been purchased on the date you originally purchased your Acquired Fund shares (so that the conversion date of the shares will be unchanged by the mergers). For more detail on the characteristics of each class of Merger Shares, please see the How do I buy fund shares? section of the prospectus of Putnam Focused Equity Fund, dated December 31, 2019, as supplemented.

Under Massachusetts law, shareholders could, under certain circumstances, be held personally liable for the obligations of Putnam Focused Equity Fund. However, the Amended and Restated Agreement and Declaration of Trust of Putnam Focused Equity Fund disclaims shareholder liability for acts or obligations of Putnam Focused Equity Fund and requires that notice of such disclaimer be given in each agreement, obligation, or instrument entered into or executed by Putnam Focused Equity Fund or its Trustees. The Amended and Restated 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 Putnam Focused Equity Fund. Thus, the risk of a shareholder incurring financial loss on account of shareholder liability is limited to circumstances in

46 

 



which Putnam Focused Equity Fund would be unable to meet its obligations. The likelihood of such circumstances is remote. The shareholders of each Acquired Fund are currently subject to this same risk of shareholder liability.

Federal Income Tax Consequences. As a condition to each fund’s obligation to consummate the transactions contemplated by the Plan, the funds will receive tax opinions from Ropes & Gray LLP, counsel to the funds (which opinions will be based on certain factual representations and customary assumptions and subject to certain qualifications), substantially to the effect that, although the matter is not free from doubt, on the basis of the existing provisions of the Code, Treasury regulations promulgated thereunder, current administrative rules and court decisions, generally for federal income tax purposes:

(i) the acquisition by Putnam Focused Equity Fund of substantially all of the assets of the relevant Acquired Fund solely in exchange for Merger Shares and the assumption by Putnam Focused Equity Fund of the liabilities of the Acquired Fund followed by the distribution by the Acquired Fund to their shareholders of Merger Shares in complete liquidation of the Acquired Fund, all pursuant to the Plan, will constitute a reorganization within the meaning of Section 368(a) of the Code, and the relevant Acquired Fund and Putnam Focused Equity Fund will each be a “party to a reorganization” within the meaning of Section 368(b) of the Code;

(ii) under Sections 361 and 357 of the Code, no gain or loss will be recognized by the relevant Acquired Fund upon the transfer of its assets to Putnam Focused Equity Fund pursuant to the Plan in exchange for Merger Shares and the assumption of the Acquired Fund’s liabilities by Putnam Focused Equity Fund or upon the distribution of Merger Shares by the Acquired Fund to its shareholders in liquidation of the Acquired Fund, except for (A) any gain or loss recognized on (1) “Section 1256 contracts” as defined in Section 1256(b) of the Code or (2) stock in a “passive foreign investment company” as defined in Section 1297(a) of the Code, and (B) any other gain or loss required to be recognized (1) as a result of the closing of the tax year of the Acquired Fund, (2) upon the termination of a position, or (3) upon the transfer of an asset regardless of whether such a transfer would otherwise be a nontaxable transaction under the Code;

(iii) under Section 354 of the Code, no gain or loss will be recognized by shareholders of the relevant Acquired Fund upon the exchange of their shares of the Acquired Fund for Merger Shares;

(iv) under Section 358 of the Code, the aggregate tax basis of the Merger Shares an Acquired Fund shareholder receives pursuant to the Plan will be the same as the aggregate tax basis of the Acquired Fund shares exchanged therefor;

(v) under Section 1223(1) of the Code, an Acquired Fund shareholder’s holding period for the Merger Shares received pursuant to the Plan will be determined by including the period during which such shareholder held or is treated for federal income tax

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purposes as having held the Acquired Fund shares exchanged therefor, provided that the shareholder held those Acquired Fund shares as capital assets;

(vi) under Section 1032 of the Code, no gain or loss will be recognized by Putnam Focused Equity Fund upon the receipt of the assets of the relevant Acquired Fund in exchange for Merger Shares and the assumption by Putnam Focused Equity Fund of the liabilities of the Acquired Fund;

(vii) under Section 362(b) of the Code, Putnam Focused Equity Fund’s tax basis in the assets of the relevant Acquired Fund transferred to Putnam Focused Equity Fund pursuant to the Plan will be the same as the Acquired Fund’s tax basis immediately prior to the transfer, increased for any gain or decreased for any loss required to be recognized as described in (ii) above;

(viii) under Section 1223(2) of the Code, the holding period in the hands of Putnam Focused Equity Fund of each Acquired Fund asset transferred to Putnam Focused Equity Fund pursuant to the Plan, other than certain assets with respect to which gain or loss is required to be recognized as described in (ii) above, will include the period during which such asset was held or treated for federal income tax purposes as held by the Acquired Fund; and

(ix) Putnam Focused Equity Fund will succeed to and take into account the items of the relevant Acquired Fund described in Section 381(c) of the Code, subject to the conditions and limitations specified in Sections 381, 382, 383 and 384 of the Code and the regulations thereunder.

Putnam Focused Equity Fund will file the tax opinions with the SEC shortly after completion of the proposed mergers. The opinions will be based on certain factual certifications made by officers of the Acquired Funds and Putnam Focused Equity Fund and will also be based on customary assumptions and subject to certain qualifications. The opinions are not a guarantee that the tax consequences of the proposed mergers will be as described above. There is no assurance that the Internal Revenue Service will agree with the opinions. If any proposed merger were consummated but did not qualify as a tax-free reorganization, the applicable Acquired Fund shareholders would recognize a taxable gain or loss equal to the difference between their tax basis in their Acquired Fund shares and the fair market value of the shares of Putnam Focused Equity Fund received.

Although each merger is expected to be a tax-free reorganization for federal income tax purposes, there will nonetheless be tax implications. Portfolio assets of each Acquired Fund may be sold in connection with the applicable proposed merger. The actual tax impact of any such sales will depend on the difference between the price at which the portfolio assets are sold and the Acquired Fund’s tax basis in the assets. If sales take place before the date of the applicable proposed merger, any net capital gains recognized in these sales will be distributed to the relevant Acquired Fund’s shareholders as capital gain dividends (to the extent of net realized long-term capital gains over net-realized short-term capital losses) and/or ordinary dividends (to the extent of net realized short-term capital

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gains over net realized long-term capital losses) during or with respect to the year of sale. These distributions will be taxable to shareholders. If these sales take place after the date of the applicable proposed merger, any net capital gains recognized in these sales will be distributed to shareholders of the combined fund and will be taxable to shareholders in the manner described in the immediately preceding sentence. Also, because each proposed merger will end the tax year for the relevant Acquired Fund, it could accelerate distributions to shareholders from the relevant Acquired Fund for its short tax year ending on the date of the applicable merger. Those tax year-end distributions will be taxable and will include any capital gains resulting from portfolio turnover prior to the merger, after reduction by any available capital losses.

Before consummating the proposed mergers, the Acquired Funds will, and Putnam Focused Equity Fund may, declare a distribution to shareholders that, together with all previous distributions, will have the effect of distributing to shareholders all of the relevant fund’s investment company taxable income (computed without regard to the deduction for dividends paid) and net capital gains, including those realized on the disposition of portfolio securities, whether independent of or in connection with the proposed mergers, effected prior to the mergers. These distributions will be taxable to shareholders.

Furthermore, differences between the funds’ unrealized gains and losses and tax loss carryforwards, and tax rules limiting the use of certain of those losses to offset gains following the mergers, may affect the timing and amount of future capital gain distributions paid to shareholders. Putnam Focused Equity Fund’s ability to carry forward its or an Acquired Fund’s pre-merger capital losses and to use them to offset future gains may be limited as a result of the mergers. First, “pre-acquisition losses” of one or more of Putnam Focused Equity Fund, Putnam Capital Spectrum Fund or Putnam Equity Spectrum Fund (including capital loss carryforwards, net current-year capital losses, and unrealized losses that exceed certain thresholds) may become unavailable to offset gains of the combined fund. Second, one fund’s pre-acquisition losses cannot be used to offset unrealized gains in another fund that are “built in” at the time of the applicable merger and that exceed certain thresholds (“non-de minimis built-in gains”) for five tax years. Third, each Acquired Fund’s loss carryforwards, as limited under the previous two rules, are permitted to offset only that portion of the income of Putnam Focused Equity Fund for the taxable year of the mergers that is equal to the portion of Putnam Focused Equity Fund’s taxable year that follows the date of the applicable merger (prorated according to number of days). Therefore, in certain circumstances, shareholders of the funds may pay taxes sooner, or pay more taxes, than they would have had the mergers not occurred.

In addition, assuming that all mergers occur, the combined fund resulting from the mergers will have tax attributes that reflect a blending of the tax attributes of all of Putnam Focused Equity Fund, Putnam Capital Spectrum Fund, and Putnam Equity Spectrum Fund at the time of the mergers (including as affected by the rules described above). Therefore, the shareholders of each fund will receive a proportionate share of any “built-in” (unrealized) gains in the other funds’ assets, as well as, in the case of

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shareholders of the Acquired Funds, any taxable gains realized by Putnam Focused Equity Fund but not distributed to its shareholders before the mergers, when Putnam Focused Equity Fund eventually distributes those gains. As a result, shareholders of any fund may receive a greater amount of taxable distributions than they would have had the mergers not occurred. Any pre-acquisition losses of an Acquired Fund (whether realized or unrealized) remaining after the operation of the limitation rules described above will become potentially available to offset capital gains realized after the mergers and thus may reduce subsequent capital gain distributions to a broader group of shareholders than would have been the case absent the mergers, such that the benefit of those losses to the shareholders of an Acquired Fund may be further reduced relative to what the benefit would have been had the mergers not occurred.

The amount of realized and unrealized gains and losses of each fund, as well as the size of each fund, at the time of the mergers will determine the extent to which the funds’ respective losses, both realized and unrealized, will be available to reduce gains realized by the combined fund following the mergers, and consequently the extent to which the combined fund may be required to distribute gains to its shareholders earlier than would have been the case absent the mergers. Thus, the impact of the rules described above will depend on factors that are currently unknown, and this impact cannot be calculated precisely before the mergers.

The following paragraphs provide a brief summary of the tax impacts, due to the above-described rules and the combination of the tax attributes of the three funds, of the mergers had they occurred on October 31, 2019. The summary is based on the gain/ loss characteristics of the funds as of October 31, 2019 and assumes that hypothetical mergers of the funds took place on that date. The gain/loss characteristics and net assets of each fund, and of the combined fund, on the actual date of the mergers will differ, perhaps significantly, from those on October 31, 2019. For example, as a result of potential portfolio turnover of each Acquired Fund, each of those funds’ tax situation, and thus the actual tax impacts of the mergers, could differ substantially from those described below. Because the tax impacts of the mergers depends on each fund’s relative tax situation at the time of the mergers, which situation will be different, and perhaps significantly different, than the tax situation on October 31, 2019, the tax impacts of the mergers will differ, perhaps significantly, from those described below.

As a result of the hypothetical mergers occurring on October 31, 2019, each fund’s gains and losses would have been spread among all shareholders of the combined fund, subject to the Section 382 limit and loss quarantine provisions described below. As of October 31, 2019, Putnam Capital Spectrum Fund had unrealized gains and Putnam Equity Spectrum Fund and Putnam Focused Equity Fund each had pre-merger net losses (after taking into account pre-merger realized gains and losses and unrealized gains). As a result of the mergers, Putnam Capital Spectrum Fund’s built-in gains would be shared across the larger shareholder base of the combined fund. In addition, the losses of Putnam Equity Spectrum Fund and Putnam Focused Equity Fund would have been spread across the

50 

 



larger shareholder base of the combined fund. The spreading of these gains and losses could potentially reduce taxable distributions that shareholders of Putnam Capital Spectrum Fund would have otherwise received while potentially increasing taxable distributions to the shareholders of Putnam Equity Spectrum Fund and Putnam Focused Equity Fund as compared to no mergers occurring. The extent to which the mergers would result in such increased or decreased taxable distributions would depend in part on the extent to which unrealized built-in gains of Putnam Capital Spectrum Fund as of the date of the mergers are realized by the combined fund following the mergers and the application of the loss limitation rules described below.

Putnam Equity Spectrum Fund and Putnam Focused Equity Fund’s losses would have also been subject to annual limitation under Section 382. As a result of the annual limitation, the mergers could result in the deferral of the use of a significant portion of Putnam Equity Spectrum Fund’s and Putnam Focused Equity Fund’s losses, thereby potentially resulting in greater distributions to shareholders sooner than if the mergers had not occurred.

As of October 31, 2019, all three funds were “gain corporations” as defined in Section 384 because they had net unrealized built-in gains over the threshold amount under Section 384. The loss “quarantine” provisions of Section 384 of the Code would have prohibited the use of any pre-merger losses of each fund (other than any pre-merger losses attributable to that particular fund) from being used to offset such fund’s built-in gains if and to the extent realized within five years following the mergers. Putnam Capital Spectrum Fund did not have any pre-merger losses with which to offset these gains if so realized, and the pre-merger losses of the other funds would not have been available to offset any such realized gains, thereby potentially increasing taxable distributions to shareholders of the combined fund. Each of Putnam Equity Spectrum Fund and Putnam Focused Equity Fund had pre-merger losses in excess of its built-in gains. Therefore the loss “quarantine” provisions likely would have little practical effect with respect to Putnam Equity Spectrum Fund’s and Putnam Focused Equity Fund’s pre-merger losses and built-in gains.

The tax principles described above are not expected to change. However, their effect will change prior to the mergers because of market developments and fluctuation, any pre-merger realignments or other sales of portfolio securities that might occur or that have already occurred, and shareholder activity in the funds, among other changes. This description of the federal income tax consequences of the proposed mergers is made without regard to the particular facts and circumstances of any shareholder, though it is applicable only to a situation when a fund’s shares are held in a taxable account. Shareholders are urged to consult their own tax advisors as to the specific consequences to them of the proposed mergers, including the applicability and effect of state, local and other tax laws.

Capitalization. The following table shows on an unaudited basis the capitalization of the funds as of August 31, 2019, and on a pro forma combined basis, giving effect to each proposed merger as of that date:

51 

 



     Putnam Focused 
     Equity Fund 
 Putnam Capital Putnam Equity Putnam Focused Pro Forma Pro Forma 
(Unaudited) Spectrum FundSpectrum Fund Equity Fund Adjustment Combined(1) 
Net assets      
Class A $218,354,043 $139,596,608 $116,775,893 $(63,221) $474,663,323 
Class B $22,349,475 $12,003,479 $6,151,912 $(3,331) $40,501,535 
Class C $183,463,642 $72,823,590 $15,010,912 $(8,127) $271,290,017 
Class M(2) $3,323,518 $1,791,589 $1,559,007 $(844) $6,673,270 
Class R $3,555,853 $2,595,901 $5,904,320 $(3,197) $12,052,877 
Class R6 N/A N/A $6,377,830 $(3,453) $6,374,377 
Class Y $230,637,407 $142,727,949 $30,517,717 $(16,522) $403,866,551 
Total $661,683,938 $371,539,116 $182,297,591  $1,215,421,950 
Shares out-      
standing(3)(4)      
Class A 7,573,245 4,034,261 5,383,951 4,904,744 21,896,201 
Class B 822,902 372,990 303,973 502,446 2,002,311 
Class C 6,770,516 2,267,306 740,527 3,612,337 13,390,686 
Class M(2) 119,865 54,258 74,008 68,829 316,960 
Class R 125,749 76,732 275,729 84,959 563,169 
Class R6 N/A N/A 289,309 289,309 
Class Y 7,876,432 4,036,666 1,387,187 5,067,468 18,367,753 
Total 23,288,709 10,842,213 8,454,684  56,826,389 
Net asset value      
per share      
Class A $28.83 $34.60 $21.69  $21.68 
Class B $27.16 $32.18 $20.24  $20.23 
Class C $27.10 $32.12 $20.27  $20.26 
Class M(2) $27.73 $33.02 $21.07  $21.05 
Class R $28.28 $33.83 $21.41  $21.40 
Class R6 N/A N/A $22.05  $22.03 
Class Y $29.28 $35.36 $22.00  $21.99 

 

(1) Pro forma combined net assets reflect that the costs associated with the proposed mergers are estimated to be $911,155. The pro forma figures shown above do not reflect the SEC filing fees (estimated to be $128,545) that would be paid by the Acquiring Fund following the completion of its fiscal year end. Putnam Management has voluntarily agreed to pay the legal and accounting expenses, the costs of printing and mailing this prospectus/ proxy statement, proxy solicitation costs, and SEC filing fees allocated to each Acquired Fund. In addition, as a result of a contractual expense limitation of 20 basis points on so-called “other expenses” (i.e., all expenses exclusive of management fees, distribution fees, investor servicing fees, investment-related expenses, interest, taxes, brokerage commissions, acquired fund fees and expenses and extraordinary expenses) applicable to Putnam Focused Equity Fund, Putnam Management will bear $104,033 of the costs allocated to Putnam Focused Equity Fund. Thus, an estimated $941,005 will be paid by Putnam Management, an estimated $98,695 will be paid by Putnam Focused Equity Fund, $0 will be paid by Putnam Capital Spectrum Fund, and $0 will be paid by Putnam Equity Spectrum Fund. Of the total fees and expenses associated with the proposed mergers, if not for the expense limitation and voluntary payment described above, an estimated $202,728 would be paid by

52 

 



Putnam Focused Equity Fund, an estimated $477,936 would be paid by Putnam Capital Spectrum Fund, and an estimated $359,036 would be paid by Putnam Equity Spectrum Fund.

(2) Effective November 25, 2019, all class M shares of Putnam Capital Spectrum Fund, Putnam Equity Spectrum Fund, and Putnam Focused Equity Fund were converted to class A shares of the respective fund.

(3) Reflects the issuance of the following shares of Putnam Focused Equity Fund in a tax-free exchange for the net assets of Putnam Capital Spectrum Fund as of August 31, 2019, less anticipated merger-related expenses:

Class A: 10,072,664 
Class B: 1,104,911 
Class C: 9,055,637 
Class M: 157,857 
Class R: 166,147 
Class Y: 10,489,334 

 

(4) Reflects the issuance of the following shares of Putnam Focused Equity Fund in a tax-free exchange for the net assets of Putnam Equity Spectrum Fund as of August 31, 2019, less anticipated merger-related expenses:

Class A: 6,439,586 
Class B: 593,427 
Class C: 3,594,522 
Class M: 85,095 
Class R: 121,293 
Class Y: 6,491,233 

 

Unaudited narrative pro forma financial information of the funds for the twelve month period ended August 31, 2019, is included in the Merger SAI. Because the Plan provides that Putnam Focused Equity Fund will be the surviving fund following the proposed mergers and because Putnam Focused Equity Fund’s investment objectives and policies will remain unchanged, the unaudited narrative pro forma financial information reflects the transfer of the assets and liabilities of Putnam Capital Spectrum Fund and Putnam Equity Spectrum Fund to Putnam Focused Equity Fund as contemplated by the Plan.

The Trustees, including all of the Independent Trustees, recommend approval of the proposed mergers.

IV. Information about Voting and the Shareholder Meetings

General. This prospectus/proxy statement is furnished in connection with the proposed mergers of Putnam Capital Spectrum Fund and Putnam Equity Spectrum Fund with and into Putnam Focused Equity Fund and the solicitation of proxies by and on behalf of the Trustees for use at the Meetings. The Meetings are to be held on April 15, 2020 for shareholders of each Acquired Fund, at 11 a.m. Eastern Time, on the 2nd Floor of 100 Federal Street, Boston, Massachusetts, or at such later time as is made necessary by postponement or adjournment. The Notice of Meeting, the prospectus/proxy statement and the enclosed form of proxy are being mailed to shareholders on or about March 6, 2020.

As of February 19, 2020, Putnam Capital Spectrum Fund had the following shares outstanding:

53 

 



 
Share Class Number of Shares Outstanding 
Class A 7,631,187.285 
Class B 784,898.89 
Class C 6,121,640.335 
Class R 120,199.512 
Class Y 5,772,314.275 
 
As of February 19, 2020, Putnam Equity Spectrum Fund had the following shares 
outstanding:  
Share Class Number of Shares Outstanding 
Class A 3,500,436.85 
Class B 312,574.804 
Class C 1,831,556.901 
Class R 61,460.449 
Class Y 2,748,709.847 

 

Only shareholders of record at the close of business on February 19, 2020 (the “Record Date”) will be entitled to notice of and to vote at the Meetings. Each share is entitled to one vote, with fractional shares voting proportionally.

Required Vote. Proxies are being solicited from each Acquired Fund’s shareholders by its Trustees for the Meeting. Unless revoked, all valid proxies will be voted in accordance with the specification thereon or, in the absence of specifications, FOR approval of the applicable proposed merger and the Plan. The transactions contemplated by the Plan will be consummated only if approved by a majority of the outstanding voting securities of the applicable Acquired Fund, as defined in the 1940 Act. A vote of a majority of the outstanding voting securities of the applicable Acquired Fund is defined in the 1940 Act as the affirmative vote of the lesser of (a) 67% or more of the voting securities of the Acquired Fund that are present or represented by proxy at the Meeting, if the holders of more than 50% of the outstanding voting securities of the Acquired Fund are present or represented by proxy at the Meeting; or (b) more than 50% of the outstanding voting securities of the Acquired Fund.

Proxies from Putnam Focused Equity Fund’s shareholders are not being solicited because their approval or consent is not necessary for consummation of the proposed mergers.

Record Date, Quorum, and Methods of Tabulation. Shareholders of record of each Acquired Fund at the close of business on the Record Date will be entitled to vote at the relevant Meeting or any postponement or adjournment thereof. Shareholders of all classes vote together as a single class. The holders of 30% of the shares of each Acquired Fund outstanding at the close of business on the Record Date present in person or represented by proxy will constitute a quorum for the Meeting of the applicable Acquired Fund.

54 

 



Votes cast by proxy or in person at the Meeting will be counted by persons appointed by the applicable Acquired Fund as tellers for the Meeting. The tellers will count the total number of votes cast “for” approval of the proposal for purposes of determining whether sufficient affirmative votes have been cast. Shares represented by proxies that reflect abstentions and “broker non-votes” will be counted as shares that are present and entitled to vote on the matter for purposes of determining the presence of a quorum. Abstentions have the effect of a negative vote on the proposal. Because broker-dealers (in the absence of specific authorization from their customers) are not expected to have discretionary authority to vote on the proposal any shares owned beneficially by their customers, there are unlikely to be any “broker non-votes” at the Meeting. Broker non-votes would otherwise have the same effect as abstentions (that is, they would be treated as being present and entitled to vote on the matter for purposes of determining the presence of a quorum, and as if they were votes against the proposal).

The documents that authorize Putnam Fiduciary Trust Company or Putnam Investor Services to act as Trustee for certain individual retirement accounts (including traditional, Roth and SEP IRAs, 403(b)(7) accounts and Coverdell Education Savings Accounts) provide that if an account owner does not submit voting instructions for his or her shares, Putnam Fiduciary Trust Company or Putnam Investor Services will vote the shares in the same proportions as other shareholders with similar accounts have submitted voting instructions for their shares. Shareholders should be aware that this practice, known as “echo-voting,” may have the effect of increasing the likelihood that the proposal will be approved and that Putnam Fiduciary Trust Company or Putnam Investor Services, each of which is an affiliate of Putnam Management, may benefit indirectly from the approval, in accordance with the Trustees’ recommendation, of the proposal.

Other Business. The Trustees know of no matters other than those described in this prospectus/proxy statement to be brought before the Meetings. If, however, any other matters properly come before a Meeting, proxies will be voted on these matters in accordance with the judgment of the persons named in the enclosed proxy card(s).

Share Ownership.

Putnam Capital Spectrum Fund

At January 31, 2020, the officers and Trustees of the fund as a group owned less than 1% of the outstanding shares of each class of the fund, except class Y of the fund, of which they owned 1.53%, and, except as noted 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.

55 

 



   Assuming 
   Completion of 
  Percentage the Proposed 
Class Shareholder name and address owned Merger* 
 NATIONAL FINANCIAL SERVICES LLC   
 FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS   
499 WASHINGTON BLVD 13.28% 5.85% 
 ATTN: MUTUAL FUNDS DEPT 4TH FL   
 JERSEY CITY NJ 07310-1995   
 PERSHING, LLC   
1 PERSHING PLZ 9.34% 4.11% 
 JERSEY CITY NJ 07399-0001   
 MLPF&S FOR THE SOLE BENEFIT OF ITS CUSTOMERS   
 ATTN FUND ADMINISTRATION   
4800 DEERLAKE DR E FL38.66% 3.81% 
 JACKSONVILLE FL 32246-6484   
 AMERICAN ENTERPRISE INVESTMENT SVC   
 FBO # 41999970   
707 2ND AVE S7.80% 3.44% 
 MINNEAPOLIS MN 55402-2405   
 MORGAN STANLEY SMITH BARNEY LLC   
 FOR THE EXCLUSIVE BENEFIT OF ITS CUSTOMERS   
1 NEW YORK PLAZA FL 127.46% 3.29% 
 NEW YORK NY 10004-1965   
 WELLS FARGO CLEARING SERVICES, LLC   
 SPECIAL CUSTODY ACCT   
FOR THE EXCLUSIVE BENEFIT OF CUSTOMER 6.32% 2.78% 
 2801 MARKET ST   
 SAINT LOUIS MO 63103-2523   
 PERSHING, LLC   
1 PERSHING PLZ 22.60% 12.05% 
 JERSEY CITY NJ 07399-0001   
 AMERICAN ENTERPRISE INVESTMENT SVC   
 FBO # 41999970   
707 2ND AVE S13.63% 7.27% 
 MINNEAPOLIS MN 55402-2405   
 CHARLES SCHWAB & CO INC   
 SPECIAL CUSTODY ACCOUNT FBO THEIR CUSTOMERS   
ATTN MUTUAL FUNDS 9.25% 4.93% 
 211 MAIN ST   
 SAN FRANCISCO CA 94105-1905   
 LPL FINANCIAL   
 —OMNIBUS CUSTOMER ACCOUNT—   
ATTN: LINDSAY O'TOOLE 8.65% 4.61% 
 4707 EXECUTIVE DRIVE   
 SAN DIEGO CA 92121-3091   
 WELLS FARGO CLEARING SERVICES, LLC   
 SPECIAL CUSTODY ACCT   
FOR THE EXCLUSIVE BENEFIT OF CUSTOMER 7.45% 3.97% 
 2801 MARKET ST   
 SAINT LOUIS MO 63103-2523   
 NATIONAL FINANCIAL SERVICES LLC   
 FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS   
499 WASHINGTON BLVD 7.26% 3.87% 
 ATTN: MUTUAL FUNDS DEPT 4TH FL   
 JERSEY CITY NJ 07310-1995   

 

56 

 



   Assuming 
   Completion of 
  Percentage the Proposed 
Class Shareholder name and address owned Merger* 
 PERSHING, LLC   
1 PERSHING PLZ 13.82% 9.08% 
 JERSEY CITY NJ 07399-0001   
 AMERICAN ENTERPRISE INVESTMENT SVC   
 FBO # 41999970   
707 2ND AVE S13.48% 8.86% 
 MINNEAPOLIS MN 55402-2405   
 WELLS FARGO CLEARING SERVICES, LLC   
 SPECIAL CUSTODY ACCT   
FOR THE EXCLUSIVE BENEFIT OF CUSTOMER 10.88% 7.15% 
 2801 MARKET ST   
 SAINT LOUIS MO 63103-2523   
 LPL FINANCIAL   
 —OMNIBUS CUSTOMER ACCOUNT—   
ATTN: LINDSAY O'TOOLE 10.33% 6.78% 
 4707 EXECUTIVE DRIVE   
 SAN DIEGO CA 92121-3091   
 MLPF&S FOR THE SOLE BENEFIT OF ITS CUSTOMERS   
 ATTN FUND ADMINISTRATION   
4800 DEERLAKE DR E FL3 10.00% 6.57% 
 JACKSONVILLE FL 32246-6484   
 RAYMOND JAMES   
 OMNIBUS FOR MUTUAL FUNDS   
 HOUSE ACCT FIRM 92500015   
ATTN: COURTNEY WALLER7.21% 4.74% 
 880 CARILLON PKWY   
 ST PETERSBURG FL 33716-1100   
 NATIONAL FINANCIAL SERVICES LLC   
 FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS   
499 WASHINGTON BLVD 6.97% 4.58% 
 ATTN: MUTUAL FUNDS DEPT 4TH FL   
 JERSEY CITY NJ 07310-1995   
 MORGAN STANLEY SMITH BARNEY LLC   
 FOR THE EXCLUSIVE BENEFIT OF ITS CUSTOMERS   
1 NEW YORK PLAZA FL 126.10% 4.01% 
 NEW YORK NY 10004-1965   
 UBS WM USA   
 0O0 11011 6100   
 OMNI ACCOUNT M/F   
SPEC CDY A/C EXCL BEN CUST UBSFSI5.81% 3.81% 
 1000 HARBOR BLVD   
 WEEHAWKEN NJ 07086-6761   
 ASCENSUS TRUST COMPANY   
 FBO PATRICIA PAVLOS DDS PA 401K PLAN 192612   
PO BOX 1075815.79% 4.64% 
 FARGO ND 58106-0758   
 MLPF&S FOR THE SOLE BENEFIT OF ITS CUSTOMERS   
 ATTN FUND ADMINISTRATION   
4800 DEERLAKE DR E FL312.03% 3.53% 
 JACKSONVILLE FL 32246-6484   

 

57 

 



   Assuming 
   Completion of 
  Percentage the Proposed 
Class Shareholder name and address owned Merger* 
 FIIOC FBO WEBB WRITES LLC 401K PS PLAN   
100 MAGELLAN WAY 7.37% 2.17% 
 COVINGTON KY 41015-1987   
 NATIONAL FINANCIAL SERVICES LLC   
 FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS   
499 WASHINGTON BLVD 14.08% 7.56% 
 ATTN: MUTUAL FUNDS DEPT 4TH FL   
 JERSEY CITY NJ 07310-1995   
 UBS WM USA   
 0O0 11011 6100   
 OMNI ACCOUNT M/F   
SPEC CDY A/C EXCL BEN CUST UBSFSI12.40% 6.66% 
 1000 HARBOR BLVD   
 WEEHAWKEN NJ 07086-6761   
 PERSHING, LLC   
1 PERSHING PLZ 9.49% 5.10% 
 JERSEY CITY NJ 07399-0001   
 LPL FINANCIAL   
 —OMNIBUS CUSTOMER ACCOUNT—   
ATTN: LINDSAY O'TOOLE 9.01% 4.84% 
 4707 EXECUTIVE DRIVE   
 SAN DIEGO CA 92121-3091   
 WELLS FARGO CLEARING SERVICES, LLC   
 SPECIAL CUSTODY ACCT   
FOR THE EXCLUSIVE BENEFIT OF CUSTOMER 8.38% 4.50% 
 2801 MARKET ST   
 SAINT LOUIS MO 63103-2523   
 AMERICAN ENTERPRISE INVESTMENT SVC   
 FBO # 41999970   
707 2ND AVE S8.38% 4.50% 
 MINNEAPOLIS MN 55402-2405   
 RAYMOND JAMES   
 OMNIBUS FOR MUTUAL FUNDS   
 HOUSE ACCT FIRM 92500015   
ATTN: COURTNEY WALLER6.93% 3.72% 
 880 CARILLON PKWY   
 ST PETERSBURG FL 33716-1100   
 MORGAN STANLEY SMITH BARNEY LLC   
 FOR THE EXCLUSIVE BENEFIT OF ITS CUSTOMERS   
1 NEW YORK PLAZA FL 125.82% 3.13% 
 NEW YORK NY 10004-1965   

 

* Percentage owned assuming completion of the mergers on January 31, 2020.

Putnam Equity Spectrum Fund

At January 31, 2020, 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.

58 

 



   Assuming 
   Completion of 
  Percentage the Proposed 
Class Shareholder name and address owned Merger* 
 NATIONAL FINANCIAL SERVICES LLC   
 FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS   
499 WASHINGTON BLVD 18.08% 5.32% 
 ATTN: MUTUAL FUNDS DEPT 4TH FL   
 JERSEY CITY NJ 07310-1995   
 PERSHING, LLC   
1 PERSHING PLZ 9.72% 2.86% 
 JERSEY CITY NJ 07399-0001   
 MORGAN STANLEY SMITH BARNEY LLC   
 FOR THE EXCLUSIVE BENEFIT OF ITS CUSTOMERS   
1 NEW YORK PLAZA FL 127.82% 2.30% 
 NEW YORK NY 10004-1965   
 WELLS FARGO CLEARING SERVICES, LLC   
 SPECIAL CUSTODY ACCT   
FOR THE EXCLUSIVE BENEFIT OF CUSTOMER 6.11% 1.80% 
 2801 MARKET ST   
 SAINT LOUIS MO 63103-2523   
 AMERICAN ENTERPRISE INVESTMENT SVC   
 FBO # 41999970   
707 2ND AVE S5.85% 1.72% 
 MINNEAPOLIS MN 55402-2405   
 AMERICAN ENTERPRISE INVESTMENT SVC   
 FBO # 41999970   
707 2ND AVE S16.70% 5.09% 
 MINNEAPOLIS MN 55402-2405   
 PERSHING, LLC   
1 PERSHING PLZ 14.25% 4.34% 
 JERSEY CITY NJ 07399-0001   
 LPL FINANCIAL   
 —OMNIBUS CUSTOMER ACCOUNT—   
ATTN: LINDSAY O'TOOLE 12.33% 3.75% 
 4707 EXECUTIVE DRIVE   
 SAN DIEGO CA 92121-3091   
 NATIONAL FINANCIAL SERVICES LLC   
 FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS   
499 WASHINGTON BLVD 8.36% 2.55% 
 ATTN: MUTUAL FUNDS DEPT 4TH FL   
 JERSEY CITY NJ 07310-1995   
 WELLS FARGO CLEARING SERVICES, LLC   
 SPECIAL CUSTODY ACCT   
FOR THE EXCLUSIVE BENEFIT OF CUSTOMER 6.97% 2.12% 
 2801 MARKET ST   
 SAINT LOUIS MO 63103-2523   
 MLPF&S FOR THE SOLE BENEFIT OF ITS CUSTOMERS   
 ATTN FUND ADMINISTRATION   
4800 DEERLAKE DR E FL35.47% 1.67% 
 JACKSONVILLE FL 32246-6484   
 WELLS FARGO CLEARING SERVICES, LLC   
 SPECIAL CUSTODY ACCT   
FOR THE EXCLUSIVE BENEFIT OF CUSTOMER 13.86% 3.92% 
 2801 MARKET ST   
 SAINT LOUIS MO 63103-2523   

 

59 

 



   Assuming 
   Completion of 
  Percentage the Proposed 
Class Shareholder name and address owned Merger* 
 PERSHING, LLC   
1 PERSHING PLZ 11.04% 3.13% 
 JERSEY CITY NJ 07399-0001   
 AMERICAN ENTERPRISE INVESTMENT SVC   
 FBO # 41999970   
707 2ND AVE S11.01% 3.12% 
 MINNEAPOLIS MN 55402-2405   
 LPL FINANCIAL   
 —OMNIBUS CUSTOMER ACCOUNT—   
ATTN: LINDSAY O'TOOLE 10.85% 3.07% 
 4707 EXECUTIVE DRIVE   
 SAN DIEGO CA 92121-3091   
 NATIONAL FINANCIAL SERVICES LLC   
 FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS   
499 WASHINGTON BLVD 10.59% 3.00% 
 ATTN: MUTUAL FUNDS DEPT 4TH FL   
 JERSEY CITY NJ 07310-1995   
 MLPF&S FOR THE SOLE BENEFIT OF ITS CUSTOMERS   
 ATTN FUND ADMINISTRATION   
 4800 DEERLAKE DR E FL39.01% 2.55% 
 JACKSONVILLE FL 32246-6484   
 RAYMOND JAMES   
 OMNIBUS FOR MUTUAL FUNDS   
 HOUSE ACCT FIRM 92500015   
ATTN: COURTNEY WALLER 6.87% 1.95% 
 880 CARILLON PKWY   
 ST PETERSBURG FL 33716-1100   
 MORGAN STANLEY SMITH BARNEY LLC   
 FOR THE EXCLUSIVE BENEFIT OF ITS CUSTOMERS   
 1 NEW YORK PLAZA FL 125.29% 1.50% 
 NEW YORK NY 10004-1965   
 MLPF&S FOR THE SOLE BENEFIT OF ITS CUSTOMERS   
 ATTN FUND ADMINISTRATION   
4800 DEERLAKE DR E FL317.89% 4.11% 
 JACKSONVILLE FL 32246-6484   
 PERSHING, LLC   
1 PERSHING PLZ 10.70% 2.46% 
 JERSEY CITY NJ 07399-0001   
 MATRIX TRUST COMPANY CUST FBO   
 AAA TRANS   
717 17TH ST STE 1300 6.28% 1.44% 
 PORT 401(K)   
 DENVER CO 80202-3304   
 ASCENSUS TRUST COMPANY FBO   
 SPECIAL AGENTS MUTUAL 401(K) 50126   
PO BOX 10758 6.28% 1.44% 
 FARGO ND 58106-0758   
 FIIOC FBO   
 TENNESSEE OPPORTUNITY PROG 401K PL   
100 MAGELLAN WAY 5.19% 1.19% 
 COVINGTON KY 41015-1987   

 

60 

 



   Assuming 
   Completion of 
  Percentage the Proposed 
Class Shareholder name and address owned Merger* 
 LPL FINANCIAL   
 —OMNIBUS CUSTOMER ACCOUNT—   
ATTN: LINDSAY O'TOOLE 15.25% 5.65% 
 4707 EXECUTIVE DRIVE   
 SAN DIEGO CA 92121-3091   
 RAYMOND JAMES   
 OMNIBUS FOR MUTUAL FUNDS   
 HOUSE ACCT FIRM 92500015   
 ATTN: COURTNEY WALLER11.52% 4.27% 
 880 CARILLON PKWY   
 ST PETERSBURG FL 33716-1100   
 WELLS FARGO CLEARING SERVICES, LLC   
 SPECIAL CUSTODY ACCT   
FOR THE EXCLUSIVE BENEFIT OF CUSTOMER 10.72% 3.97% 
 2801 MARKET ST   
 SAINT LOUIS MO 63103-2523   
 AMERICAN ENTERPRISE INVESTMENT SVC   
 FBO # 41999970   
 707 2ND AVE S10.32% 3.82% 
 MINNEAPOLIS MN 55402-2405   
 PERSHING, LLC   
1 PERSHING PLZ 8.66% 3.21% 
 JERSEY CITY NJ 07399-0001   
 GREAT-WEST TRUST COMPANY, LLC   
 - THE PUTNAM RETIREMENT PLAN   
8515 E ORCHARD RD. 2T2 8.07% 2.99% 
 GREENWOOD VILLAGE, CO 80111-5002   
 UBS WM USA   
 0O0 11011 6100   
 OMNI ACCOUNT M/F   
SPEC CDY A/C EXCL BEN CUST UBSFSI 6.03% 2.23% 
 1000 HARBOR BLVD   
 WEEHAWKEN NJ 07086-6761   

 

* Percentage owned assuming completion of the mergers on January 31, 2020.

Putnam Focused Equity Fund

At January 31, 2020, the officers and Trustees of the fund as a group owned less than 1% of the outstanding shares of each class of the fund, except class R6 of the fund, of which they owned 1.06%, 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.

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   Assuming 
   Completion of 
  Percentage the Proposed 
Class Shareholder name and address owned Merger* 
 PERSHING, LLC   
1 PERSHING PLZ 7.65% 2.01% 
 JERSEY CITY NJ, 07399-0001   
 NATIONAL FINANCIAL SERVICES LLC   
 FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS   
499 WASHINGTON BLVD 7.20% 1.90% 
 ATTN: MUTUAL FUNDS DEPT 4TH FL   
 JERSEY CITY NJ, 07310-1995   
 PERSHING, LLC   
1 PERSHING PLZ 29.34% 4.73% 
 JERSEY CITY NJ, 07399-0001   
 AMERICAN ENTERPRISE INVESTMENT SVC   
707 2ND AVE S 21.19% 3.42% 
 MINNEAPOLIS MN, 55402-2405   
 NATIONAL FINANCIAL SERVICES LLC   
 FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS   
499 WASHINGTON BLVD 6.01% 0.97% 
 ATTN: MUTUAL FUNDS DEPT 4TH FL   
 JERSEY CITY NJ, 07310-1995   
 PERSHING, LLC   
1 PERSHING PLZ 17.02% 1.00% 
 JERSEY CITY NJ, 07399-0001   
 WELLS FARGO CLEARING SERVICES, LLC   
 SPECIAL CUSTODY ACCT FOR THE   
EXCLUSIVE BENEFIT OF CUSTOMER 16.53% 0.98% 
 2801 MARKET ST   
 SAINT LOUIS MO, 63103-2523   
 RAYMOND JAMES   
 OMNIBUS FOR MUTUAL FUNDS   
ATTN: COURTNEY WALLER 15.31% 0.90% 
 880 CARILLON PKWY   
 ST PETERSBURG FL, 33716-1100   
 NATIONAL FINANCIAL SERVICES LLC   
 FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS   
499 WASHINGTON BLVD 8.55% 0.50% 
 ATTN: MUTUAL FUNDS DEPT 4TH FL   
 JERSEY CITY NJ, 07310-1995   
 MLPF&S FOR THE SOLE BENEFIT OF IT'S CUSTOMERS   
 ATTN FUND ADMINISTRATION   
4800 DEER LAKE DR E FL 313.19% 6.28% 
 JACKSONVILLE FL, 32246-6484   
 STATE STREET BK & TR TTEE &/OR CUST   
 ADP ACCESS PRODUCT   
 1 LINCOLN ST9.20% 4.38% 
 BOSTON MA, 02111-2901   
 CHARLES MCCOMB & LOWELL KAHN TTEE   
 HARTLAND BUILDING & RESTORATION COM   
C/O FASCORE LLC 6.49% 3.09% 
 8515 E ORCHARD RD # 2T2   
 GREENWOOD VLG CO, 80111-5002   

 

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   Assuming 
   Completion of 
  Percentage the Proposed 
Class Shareholder name and address owned Merger* 
 ANASTASIA OLSON TTEE FBO   
 EXTREME COATINGS INC 401K   
C/O FASCORE LLC 5.27% 2.51% 
 8515 E ORCHARD RD # 2T2   
 GREENWOOD VLG CO, 80111-5002   
 GREAT WEST TR CO LLC FBO PFTC FBO   
 THE PUTNAM RETIREMENT PLAN   
R6 C/O FASCORE LLC 99.50% 99.50% 
 8515 E ORCHARD RD # 2T2   
 GREENWOOD VLG CO, 80111-50026   
 LPL FINANCIAL   
 —OMNIBUS CUSTOMER ACCOUNT—   
ATTN: LINDSAY O'TOOLE 20.27% 1.84% 
 4707 EXECUTIVE DRIVE   
 SAN DIEGO CA, 92121-3091   
 NATIONAL FINANCIAL SERVICES LLC   
 FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS   
499 WASHINGTON BLVD 18.37% 1.66% 
 ATTN: MUTUAL FUNDS DEPT 4TH FL   
 JERSEY CITY NJ, 07310-1995   
 WELLS FARGO CLEARING SERVICES, LLC   
 SPECIAL CUSTODY ACCT FOR THE   
EXCLUSIVE BENEFIT OF CUSTOMER 12.01% 1.09% 
 2801 MARKET ST   
 SAINT LOUIS MO, 63103-2523   
 PERSHING, LLC   
1 PERSHING PLZ 11.25% 1.02% 
 JERSEY CITY NJ, 07399-0001   
 RAYMOND JAMES   
 OMNIBUS FOR MUTUAL FUNDS   
ATTN: COURTNEY WALLER 10.86% 0.98% 
 880 CARILLON PKWY   
 ST PETERSBURG FL, 33716-1100   
 MORGAN STANLEY SMITH BARNEY LLC   
 FOR THE EXCLUSIVE BENEFIT OF ITS CUSTOMERS   
1 NEW YORK PLAZA FL 12 6.59% 0.60% 
 NEW YORK NY, 10004-1901   

 

* Percentage owned assuming completion of the mergers on January 31, 2020.

Solicitation of Proxies. In addition to soliciting proxies by mail, the Trustees of The Putnam Funds and employees of Putnam Management and Putnam Investor Services, as well as their agents, may solicit proxies in person or by telephone. The Acquired Funds may arrange to have a proxy solicitation firm call you to record your voting instructions by telephone. The procedures for voting proxies by telephone are designed to authenticate shareholders’ identities, to allow them to authorize the voting of their shares in accordance with their instructions, and to confirm that their instructions have been properly recorded. Shareholders would be called at the phone number Putnam Management or Putnam Investor Services has in its records for their accounts (or that Putnam Management or Putnam Investor Services obtains from agents acting on behalf of

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financial intermediaries, in the case of shares held in street name through a bank, broker or other financial intermediary) and would be given an opportunity to authenticate their identities and to authorize the proxies to vote their shares at a Meeting in accordance with their instructions. To ensure that shareholders’ instructions have been recorded correctly, they will also receive a confirmation of their instructions in the mail. A special toll-free number will be available in case the information contained in the confirmation is incorrect. Each Acquired Fund has been advised by counsel that these procedures are consistent with the requirements of applicable law. If these procedures were subject to a successful legal challenge, such votes would not be counted at a Meeting. Each Acquired Fund is unaware of any such challenge at this time.

Shareholders of each Acquired Fund also have the opportunity to submit their voting instructions over the Internet by using a program provided by a third-party vendor hired by Putnam Management or by automated telephone service. The giving of a proxy will not affect your right to vote in person should you decide to attend the Meeting. To vote online using the Internet, please access the Internet address listed on the proxy card and follow the instructions on the Internet site. To record your voting instructions using the automated telephone service, use the toll-free number listed on your proxy card. The Internet and telephone voting procedures are designed to authenticate shareholder identities, to allow shareholders to give their voting instructions, and to confirm that shareholders’ instructions have been recorded properly.

Each Acquired Fund generally maintains confidentiality in the voting of proxies. Consistent with this policy, your fund may solicit proxies from shareholders who have not voted their shares or who have abstained from voting, including brokers and nominees.

Expenses of the Solicitation. For managing the proxy campaign, Broadridge Financial Solutions, Inc. (“Broadridge”) will receive a fee plus reimbursement for out-of-pocket expenses. Broadridge will also receive fees in connection with assembling, mailing, and transmitting the notice of meeting, proxy statement and related materials on behalf of each Acquired Fund, tabulating those votes that are received, and any solicitation of additional votes. While the fees received by Broadridge will vary based on the level of additional solicitation necessary to achieve quorum and shareholder approval, the fees paid to Broadridge are estimated to be approximately $190,000. In addition, banks, brokers, or other financial intermediaries holding shares as nominees will be reimbursed, upon request, for their reasonable expenses in sending solicitation materials to the principals of the accounts and tabulating those instructions that are received. After reimbursement of these expenses, it is estimated that Putnam Capital Spectrum Fund would incur total costs of approximately $256,000 in connection with its proxy campaign and Putnam Equity Spectrum Fund would incur total costs of approximately $156,000 in connection with its proxy campaign. Other costs associated with the proxy campaign include the expenses of the preparation, printing, and delivery of proxy materials. Putnam Management has agreed to bear these expenses. See “Information about the Proposed Mergers — Costs of the proposed mergers.” for more details.

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Revocation of Proxies. Giving your proxy, whether by returning the proxy card(s) or providing voting instructions over the Internet or by telephone, does not affect your right to attend the Meeting and vote in person. Proxies, including proxies given by telephone or over the Internet, may be revoked at any time before they are voted (i) by a written revocation received by the Clerk of the applicable Acquired Fund, (ii) by properly executing and submitting a later-dated proxy, (iii) by recording later-dated voting instructions by telephone or via the Internet, or (iv) by attending the Meeting and voting in person. If your shares are held in street name through a bank, broker, or other financial intermediary, please check your voting instruction form or contact your bank, broker, or other financial intermediary for instructions on how to change or revoke your vote.

Postponement and Adjournment. To the extent permitted by your fund’s Amended and Restated Agreement and Declaration of Trust and Amended and Restated Bylaws, any meeting of shareholders may be postponed or cancelled by the Trustees upon public notice prior to the time scheduled for the meeting. In addition to any ability that the persons named as proxy may have to propose and/or vote on an adjournment of any meeting or shareholders as described below, to the extent permitted by your fund’s Amended and Restated Agreement and Declaration of Trust and Amended and Restated Bylaws, any meeting of shareholders may, by action of the chair of the meeting, be adjourned from time to time without notice (other than announcement at the meeting at which the adjournment is taken) with respect to one or more matters to be considered at the meeting to a designated date (which may be more than 120 days after the date initially set for the meeting), time, and place, whether or not a quorum is present with respect to a matter. Upon motion of the chair of the meeting, the question of adjournment may, but need not, be submitted to a vote of the shareholders, and in that case, any adjournment with respect to one or more matters must be approved by the vote of holders of a majority of the shares present and entitled to vote with respect to the matter or matters to be adjourned and, if approved, the adjournment shall take place without further notice (other than announcement at the meeting at which the adjournment is taken). If the quorum required for the Meeting has not been met, the persons named as proxies intend to propose adjournment of the meeting and to vote all shares that they are entitled to vote in favor of adjournment. If the quorum required for the Meeting has been met, but sufficient votes in accordance with the Trustees’ recommendation are not received by the time scheduled for the meeting, the persons named as proxies may also propose adjournment of the meeting in order to permit solicitation of additional proxies. The persons named as proxies will vote in favor of adjournment those proxies that they are entitled to vote in accordance with the Trustees’ recommendation. They will vote against adjournment those proxies required to be voted contrary to the Trustees’ recommendation. Unless a proxy is otherwise limited in this regard, any shares present and entitled to vote at a meeting, including shares that are represented by broker non-votes, may, at the discretion of the proxies named therein, be voted in favor of such an adjournment. Adjournments of a Meeting may be proposed for a reasonable period or periods to permit further solicitation of proxies.

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Duplicate mailings. As permitted by SEC rules, Putnam Management’s policy is to send a single copy of the prospectus/proxy statement to shareholders who share the same last name and address, unless a shareholder previously has requested otherwise. Separate proxy cards will be included with the prospectus/proxy statement for each account registered at that address. If you would prefer to receive your own copy of the prospectus/ proxy statement, please contact Putnam Investor Services by phone at 1-800-225-1581 or by mail at P.O. Box 219697, Kansas City, MO 64121-9697.

Financial information. Your fund’s Clerk will furnish to you, upon request and without charge, a copy of the fund’s annual report for its most recent fiscal year, and a copy of its semiannual report for any subsequent semiannual period. You may direct these requests to Putnam Investor Services, P.O. Box 219697, Kansas City, MO 64121-9697 or by phone at 1-800-225-1581. You may also access copies of these reports by visiting Putnam’s website at www.putnam.com/individual.

The Trustees, including all of the Independent Trustees, have carefully reviewed the terms of the proposed mergers and recommend that shareholders of the Acquired Funds approve the proposed mergers.

V. Additional Information about Putnam Focused Equity Fund

References to the “fund” in this section refer to Putnam Focused Equity Fund.

Purchase and sale of fund shares

You can open an account, purchase and/or sell fund shares, or exchange them for shares of another Putnam fund by contacting your financial advisor or by calling Putnam Investor Services at 1-800-225-1581. Purchases of class B shares are closed to new and existing investors except by exchange from class B shares of another Putnam fund or through dividend and/or capital gains reinvestment.

When opening an account, you must complete and mail a Putnam account application, along with a check made payable to the fund, to: Putnam Investments, P.O. Box 219697, Kansas City, MO 64121-9697. The minimum initial investment of $500 is currently waived, although Putnam reserves the right to reject initial investments under $500 at its discretion. There is no minimum for subsequent investments.

You can sell your shares back to the fund or exchange them for shares of another Putnam fund any day the New York Stock Exchange (NYSE) is open. Shares may be sold or exchanged by mail, by phone, or online at putnam.com. Some restrictions may apply.

Tax Information

The fund’s distributions will be taxed as ordinary income or capital gains unless you hold the shares through a tax-advantaged arrangement, in which case you will generally be taxed only upon withdrawal of monies from the arrangement.

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Financial intermediary compensation

If you purchase the fund through a broker/dealer or other financial intermediary (such as a bank or financial advisor), the fund and its related companies may pay that intermediary for the sale of fund shares and related services. Please bear in mind that these payments may create a conflict of interest by influencing the broker/dealer or other intermediary to recommend the fund over another investment. Ask your advisor or visit your advisor’s website for more information.

Who oversees and manages the fund?

The fund’s Trustees. As a shareholder of a mutual fund, you have certain rights and protections, including representation by a Board of Trustees. The Putnam Funds’ Board of Trustees oversees the general conduct of the fund’s business and represents the interests of the Putnam fund shareholders. At least 75% of the members of the Putnam Funds’ Board of Trustees are independent, which means they are not officers of the fund or affiliated with Putnam Investment Management, LLC (Putnam Management).

The Trustees periodically review the fund’s investment performance and the quality of other services such as administration, custody, and investor services. At least annually, the Trustees review the fees paid to Putnam Management and its affiliates for providing or overseeing these services, as well as the overall level of the fund’s operating expenses. In carrying out their responsibilities, the Trustees are assisted by an administrative staff, auditors and legal counsel that are selected by the Trustees and are independent of Putnam Management and its affiliates.

Contacting the fund’s Trustees

Address correspondence to:
 
The Putnam Funds Trustees 
100 Federal Street 
Boston, MA 02110 

 

The fund’s investment manager. The Trustees have retained Putnam Management, which has managed mutual funds since 1937, 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 basis for the Trustees’ approval of the fund’s management contract and the sub-management and sub-advisory contracts described below is discussed in the fund’s annual report to shareholders dated August 31, 2019.

The fund pays a monthly management fee to Putnam Management. The fee is calculated by applying a rate to the fund’s average net assets for the month. The rate is based on the monthly average of the aggregate net assets of all open-end funds sponsored by Putnam Management (excluding net assets of funds that are invested in, or that are invested in by, other Putnam funds to the extent necessary to avoid “double counting” of those assets), and generally declines as the aggregate net assets increase.

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The fund paid Putnam Management a management fee (after any applicable waivers) of 0.62% of average net assets for the fund’s last fiscal year.

Putnam Management’s address is 100 Federal Street, Boston, MA 02110.

Putnam Management has retained its affiliate Putnam Investments Limited (PIL) to make investment decisions for such fund assets as may be designated from time to time for its management by Putnam Management. PIL is not currently managing any fund assets. If PIL were to manage any fund assets, Putnam Management (and not the fund) would pay a quarterly sub-management fee to PIL for its services at the annual rate of 0.35% of the average net asset value (NAV) of any fund assets managed by PIL. PIL, which provides a full range of international investment advisory services to institutional clients, is located at 16 St James’s Street, London, England, SW1A 1ER.

Putnam Management and PIL have retained their affiliate The Putnam Advisory Company, LLC (PAC) to make investment decisions for such fund assets as may be designated from time to time for its management by Putnam Management or PIL, as applicable. PAC is not currently managing any fund assets. If PAC were to manage any fund assets, Putnam Management or PIL, as applicable (and not the fund), would pay a quarterly sub-advisory fee to PAC for its services at the annual rate of 0.35% of the average NAV of any fund assets managed by PAC. PAC, which provides financial services to institutions and individuals through separately-managed accounts and pooled investment vehicles, has its headquarters at 100 Federal Street, Boston, MA 02110, with additional investment management personnel located in Singapore.

Pursuant to these arrangements, Putnam investment professionals who are based in foreign jurisdictions may serve as portfolio managers of the fund or provide other investment services, consistent with local regulations.

Portfolio manager. The officer of Putnam Management identified below is primarily responsible for the day-to-day management of the fund’s portfolio.

Portfolio manager Joined fund Employer Positions over past five years 
Daniel Schiff 2016 Putnam Management Portfolio Manager , Analyst 
  2016 – Present  
 
  Northern Pines Capital Portfolio Manager and Partner 
  2010 – 2016  

 

The fund’s SAI provides information about this individual’s compensation, other accounts managed by this individual and this individual’s ownership of securities in the fund.

Portfolio holdings. The fund’s SAI includes a description of the fund’s policies with respect to the disclosure of its portfolio holdings. For more specific information on the fund’s portfolio, you may visit the Putnam Investments website, putnam.com/individual, where the fund’s top 10 holdings and related portfolio information may be viewed monthly beginning approximately 15 days after the end of each month, and full portfolio holdings may be viewed quarterly beginning on the 8th business day after the end of each calendar quarter. This information will remain available on the website at least until the

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fund files a Form N-CSR or publicly available Form N-PORT with the SEC for the period that includes the date of the information, after which such information can be found on the SEC’s website at http://www.sec.gov.

How does the fund price its shares?

The price of the fund’s shares is based on its 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 scheduled close of regular trading on the NYSE each day the exchange is open.

The fund values its investments for which market quotations are readily available at market value. It values all other investments and assets at their fair value, which may differ from recent market prices. For example, the fund may value a stock traded on a U.S. exchange at its fair value when the exchange closes early or trading in the stock is suspended. It may also value a stock at fair value if recent transactions in the stock have been very limited or if, in the case of a security traded on a market that closes before the NYSE closes, material information about the issuer becomes available after the close of the relevant market.

The fund translates prices for its investments quoted in foreign currencies into U.S. dollars at current exchange rates, which are generally determined as of 4:00 p.m. Eastern Time each day the NYSE is open. 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 NYSE, the value of the fund’s shares may change on days when shareholders are not able to buy or sell them.

Many securities markets and exchanges outside the U.S. close before the close of the NYSE, and the closing prices for securities in those markets or exchanges may not reflect events that occur after the close but before the scheduled close of regular trading on the NYSE. As a result, the fund has adopted fair value pricing procedures, which, among other things, require the fund to fair value foreign equity 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 the 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. As noted above, the value determined for an investment using the fund’s fair value pricing procedures may differ from recent market prices for the investment.

The fund’s most recent NAV is available on Putnam Investments’ website at putnam.com/individual or by contacting Putnam Investor Services at 1-800-225-1581.

How do I buy fund shares?

Opening an account

You can open a fund account and purchase class A, B and C shares by contacting your financial representative or Putnam Investor Services at 1-800-225-1581 and obtaining a Putnam account application. Purchases of class B shares are closed to new and existing

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investors except by exchange from class B shares of another Putnam fund or through dividend and/or capital gains reinvestment. The completed application, along with a check made payable to the fund, must then be returned to Putnam Investor Services at the following address:

Putnam Investments
P.O. Box 219697
Kansas City, MO 64121-9697

You can open a fund account with as little as $500. The minimum investment is waived if you make regular investments weekly, semi-monthly or monthly through automatic deductions from your bank checking or savings account. Although Putnam is currently waiving the minimum, it reserves the right to reject initial investments under the minimum at its discretion.

The fund sells its shares at the offering price, which is the NAV plus any applicable sales charge (class A shares only). Your financial representative or Putnam Investor Services generally must receive your completed buy order before the close of regular trading on the NYSE for your shares to be bought at that day’s offering price.

If you participate in an employer-sponsored retirement plan that offers the fund, please consult your employer for information on how to purchase shares of the fund through the plan, including any restrictions or limitations that may apply.

Federal law requires mutual funds to obtain, verify, and record information that identifies investors opening new accounts. 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 additional identifying documentation. For trusts, the fund must obtain and verify identifying information for each trustee listed in the account registration. For certain legal entities, the fund must also obtain and verify identifying information regarding beneficial owners and/or control persons. The fund is unable to accept new accounts if any required information is not provided. If Putnam Investor Services cannot verify identifying information after opening your account, the fund reserves the right to close your account at the then-current NAV, which may be more or less than your original investment, net of any applicable sales charges. Putnam Investor Services may share identifying information with third parties for the purpose of verification subject to the terms of Putnam’s privacy policy.

Also, 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.

Purchasing additional shares

Once you have an existing account, you can make additional investments at any time in any amount in the following ways:

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Through a financial representative. Your representative will be responsible for furnishing all necessary documents to Putnam Investor Services and may charge you for his or her services.

Through Putnam’s Systematic Investing Program. You can make regular investments weekly, semi-monthly or monthly through automatic deductions from your bank checking or savings account.

Via the Internet or phone. 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 putnam.com or by calling Putnam Investor Services at 1-800-225-1581.

By mail. You may also request a book of investment stubs for your account. Complete an investment stub and write a check for the amount you wish to invest, payable to the fund. Return the check and investment stub to Putnam Investor Services.

By wire transfer. You may buy fund shares by bank wire transfer of same-day funds. Please call Putnam Investor Services at 1-800-225-1581 for wiring instructions. Any commercial bank can transfer same-day funds by wire. The fund will normally accept wired funds for investment on the day received if they are received by the fund’s designated bank before the close of regular trading on the NYSE. Your bank may charge you for wiring same-day funds. Although the fund’s designated bank does not currently charge you for receiving same-day funds, it reserves the right to charge for this service. You cannot buy shares for employer-sponsored retirement plans by wire transfer.

Which class of shares is best for me?

The fund’s prospectus offers you three classes of fund shares: A, B and C. Employer-sponsored retirement plans may also choose class R or R6 shares, and certain investors described below may also choose class Y or R6 shares. Purchases of class B shares are closed to new and existing investors except by exchange from class B shares of another Putnam fund or through dividend and/or capital gains reinvestment. Each share class represents investments in the same portfolio of securities, but each class has its own sales charge and expense structure, as illustrated in the Fund summary — Fees and expenses section, allowing you and your financial representative to choose the class that best suits your investment needs. When you purchase shares of the fund, you must choose a share class. Deciding which share class best suits your situation depends on a number of factors that you should discuss with your financial representative, including:

How long you expect to hold your investment. Class B shares charge a contingent deferred sales charge (CDSC) on redemptions that is phased out over the first six years; class C shares charge a CDSC on redemptions in the first year.

How much you intend to invest. While investments of less than $100,000 can be made in any share class, class A offers sales charge discounts starting at $50,000.

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Total expenses associated with each share class. As shown in the section entitled Fund summary — Fees and expenses, each share class offers a different combination of up-front and ongoing expenses. Generally, the lower the up-front sales charge, the greater the ongoing expenses.

Here is a summary of the differences among the classes of shares

Class A shares

• Initial sales charge of up to 5.75%

• Lower sales charges available for investments of $50,000 or more

• No deferred sales charge (except that a deferred sales charge of 1.00% may be imposed 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.

Class B shares

• Purchases of class B shares are closed to new and existing investors except by exchange from class B shares of another Putnam fund or through dividend and/or capital gains reinvestment.

• 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 shares because of higher 12b-1 fees

• Convert automatically to class A shares after eight years, thereby reducing future 12b-1 fees.

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 shares because of higher 12b-1 fees

• Convert automatically to class A shares after ten years thereby reducing future 12b-1 fees, provided that Putnam Investor Services or the financial intermediary through which a shareholder purchased class C shares has records verifying that the class C shares have been held for at least ten years, and that class A shares are available for purchase by residents in the shareholder’s jurisdiction. In certain cases, records verifying that the class C shares have been held for at least ten years may not be available (for example, participant level share lot aging may not be tracked by group retirement plan recordkeeping platforms through which class C shares of the fund are held in an omnibus account). If such records are unavailable, Putnam Investor Services or the relevant financial intermediary may not effect the conversion or may effect the conversion on a different schedule determined by

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Putnam Investor Services or the financial intermediary, which may be shorter or longer than ten years. Investors should consult their financial representative for more information about their eligibility for class C share conversion.

• Orders for class C shares of one or more Putnam funds, other than class C shares sold to employer-sponsored retirement plans, 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 of $1,000,000 or more should consider whether class A shares would be more advantageous and consult their financial representative.

Class R shares (available only to employer-sponsored retirement plans)

• No initial sales charge; your entire investment goes to work immediately

• No deferred 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 no reduction in future 12b-1 fees.

Class R6 shares (available only to investors listed below)

• The following investors may purchase class R6 shares:

— employer-sponsored retirement plans that are clients of third-party administrators (including affiliates of Putnam) that have entered into agreements with Putnam;

— investors purchasing shares through an asset-based fee program that is sponsored by a registered broker-dealer or other financial institution;

— investors purchasing shares through a commission-based platform of a registered broker-dealer or other financial institution that charges you additional fees or commissions, other than those described in the prospectus and statement of additional information, and that has entered into an agreement with Putnam Retail Management to offer class R6 shares through such a program;

— corporations, endowments, foundations and other institutional investors that have been approved by Putnam; and

— unaffiliated investment companies (whether registered or private) that have been approved by Putnam.

• No initial sales charge; your entire investment goes to work immediately

• No deferred sales charge

• Lower annual expenses, and higher dividends, than class A, B, C, or R shares because of no 12b-1 fees and lower investor servicing fees

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• Lower annual expenses, and higher dividends, than class Y shares because of lower investor servicing fees.

Class Y shares (available only to investors listed below)

• The following investors may purchase class Y shares if approved by Putnam:

— employer-sponsored retirement plans that are clients of third-party administrators (including affiliates of Putnam) that have entered into agreements with Putnam;

— bank trust departments and trust companies that have entered into agreements with Putnam and offer institutional share class pricing to their clients;

— corporate individual retirement accounts (IRAs) administered by Putnam, if another retirement plan of the sponsor is eligible to purchase class Y shares;

— college savings plans that qualify for tax-exempt treatment under Section 529 of the Internal Revenue Code;

— other Putnam funds and Putnam investment products;

— investors purchasing shares through an asset-based fee program that is sponsored by a registered broker-dealer or other financial institution;

— investors purchasing shares through a commission-based platform of a registered broker-dealer or other financial institution that charges you additional fees or commissions, other than those described in the fund’s prospectus and SAI, and that has entered into an agreement with Putnam Retail Management Limited Partnership (PRM) to offer class Y shares through such a program;

— clients of a financial representative who are charged a fee for consulting or similar services;

— corporations, endowments, foundations, and other institutional investors that have been approved by Putnam;

— unaffiliated investment companies (whether registered or private) that have been approved by Putnam;

— current and retired Putnam employees and their immediate family members (including an employee’s spouse, domestic partner, fiancé(e), or other family members who are living in the same household) as well as, in each case, Putnam-offered health savings accounts, IRAs, and other similar tax-advantaged plans solely owned by the foregoing individuals; current and retired directors of Putnam Investments, LLC; current and retired Great-West Life & Annuity Insurance Company employees; and current and retired Trustees of the fund. Upon the departure of any member of this group of individuals from Putnam, Great-West Life & Annuity Insurance Company, or the fund’s Board of Trustees, the member’s class Y shares convert automatically to class A shares, unless the member’s departure is a retirement, as determined by Putnam in its discretion for employees and directors of Putnam and employees of Great-West Life & Annuity Insurance Company and by the Board of Trustees in its

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discretion for Trustees; provided that conversion will not take place with respect to class Y shares held by former Putnam employees and their immediate family members in health savings accounts where it is not operationally practicable due to platform or other limitations; and

— personal and family member IRAs of registered representatives and other employees of broker-dealers and other financial institutions having a sales agreement with Putnam Retail Management, if (1) the registered representative or other employee is the broker of record or financial representative for the account, (2) the broker-dealer or other financial institution’s policies prohibit the use of class A shares or other classes of fund shares that pay 12b-1 fees in such accounts to avoid potential prohibited transactions under Internal Revenue Service rules due to the account owners’ status as “disqualified persons” under those rules, and (3) the broker-dealer or other financial institution has an agreement with Putnam Retail Management related to the use of class Y shares in these accounts.

Trust companies or bank trust departments that purchased class Y shares for trust accounts may transfer them to the beneficiaries of the trust accounts, who may continue to hold them or exchange them for class Y shares of other Putnam funds. Defined contribution plans (including corporate IRAs) that purchased class Y shares under prior eligibility criteria may continue to purchase class Y shares.

• No initial sales charge; your entire investment goes to work immediately

• No deferred sales charge

• Lower annual expenses, and higher dividends, than class A, B, C, or R shares because of no 12b-1 fees

• Higher annual expenses, and lower dividends, than class R6 shares because of higher investor servicing fees.

Initial sales charges for class A shares  
 Class A sales charge as a percentage of:* 
Amount of purchase at   
offering price ($) Net amount invested Offering price** 
Under 50,000 6.10% 5.75% 
50,000 but under 100,000 4.71 4.50 
100,000 but under 250,000 3.63 3.50 
250,000 but under 500,000 2.56 2.50 
500,000 but under 1,000,000 2.04 2.00 
1,000,000 and above NONE NONE 

 

* Because of rounding in the calculation of offering price and the number of shares purchased, actual sales charges you pay may be more or less than these percentages.

** Offering price includes sales charge.

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Reducing your class A sales charge

The fund offers two principal ways for you to qualify for discounts on initial sales charges on class A shares, often referred to as “breakpoint discounts”:

Right of accumulation. You can add the amount of your current purchases of class A 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 representatives. 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 higher of (a) the current maximum public offering price of those shares or (b) if you purchased the shares after December 31, 2007, the initial value of the total purchases, or, if you held the shares on December 31, 2007, the market value at maximum public offering price on that date, in either case, less the market value on the applicable redemption date of any of those shares that you have redeemed.

Statement of intention. A statement of intention is a document in which you agree to make purchases of class A 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 difference between the higher initial sales charge you would have paid in the absence of the statement of intention and the initial sales charge you actually paid.

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)

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In order to obtain a breakpoint discount, you should inform your financial representative 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 representative 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 representative. Restrictions may apply to certain accounts and transactions. Further details about breakpoint discounts can be found on Putnam Investments’ website at putnam.com/individual by selecting Mutual Funds, then Pricing and performance, and then About fund costs, and in the fund’s SAI.

Additional reductions and waivers of sales charges. In addition to the breakpoint discount methods described above for class A shares, the fund may sell the classes of shares specified below without a sales charge or CDSC under the circumstances described below. The sales charge and CDSC waiver categories described below do not apply to customers purchasing shares of the fund through any of the financial intermediaries specified in Appendix B (each, a “Specified Intermediary”).

Different financial intermediaries may impose different sales charges. Please refer to Appendix B for the sales charge or CDSC waivers that are applicable to each Specified Intermediary.

Class A shares

The following categories of investors are eligible to purchase class A shares without payment of a sales charge:

(i) current and former Trustees of the fund, their family members, business and personal associates; current and former employees of Putnam Management and certain current and former corporate affiliates, their family members, business and personal associates; employer-sponsored retirement plans for the foregoing; and partnerships, trusts or other entities in which any of the foregoing has a substantial interest;

(ii) clients of administrators or other service providers of employer-sponsored retirement plans (for purposes of this waiver, employer-sponsored retirement plans do not include SEP IRAs, SIMPLE IRAs or SARSEPs) (not applicable to tax-exempt funds);

(iii) 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 immediate family members (spouses and children under age 21, including step-children and adopted children);

(iv) 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;

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(v) clients of (i) broker-dealers, financial institutions, financial intermediaries or registered investment advisors that charge a fee for advisory or investment services or (ii) broker-dealers, financial institutions, or financial intermediaries that have entered into an agreement with Putnam Retail Management to offer shares through a retail self-directed brokerage account with or without the imposition of a transaction fee;

(vi) college savings plans that qualify for tax-exempt treatment under Section 529 of the Internal Revenue Code of 1986, as amended (the “Code”); and

(vii) shareholders reinvesting the proceeds from a Putnam Corporate IRA Plan distribution into a nonretirement plan account.

Administrators and other service providers of employer-sponsored retirement plans are required to enter into contractual arrangements with Putnam Investor Services in order to offer and hold fund shares. Administrators and other service providers of employer-sponsored retirement plans seeking to place trades on behalf of their plan clients should consult Putnam Investor Services as to the applicable requirements.

Class B and class C shares

A CDSC is waived in the event of a redemption under the following circumstances:

(i) a withdrawal from a Systematic Withdrawal Plan (“SWP”) of up to 12% of the net asset value of the account (calculated as set forth in the SAI);

(ii) a redemption of shares that are no longer subject to the CDSC holding period therefor;

(iii) a redemption of shares that were issued upon the reinvestment of distributions by the fund;

(iv) a redemption of shares that 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 or Putnam Ultra Short Duration Income Fund) will continue to remain subject to the CDSC, if applicable, until the applicable holding period expires; and

(v) 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.

Additional information about reductions and waivers of sales charges, including deferred sales charges, is included in the SAI. You may consult your financial representative or Putnam Retail Management for assistance.

How do I sell or exchange fund shares?

You can sell your shares back to the fund or exchange them for shares of another Putnam fund any day the NYSE is open, either through your financial representative or directly to the fund.

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If you redeem your shares shortly after purchasing them, your redemption payment for the shares may be delayed until the fund collects the purchase price of the shares, which may be up to 7 calendar days after the purchase date.

Regarding exchanges, not all Putnam funds offer all classes of shares or may be open to new investors. If you exchange shares otherwise 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, however, the redemption may be subject to the deferred sales charge, depending upon when and from which fund 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, unless you originally purchased the shares from another Putnam fund that does not directly charge a deferred sales charge, in which case the length of time you have owned your shares will be measured from the date you exchange those shares for shares of another Putnam fund that does charge a deferred sales charge, and will not be affected by any subsequent exchanges among funds.

Selling or exchanging shares through your financial representative. Your representative must receive your request in proper form before the close of regular trading on the NYSE for you to receive that day’s NAV, less any applicable deferred sales charge. Your representative 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 or exchanging shares directly with the fund. Putnam Investor Services must receive your request in proper form before the close of regular trading on the NYSE in order to receive that day’s NAV, less any applicable deferred sales charge.

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 or exchange, you must return them unendorsed with your letter of instruction.

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. A telephone exchange privilege is currently available for amounts up to $500,000. Sale or exchange of shares by telephone is not permitted if there are certificates for your shares. The telephone redemption and exchange privileges may be modified or terminated without notice.

Via the Internet. You may also exchange shares via the Internet at putnam.com/individual.

Shares held through your employer’s retirement plan. For information on how to sell or exchange shares of the fund that were purchased through your employer’s retirement plan, including any restrictions and charges that the plan may impose, please consult your employer.

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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 surviving joint owner. For more information concerning Putnam’s signature guarantee and documentation requirements, contact Putnam Investor Services

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. Ask your financial representative or Putnam Investor Services for prospectuses of other Putnam funds. Some Putnam funds are not available in all states.

Deferred sales charges for class B, class C and certain class A 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. Class A shares that are part of a purchase of $1 million or more (other than by an employer-sponsored retirement plan) will be subject to a 1.00% deferred sales charge if redeemed within twelve months 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.

Payment information. The fund typically expects to send you payment for your shares the business day after your request is received in good order, although if you hold your shares through certain financial intermediaries or financial intermediary programs, the fund typically expects to send payment for your shares within three business days after your request is received in good order. However, it is possible that payment of redemption proceeds may take up to seven days. Under unusual circumstances, the fund may suspend redemptions, or postpone payment for more than seven days, as permitted by federal securities law. Under normal market conditions, the fund typically expects to satisfy redemption requests by using holdings of cash and cash equivalents or selling portfolio assets to generate cash. Under stressed market conditions, the fund may also satisfy redemption requests by borrowing under the fund’s lines of credit or interfund lending arrangements. For additional information regarding the fund’s lines of credit and interfund lending arrangements, please see the Statement of Additional Information.

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To the extent consistent with applicable laws and regulations, the fund reserves the right to satisfy all or a portion of a redemption request by distributing securities or other property in lieu of cash (“in-kind” redemptions), under both normal and stressed market conditions. The fund generally expects to use in-kind redemptions only in stressed market conditions or stressed conditions specific to the fund, such as redemption requests that represent a large percentage of the fund’s net assets in order to minimize the effect of the large redemption on the fund and its remaining shareholders. The fund will not use in-kind redemptions for retail investors who hold shares of the fund through a financial intermediary. Any in-kind redemption will be effected through a pro rata distribution of all publicly traded portfolio securities or securities for which quoted bid prices are available, subject to certain exceptions. The securities distributed in an in-kind redemption will be valued in the same manner as they are valued for purposes of computing the fund’s net asset value. Once distributed in-kind to an investor, securities may increase or decrease in value before the investor is able to convert them into cash. Any transaction costs or other expenses involved in liquidating securities received in an in-kind redemption will be borne by the redeeming investor. The fund has committed, in connection with an election under Rule 18f-1 under the Investment Company Act of 1940, to pay all redemptions of fund shares by a single shareholder during any 90-day period in cash, up to the lesser of (i) $250,000 or (ii) 1% of the fund’s net assets measured as of the beginning of such 90-day period. For information regarding procedures for in-kind redemptions, please contact Putnam Retail Management. You will not receive interest on uncashed redemption checks.

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 after providing you with at least 60 days’ notice to attain the minimum. To the extent permitted by applicable law, 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.

Policy on excessive short-term trading

Risks of excessive short-term trading. Excessive short-term trading activity may reduce the fund’s performance and harm all fund shareholders by interfering with portfolio management, increasing the fund’s expenses and diluting the fund’s NAV. Depending on the size and frequency of short-term trades in the fund’s shares, the fund may experience increased cash volatility, which could require the fund to maintain undesirably large cash positions or buy or sell portfolio securities it would not have bought or sold otherwise. The need to execute additional portfolio transactions due to these cash flows may also increase the fund’s brokerage and administrative costs and, for investors in taxable accounts, may increase taxable distributions received from the fund.

When the fund invests in foreign securities, its performance may be adversely impacted and the interests of longer-term shareholders may be diluted as a result of time-zone arbitrage, a short-term trading practice that seeks to exploit changes in the value of the fund’s investments that result from events occurring after the close of the foreign markets on which the

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investments trade, but prior to the later close of trading on the NYSE, the time as of which the fund determines its NAV. If an arbitrageur is successful, he or she may dilute the interests of other shareholders by trading shares at prices that do not fully reflect their fair value.

When the fund invests in securities that may trade infrequently or may be more difficult to value, such as securities of smaller companies, it may be susceptible to trading by short-term traders who seek to exploit perceived price inefficiencies in the fund’s investments. In addition, the market for securities of smaller companies may at times show “market momentum,” in which positive or negative performance may continue from one day to the next for reasons unrelated to the fundamentals of the issuer. Short-term traders may seek to capture this momentum by trading frequently in the fund’s shares, which will reduce the fund’s performance and may dilute the interests of other shareholders. Because securities of smaller companies may be less liquid than securities of larger companies, the fund may also be unable to buy or sell these securities at desirable prices when the need arises (for example, in response to volatile cash flows caused by short-term trading). Similar risks may apply if the fund holds other types of less liquid securities, including below-investment-grade bonds.

Fund policies. In order to protect the interests of long-term shareholders of the fund, Putnam Management and the fund’s Trustees have adopted policies and procedures intended to discourage excessive short-term trading. The fund seeks to discourage excessive short-term trading by using fair value pricing procedures to value investments under some circumstances. In addition, Putnam Management monitors activity in those shareholder accounts about which it possesses the necessary information in order to detect excessive short-term trading patterns and takes steps to deter excessive short-term traders.

Account monitoring. Putnam Management’s Compliance Department currently uses multiple reporting tools to detect short-term trading activity occurring in accounts for investors held directly with the Putnam funds as well as within accounts held through certain financial intermediaries. Putnam Management measures excessive short-term trading in the fund by the number of “round trip” transactions above a specified dollar amount within a specified period of time. A “round trip” transaction is defined as a purchase or exchange into a fund followed, or preceded, by a redemption or exchange out of the same fund. Generally, if an investor has been identified as having completed two “round trip” transactions with values above a specified amount within a rolling 90-day period, Putnam Management will issue the investor and/or his or her financial intermediary, if any, a written warning. Putnam Management’s practices for measuring excessive short-term trading activity and issuing warnings may change from time to time. Certain types of transactions are exempt from monitoring, such as those in connection with systematic investment or withdrawal plans and reinvestment of dividend and capital gain distributions.

Account restrictions. In addition to these monitoring practices, Putnam Management and the fund reserve the right to reject or restrict purchases or exchanges for any reason. Continued excessive short-term trading activity by an investor or intermediary following a

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warning may lead to the termination of the exchange privilege for that investor or intermediary. Putnam Management or the fund may determine that an investor’s trading activity is excessive or otherwise potentially harmful based on various factors, including an investor’s or financial intermediary’s trading history in the fund, other Putnam funds or other investment products, and may aggregate activity in multiple accounts in the fund or other Putnam funds under common ownership or control for purposes of determining whether the activity is excessive. If the fund identifies an investor or intermediary as a potential excessive trader, it may, among other things, require future trades to be submitted by mail rather than by phone or over the Internet, impose limitations on the amount, number, or frequency of future purchases or exchanges, or temporarily or permanently bar the investor or intermediary from investing in the fund or other Putnam funds. The fund may take these steps in its discretion even if the investor’s activity does not fall within the fund’s current monitoring parameters.

Limitations on the fund’s policies. There is no guarantee that the fund will be able to detect excessive short-term trading in all accounts. For example, Putnam Management currently does not have access to sufficient information to identify each investor’s trading history, and in certain circumstances there are operational or technological constraints on its ability to enforce the fund’s policies. In addition, even when Putnam Management has sufficient information, its detection methods may not capture all excessive short-term trading.

In particular, many purchase, redemption and exchange orders are received from financial intermediaries that hold omnibus accounts with the fund. Omnibus accounts, in which shares are held in the name of an intermediary on behalf of multiple beneficial owners, are a common form of holding shares among retirement plans and financial intermediaries such as brokers, advisers and third-party administrators. The fund is generally not able to identify trading by a particular beneficial owner within an omnibus account, which makes it difficult or impossible to determine if a particular shareholder is engaging in excessive short-term trading. Putnam Management monitors aggregate cash flows in omnibus accounts on an ongoing basis. If high cash flows or other information indicate that excessive short-term trading may be taking place, Putnam Management will contact the financial intermediary, plan sponsor or recordkeeper that maintains accounts for the beneficial owner and attempt to identify and remedy any excessive trading. However, the fund’s ability to monitor and deter excessive short-term traders in omnibus accounts ultimately depends on the capabilities and cooperation of these third-party financial firms. A financial intermediary or plan sponsor may impose different or additional limits on short-term trading.

Distribution plans and payments to dealers.

Putnam funds are distributed primarily through dealers (including any broker, dealer, bank, bank trust department, registered investment advisor, financial planner, retirement plan administrator, and any other institution having a selling, services, or any similar agreement with Putnam Retail Management or one of its affiliates). In order to pay for the

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marketing of fund shares and services provided to shareholders, the fund has adopted distribution and service (12b-1) plans, which increase the annual operating expenses you pay each year in certain share classes, as shown in the table of annual fund operating expenses in the section Fund summary — Fees and expenses. Putnam Retail Management and its affiliates also make additional payments to dealers that do not increase your fund expenses, as described below.

Distribution and service (12b-1) plans. The fund’s 12b-1 plans provide for payments at annual rates (based on average net assets) of up to 0.35% on class A shares and 1.00% on class B, class C, and class R shares. The Trustees currently limit payments on class A and class R shares to 0.25% 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, and class R shares may cost you more over time than paying the initial sales charge for class A shares. Because class R shares, unlike class B and class C shares, do not convert to class A shares, class R shares may cost you more over time than class B and class C shares. Class R6 and class Y shares, for shareholders who are eligible to purchase them, will be less expensive than other classes of shares because they do not bear sales charges or 12b-1 fees.

Payments to dealers. If you purchase your shares through a dealer, your dealer generally receives payments from Putnam Retail Management representing some or all of the sales charges and distribution and service (12b-1) fees, if any, shown in the tables under Fund summary — Fees and expenses at the front of this prospectus.

Putnam Retail Management and its affiliates also pay additional compensation to selected dealers in recognition of their marketing support and/or program servicing (each of which is described in more detail below). These payments may create an incentive for a dealer firm or its representatives to recommend or offer shares of the fund or other Putnam funds to its customers. These additional payments are made by Putnam Retail Management and its affiliates and do not increase the amount paid by you or the fund as shown under Fund summary — Fees and expenses.

The additional payments to dealers by Putnam Retail Management and its affiliates are generally based on one or more of the following factors: average net assets of a fund attributable to that dealer, sales or net sales of a fund attributable to that dealer, or reimbursement of ticket charges (fees that a dealer firm charges its representatives for effecting transactions in fund shares), or on the basis of a negotiated lump sum payment for services provided.

Marketing support payments are generally available to most dealers engaging in significant sales of Putnam fund shares. These payments are individually negotiated with each dealer firm, taking into account the marketing support services provided by the dealer, including business planning assistance, educating dealer personnel about the Putnam funds and shareholder financial planning needs, placement on the dealer’s preferred or recommended fund company list, access to sales meetings, sales representatives and management representatives of the dealer, market data, as well as the size of the dealer’s

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relationship with Putnam Retail Management. Although the total amount of marketing support payments made to dealers in any year may vary, on average, the aggregate payments are not expected, on an annual basis, to exceed 0.085% of the average net assets of Putnam’s retail mutual funds attributable to the dealers.

Program servicing payments, which are paid in some instances to dealers in connection with investments in the fund through dealer platforms and other investment programs, are not expected, with certain limited exceptions, to exceed 0.20% of the total assets in the program on an annual basis. These payments are made for program or platform services provided by the dealer, including shareholder recordkeeping, reporting, or transaction processing, as well as services rendered in connection with dealer platform development and maintenance, fund/investment selection and monitoring, or other similar services.

You can find a list of all dealers to which Putnam made marketing support and/or program servicing payments in 2018 in the fund’s SAI, which is on file with the SEC and is also available on Putnam’s website at putnam.com. You can also find other details in the SAI about the payments made by Putnam Retail Management and its affiliates and the services provided by your dealer. Your dealer may charge you fees or commissions in addition to those disclosed in this prospectus/proxy statement. You can also ask your dealer about any payments it receives from Putnam Retail Management and its affiliates and any services your dealer provides, as well as about fees and/or commissions it charges.

Other payments. Putnam Retail Management and its affiliates may make other payments (including payments in connection with educational seminars or conferences) or allow other promotional incentives to dealers to the extent permitted by SEC and NASD (as adopted by FINRA) rules and by other applicable laws and regulations. The fund’s transfer agent may also make payments to certain financial intermediaries in recognition of subaccounting or other services they provide to shareholders or plan participants who invest in the fund or other Putnam funds through their retirement plan. See the discussion in the SAI under Management — Investor Servicing Agent for more details.

Fund distributions and taxes

The fund normally distributes any net investment income and any net realized capital gains annually. You may choose to reinvest distributions from net investment income, capital gains or both in additional shares of your fund or other Putnam funds, or you may receive them in cash in the form of a check or an electronic deposit to your bank account. If you do not select an option when you open your account, all distributions will be reinvested. If you choose to receive distributions in cash, but correspondence from the fund or Putnam Investor Services is returned as “undeliverable,” the distribution option on your account may be converted to reinvest future distributions in the fund. You will not receive interest on uncashed distribution checks.

For shares purchased through your employer’s retirement plan, the terms of the plan will govern how the plan may receive distributions from the fund.

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For federal income tax purposes, distributions of net investment income are generally taxable to you as ordinary income. Taxes on distributions of capital gains are determined by how long the fund owned (or is deemed to have owned) the investments that generated them, rather than by how long you have owned (or are deemed to have owned) your shares. Distributions that the fund properly reports to you as gains from investments that the fund owned for more than one year are generally taxable to you as long-term capital gains includible in net capital gain and taxed to individuals at reduced rates. Distributions of gains from investments that the fund owned for one year or less are generally taxable to you as ordinary income. Distributions that the fund properly reports to you as “qualified dividend income” are taxable at the reduced rates applicable to your net capital gain provided that both you and the fund meet certain holding period and other requirements. Distributions are taxable in the manner described in this paragraph whether you receive them in cash or reinvest them in additional shares of this fund or other Putnam funds.

Distributions by the fund to retirement plans that qualify for tax-advantaged 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.

Unless you are investing through a tax-advantaged retirement account (such as an IRA), you should consider avoiding a purchase of fund shares shortly before the fund makes a distribution because doing so may cost you money in taxes. 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). Contact your financial representative or Putnam to find out the distribution schedule for your fund.

The fund’s investments in foreign securities, if any, may be subject to foreign withholding or other 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 these foreign taxes. In addition, the fund’s investments in foreign securities or foreign currencies may increase or accelerate the fund’s recognition of ordinary income and may affect the timing or amount of the fund’s distributions.

The fund’s use of derivatives, if any, may affect the amount, timing and character of distributions to shareholders and, therefore, may increase the amount of taxes payable by shareholders.

Any gain resulting from the sale or exchange of your shares generally also will be subject to tax.

The above is a general summary of the tax implications of investing in the fund. Please refer to the fund’s SAI for further details. You should consult your tax advisor for more information on your own tax situation, including possible foreign, state and local taxes.

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Appendix A 

 

Form of
 
AGREEMENT AND PLAN OF REORGANIZATION 

 

This Agreement and Plan of Reorganization (the “Agreement”) is made as of [ ], 2020 in Boston, Massachusetts, by and among PUTNAM FUNDS TRUST, a Massachusetts business trust (the “Trust”), on behalf of its PUTNAM FOCUSED EQUITY FUND series (the “Acquiring Fund”), the Trust, on behalf of its PUTNAM CAPITAL SPECTRUM FUND series (the “Capital Spectrum Fund”), the Trust, on behalf of its PUTNAM EQUITY SPECTRUM FUND series (the “Equity Spectrum Fund”) (each of Capital Spectrum Fund and Equity Spectrum Fund are referred to individually as an “Acquired Fund”), and, solely for purposes of Section 5 hereto, PUTNAM INVESTMENT MANAGEMENT, LLC (“Putnam Management”), each of the Acquiring Fund, Capital Spectrum Fund, Equity Spectrum Fund, and Putnam Management acting separately on its own behalf and not jointly or jointly and severally. All references to the “Acquired Fund” are to each of Capital Spectrum Fund and Equity Spectrum Fund, individually, as if this Agreement were between such individual Acquired Fund, the Acquiring Fund, and, solely for purposes of Section 5 hereto, Putnam Management. Any reference in this Agreement to “the parties” means the Acquiring Fund, Putnam Management, and the individual Acquired Fund as to which the matter pertains.

PLAN OF REORGANIZATION

(a) The Acquired Fund agrees to sell, assign, convey, transfer and deliver to the Acquiring Fund on the Exchange Date (as defined in Section 6) all of its properties and assets existing at the Valuation Time (as defined in Section 4(f)). In consideration therefor, the Acquiring Fund agrees, on the Exchange Date, to assume all of the liabilities of each Acquired Fund existing at the Valuation Time and to deliver to the Acquired Fund (i) a number of full and fractional Class A shares of beneficial interest of the Acquiring Fund (the “Class A Merger Shares”) having an aggregate net asset value equal to the value of the assets of the Acquired Fund attributable to Class A shares of the Acquired Fund transferred to the Acquiring Fund on such date less the value of the liabilities of the Acquired Fund attributable to Class A shares of the Acquired Fund assumed by the Acquiring Fund on such date, (ii) a number of full and fractional Class B shares of beneficial interest of the Acquiring Fund (the “Class B Merger Shares”) having an aggregate net asset value equal to the value of the assets of the Acquired Fund attributable to Class B shares of the Acquired Fund transferred to the Acquiring Fund on such date less the value of the liabilities of the Acquired Fund attributable to Class B shares of Acquired Fund assumed by the Acquiring Fund on such date, (iii) a number of full and fractional Class C shares of beneficial interest of the Acquiring Fund (the “Class C Merger Shares”) having an aggregate net asset value equal to the value of the assets of the Acquired Fund attributable to Class C shares of the Acquired Fund transferred to the Acquiring Fund on such date less the value of the liabilities of the Acquired Fund attributable to Class C shares of the Acquired Fund assumed by

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the Acquiring Fund on such date, (iv) a number of full and fractional Class R shares of beneficial interest of the Acquiring Fund (the “Class R Merger Shares”) having an aggregate net asset value equal to the value of the assets of the Acquired Fund attributable to Class R shares of the Acquired Fund transferred to the Acquiring Fund on such date less the value of the liabilities of the Acquired Fund attributable to Class R shares of the Acquired Fund assumed by the Acquiring Fund on such date, and (v) a number of full and fractional Class Y shares of beneficial interest of the Acquiring Fund (the “Class Y Merger Shares”) having an aggregate net asset value equal to the value of the assets of the Acquired Fund attributable to Class Y shares of the Acquired Fund transferred to the Acquiring Fund on such date less the value of the liabilities of the Acquired Fund attributable to Class Y shares of the Acquired Fund assumed by the Acquiring Fund on such date. The Class A Merger Shares, Class B Merger Shares, Class C Merger Shares, Class R Merger Shares, and Class Y Merger Shares are referred to collectively as the “Merger Shares.” The reorganization described in this Plan is intended to be a reorganization within the meaning of Section 368 of the Internal Revenue Code of 1986, as amended (the “Code”). Before the Exchange Date, the Acquired Fund will declare and pay to its shareholders a dividend and/or other distribution in an amount such that it will have distributed all of its net investment income and capital gains as described in Section 8(k) hereof.

(b) Upon consummation of the transactions described in paragraph (a) of this Agreement, the Acquired Fund will distribute in complete liquidation to its Class A, Class B, Class C, Class R, and Class Y shareholders of record as of the Exchange Date the Merger Shares, each shareholder being entitled to receive that proportion of Class A Merger Shares, Class B Merger Shares, Class C Merger Shares, Class R Merger Shares, and Class Y Merger Shares that the number of Class A, Class B, Class C, Class R, and Class Y shares of beneficial interest of the Acquired Fund held by such shareholder bears to the number of Class A, Class B, Class C, Class R, and Class Y shares of the Acquired Fund outstanding on such date.

AGREEMENT

The Acquiring Fund and the Acquired Fund agree as follows:

1. Representations and warranties of the Acquiring Fund.

The Acquiring Fund represents and warrants to and agrees with the Acquired Fund that:

(a) The Acquiring Fund is a series of the Trust, which is a voluntary association with transferable shares duly established and validly existing under the laws of The Commonwealth of Massachusetts, and has power to own all of its properties and assets and to carry out its obligations under this Agreement. The Acquiring Fund is not required to qualify as a foreign association in any jurisdiction. The Acquiring Fund has all necessary federal, state and local authorizations to carry on its business as now being conducted and to carry out this Agreement.

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(b) The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company, and its registration has not been revoked or rescinded and is in full force and effect.

(c) The financial statements and financial highlights of the Acquiring Fund for the fiscal year ended August 31, 2019 audited by KPMG LLP, the Acquiring Fund’s independent registered public accounting firm have been furnished to the Acquired Fund. The statement of assets and liabilities and schedule of investments fairly presents the financial position of the Acquiring Fund as of the dates thereof and the statements of operations and changes in net assets fairly reflect the results of its operations and changes in net assets for the periods covered thereby in conformity with U.S. generally accepted accounting principles.

(d) The prospectus and statement of additional information dated December 31, 2019, previously furnished to the Acquired Fund, as modified by any amendment or supplement thereto or any superseding prospectus or statement of additional information in respect thereof in effect before the Exchange Date, which will be furnished to the Acquired Fund (collectively, the “Acquiring Fund Prospectus”), do not, as of the date hereof, and will not, as of the Exchange Date, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; provided however, that the Acquiring Fund makes no representation or warranty as to any information in the Acquiring Fund Prospectus that does not specifically relate to the Acquiring Fund.

(e) There are no material legal, administrative or other proceedings pending or, to the knowledge of the Acquiring Fund, threatened against the Acquiring Fund which assert liability or which may, if successfully prosecuted to their conclusion, result in liability on the part of the Acquiring Fund, other than as have been disclosed in the Registration Statement (defined below), the Acquiring Fund Prospectus or otherwise disclosed in writing to the Acquired Fund.

(f) The Acquiring Fund has no known liabilities of a material nature, contingent or otherwise, other than those shown as belonging to it on its statement of assets and liabilities as of August 31, 2019 and those incurred in the ordinary course of the Acquiring Fund’s business as an investment company since that date.

(g) No consent, approval, authorization or order of any court or governmental authority is required for the consummation by the Trust, on behalf of the Acquiring Fund, of the transactions contemplated by this Agreement, except such as may be required under the Securities Act of 1933, as amended (the “1933 Act”), the Securities Exchange Act of 1934, as amended (the “1934 Act”), the 1940 Act, state securities or blue sky laws (which term as used herein will include the laws of the District of Columbia and of Puerto Rico) or the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “H-S-R Act”).

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(h) The registration statement and any amendment thereto (including any post-effective amendment) (the “Registration Statement”) filed with the Securities and Exchange Commission (the “Commission”) by the Acquiring Fund on Form N-14 relating to the Merger Shares issuable hereunder, and the proxy statement of the Acquired Fund included therein (the “Proxy Statement”), on the effective date of the Registration Statement (i) will comply in all material respects with the provisions of the 1933 Act, the 1934 Act and the 1940 Act and the rules and regulations thereunder and (ii) will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; and at the time of the shareholders’ meeting referred to in Section 7(a) and at the Exchange Date, the prospectus contained in the Registration Statement (the “Prospectus”), as amended or supplemented by any amendments or supplements filed or requested to be filed with the Commission by the Acquiring Fund, will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; provided however, that none of the representations and warranties in this subsection shall apply to statements in or omissions from the Registration Statement, the Prospectus, or the Proxy Statement made in reliance upon and in conformity with information furnished by the Acquired Fund for use in the Registration Statement, the Prospectus, or the Proxy Statement.

(i) There are no material contracts outstanding to which the Acquiring Fund is a party, other than as disclosed in the Registration Statement, the Prospectus, or the Proxy Statement.

(j) All of the issued and outstanding shares of beneficial interest of the Acquiring Fund have been offered for sale and sold in conformity with all applicable federal securities laws.

(k) For each taxable year of its operation, the Acquiring Fund has qualified and will at all times through the Exchange Date qualify for taxation as a “regulated investment company” under Sections 851 and 852 of the Code.

(l) The Acquiring Fund has timely filed or will timely file (taking into account extensions) all federal, state and other tax returns or reports which are required to be filed by the Acquiring Fund and all such tax returns and reports are or will be true, correct and complete in all material respects. The Acquiring Fund has timely paid or will timely pay all federal, state and other taxes shown to be due or required to be shown as due on said returns or on any assessments received by the Acquiring Fund. All tax liabilities of the Acquiring Fund have been adequately provided for on its books, and to the knowledge of the Acquiring Fund, no tax deficiency or liability of the Acquiring Fund has been asserted, and no question with respect thereto has been raised, by the Internal Revenue Service or by any state or local tax authority for taxes in excess of those already paid. As of the Exchange Date, the Acquiring Fund is not under audit by the Internal Revenue Service or by any state or local tax authority for taxes in excess of those already paid.

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(m) The issuance of the Merger Shares pursuant to this Agreement will be in compliance with all applicable federal securities laws.

(n) The Merger Shares have been duly authorized and, when issued and delivered pursuant to this Agreement, will be legally and validly issued and will be fully paid and nonassessable by the Acquiring Fund, and no shareholder of the Acquiring Fund will have any preemptive right of subscription or purchase in respect thereof.

2. Representations and warranties of the Acquired Fund.

The Acquired Fund represents and warrants to and agrees with the Acquiring Fund that:

(a) The Acquired Fund is a series of the Trust, which is a voluntary association with transferable shares duly established and validly existing under the laws of The Commonwealth of Massachusetts, and has power to own all of its properties and assets and to carry out its obligations under this Agreement. The Trust is not required to qualify as a foreign association in any jurisdiction. The Trust has all necessary federal, state and local authorizations to carry on its business as now being conducted and to carry out this Agreement.

(b) The Trust is registered under the 1940 Act as an open-end management investment company, and its registration has not been revoked or rescinded and is in full force and effect.

(c) The financial statements and financial highlights of the Acquired Fund for the fiscal year ended April 30, 2019, audited by PricewaterhouseCoopers LLP with respect to Capital Spectrum Fund and audited by KPMG LLP with respect to Equity Spectrum Fund, it being understood that PricewaterhouseCoopers LLP and KPMG LLP are the independent registered public accounting firms for the applicable Acquired Funds, and an unaudited statement of assets and liabilities, statement of operations, statement of changes in net assets and schedule of investments (indicating their market values) of the Acquired Fund for the six months ended as of October 31, 2019 have been furnished to the Acquiring Fund. The statements of assets and liabilities and schedules of investments fairly present the financial position of the Acquired Fund as of the dates thereof, and the statements of operations and changes in net assets fairly reflect the results of its operations and changes in net assets for the periods covered thereby in conformity with U.S. generally accepted accounting principles.

(d) The Acquired Fund’s prospectus and statement of additional information dated August 30, 2019 previously furnished to the Acquiring Fund, together with any amendment or supplement thereto or any superseding prospectus or statement of additional information in respect thereof in effect before the Exchange Date, which will be furnished to the Acquiring Fund (each an “Acquired Fund Prospectus”), do not, as of the date hereof, and will not, as of the Exchange Date, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; provided however, that

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the Acquired Fund makes no representation or warranty as to any information in its Acquired Fund Prospectus that does not specifically relate to the Acquired Fund.

(e) There are no material legal, administrative or other proceedings pending or, to the knowledge of the Acquired Fund, threatened against the Acquired Fund which assert liability or which may, if successfully prosecuted to their conclusion, result in liability on the part of the Acquired Fund, other than as have been disclosed in the Registration Statement, its Acquired Fund Prospectus or otherwise disclosed in writing to the Acquiring Fund.

(f) The Acquired Fund has no known liabilities of a material nature, contingent or otherwise, other than those shown as belonging to it on its unaudited statement of assets and liabilities as of October 31, 2019 and those incurred in the ordinary course of the Acquired Fund’s business as an investment company since such date. Before the Exchange Date, the Acquired Fund will advise the Acquiring Fund of all material liabilities, contingent or otherwise, incurred by it subsequent to October 31, 2019, whether or not incurred in the ordinary course of business.

(g) No consent, approval, authorization or order of any court or governmental authority is required for the consummation by the Trust, on behalf of the Acquired Fund, of the transactions contemplated by this Agreement, except such as may be required under the 1933 Act, the 1934 Act, the 1940 Act, state securities or blue sky laws, or the H-S-R Act.

(h) The Registration Statement, the Prospectus, and the Proxy Statement on the effective date of the Registration Statement and insofar as they do not relate to the Acquiring Fund or the other Acquired Fund (i) will comply in all material respects with the provisions of the 1933 Act, the 1934 Act and the 1940 Act and the rules and regulations thereunder and (ii) will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; and at the time of the shareholder’s meetings referred to in Section 7(a) and at the Exchange Date, the Prospectus, as amended or supplemented by any amendments or supplements filed or requested to be filed by the Acquiring Fund with the Commission, will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; provided however, that the representations and warranties in this subsection shall apply only to statements of fact relating to the Acquired Fund contained in the Registration Statement, the Prospectus or the Proxy Statement, or omissions to state in any thereof a material fact relating to the Acquired Fund, as such Registration Statement, Prospectus and Proxy Statement shall be furnished to the Acquired Fund in definitive form as soon as practicable following effectiveness of the Registration Statement and before any public distribution of the Prospectus or Proxy Statement.

(i) There are no material contracts outstanding to which the Acquired Fund is a party, other than as disclosed in the Acquired Fund’s registration statement (including any

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post-effective amendment) filed with the Commission on Form N-1A or the Acquired Fund’s Prospectus.

(j) All of the issued and outstanding shares of beneficial interest of the Acquired Fund have been offered for sale and sold in conformity with all applicable federal securities laws.

(k) For each taxable year of its operation (including the taxable year ending on the Exchange Date), the Acquired Fund has qualified and will at all times through the Exchange Date qualify for taxation as a “regulated investment company” under Sections 851 and 852 of the Code.

(l) The Acquired Fund has timely filed or will timely file (taking into account extensions) all federal, state and other tax returns or reports which are required to be filed by the Acquired Fund on or before the Exchange Date, and all such tax returns and reports are or will be true, correct and complete in all material respects. The Acquired Fund has timely paid or will timely pay all federal, state and other taxes shown to be due or required to be shown as due on said returns or on any assessments received by the Acquired Fund. All tax liabilities of the Acquired Fund have been adequately provided for on its books, and to the knowledge of the Acquired Fund, no tax deficiency or liability of the Acquired Fund has been asserted, and no question with respect thereto has been raised, by the Internal Revenue Service or by any state or local tax authority for taxes in excess of those already paid. As of the Exchange Date, the Acquired Fund is not under audit by the Internal Revenue Service or by any state or local tax authority for taxes in excess of those already paid.

(m) At both the Valuation Time and the Exchange Date, the Acquired Fund will have full right, power and authority to sell, assign, transfer and deliver the Investments (defined below) and any other assets and liabilities of the Acquired Fund to be transferred to the Acquiring Fund pursuant to this Agreement. At the Exchange Date, subject only to the delivery of the Investments and any such other assets and liabilities as contemplated by this Agreement, the Acquiring Fund will acquire the Investments and any such other assets and liabilities subject to no encumbrances, liens or security interests whatsoever and without any restrictions upon the transfer thereof (except for restrictions previously disclosed to the Acquiring Fund by the Acquired Fund). As used in this Agreement, the term “Investments” means the Acquired Fund’s investments shown on the schedule of its investments as of October 31, 2019 referred to in Section 2(c) hereof, as supplemented with such changes as the Acquired Fund makes and changes resulting from stock dividends, stock splits, mergers and similar corporate actions.

(n) No registration under the 1933 Act of any of the Investments would be required if they were, as of the time of such transfer, the subject of a public distribution by either of the Acquiring Fund or the Acquired Fund, except as previously disclosed to the Acquiring Fund by the Acquired Fund.

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(o) At the Exchange Date, the Acquired Fund will have sold such of its assets, if any, as may be necessary to ensure that, after giving effect to the acquisition of the assets of the Acquired Fund pursuant to this Agreement, the Acquiring Fund will remain in compliance with its investment restrictions as set forth in the Registration Statement.

3. Reorganization.

(a) The Acquired Fund, subject to the requisite approval of its shareholders and to the other terms and conditions contained herein (including the Acquired Fund’s obligation to distribute to its shareholders all of its net investment income and capital gains as described in Section 8(k) hereof), agrees to sell, assign, convey, transfer and deliver to the Acquiring Fund, and the Acquiring Fund agrees to acquire from the Acquired Fund, on the Exchange Date all of the Investments and all of the cash and other properties and assets of the Acquired Fund, whether accrued or contingent (including cash received by the Acquired Fund upon the liquidation by the Acquired Fund of any investments purchased by it after October 31, 2019 and designated by the Acquiring Fund as being unsuitable for it to acquire), in exchange for that number of Merger Shares provided for in Section 4 and the assumption by the Acquiring Fund of all of the liabilities of the Acquired Fund, whether accrued or contingent, existing at the Valuation Time. Pursuant to this Agreement, the Acquired Fund will, as soon as practicable after the Exchange Date, distribute all of the Class A Merger Shares, Class B Merger Shares, Class C Merger Shares, Class R Merger Shares, and Class Y Merger Shares received by it to the Class A, Class B, Class C, Class R and Class Y shareholders, respectively, of the Acquired Fund, in complete liquidation of the Acquired Fund. The approval or consummation of the merger of the Acquired Fund is not conditioned on the approval or consummation of the merger of the other Acquired Fund.

(b) The Acquired Fund will, as soon as practicable following the requisite approval of its shareholders, at its expense, liquidate such of its portfolio securities as the Acquiring Fund indicates it does not wish to acquire. These liquidations will be substantially completed before the Exchange Date, unless otherwise agreed by the Acquired Fund and the Acquiring Fund.

(c) The Acquired Fund agrees to pay or cause to be paid to the Acquiring Fund any interest, cash or such dividends, rights and other payments received by it on or after the Exchange Date with respect to the Investments and other properties and assets of the Acquired Fund, whether accrued or contingent. Any such distribution will be deemed included in the assets transferred to the Acquiring Fund at the Exchange Date and will not be separately valued unless the securities in respect of which such distribution is made have gone “ex” before the Valuation Time, in which case any such distribution which remains unpaid at the Exchange Date will be included in the determination of the value of the assets of the Acquired Fund acquired by the Acquiring Fund.

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4. Exchange date; valuation time.

On the Exchange Date, the Acquiring Fund will deliver to the Acquired Fund, determined in each case as provided hereafter in Section 4, (i) a number of full and fractional Class A Merger Shares having an aggregate net asset value equal to the value of the assets of the Acquired Fund attributable to Class A shares of the Acquired Fund transferred to the Acquiring Fund on that date less the value of the liabilities of the Acquired Fund attributable to Class A shares of the Acquired Fund assumed by the Acquiring Fund on that date; (ii) a number of full and fractional Class B Merger Shares having an aggregate net asset value equal to the value of the assets of the Acquired Fund attributable to Class B shares of the Acquired Fund transferred to the Acquiring Fund on that date less the value of the liabilities of the Acquired Fund attributable to Class B shares of the Acquired Fund assumed by the Acquiring Fund on that date; (iii) a number of full and fractional Class C Merger Shares having an aggregate net asset value equal to the value of the assets of the Acquired Fund attributable to Class C shares of the Acquired Fund transferred to the Acquiring Fund on that date less the value of the liabilities of the Acquired Fund attributable to Class C shares of the Acquired Fund assumed by the Acquiring Fund on that date; (iv) a number of full and fractional Class R Merger Shares having an aggregate net asset value equal to the value of the assets of the Acquired Fund attributable to Class R shares of the Acquired Fund transferred to the Acquiring Fund on that date less the value of the liabilities of the Acquired Fund attributable to Class R shares of the Acquired Fund assumed by the Acquiring Fund on that date; and (v) a number of full and fractional Class Y Merger Shares having an aggregate net asset value equal to the value of the assets of the Acquired Fund attributable to Class Y shares of the Acquired Fund transferred to the Acquiring Fund on that date less the value of the liabilities of the Acquired Fund attributable to Class Y shares of the Acquired Fund assumed by the Acquiring Fund on that date.

(a) The net asset value of the Merger Shares to be delivered to the Acquired Fund, the value of the assets attributable to the Class A, Class B, Class C, Class R, and Class Y shares of the Acquired Fund and the value of the liabilities attributable to the Class A, Class B, Class C, Class R and Class Y shares of the Acquired Fund to be assumed by the Acquiring Fund will in each case be determined as of the Valuation Time by the Acquiring Fund, in cooperation with the Acquired Fund, pursuant to procedures customarily used by the Acquiring Fund in determining the fair market value of the Acquiring Fund’s assets and liabilities.

(b) No adjustment will be made in the net asset value of either the Acquired Fund or the Acquiring Fund to take into account differences in realized and unrealized gains and losses.

(c) The investment restrictions of the Acquired Fund will be temporarily amended to the extent necessary to effect the transactions contemplated by this Agreement.

(d) The Acquiring Fund will issue the Merger Shares, registered in the name of the Acquired Fund, to the Acquired Fund. The Acquiring Fund will then, in accordance with written instructions furnished by the Acquired Fund, re-register the Class

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A Merger Shares in the names of the Class A shareholders of the Acquired Fund, re-register the Class B Merger Shares in the names of the Class B shareholders of the Acquired Fund, re-register the Class C Merger Shares in the names of the Class C shareholders of the Acquired Fund, re-register the Class R Merger Shares in the names of the Class R shareholders of the Acquired Fund, and re-register the Class Y Merger Shares in the names of the Class Y shareholders of the Acquired Fund. The Acquiring Fund will not permit any shareholder of an Acquired Fund holding share certificates as of the Exchange Date to receive dividends and other distributions on the Merger Shares (although such dividends and other distributions will be credited to the account of such shareholder) or pledge the Merger Shares until such shareholder has surrendered his or her outstanding certificates of the Acquired Fund or, in the event of lost, stolen, or destroyed certificates, posted adequate bond. In the event that a shareholder is not permitted to receive dividends and other distributions on the Merger Shares as provided in the preceding sentence, the Acquiring Fund will pay any such dividends or distributions in additional shares, notwithstanding any election such shareholder has made previously with respect to the payment, in cash or otherwise, of dividends and distributions on shares of the Acquired Fund. An Acquired Fund with outstanding share certificates as of the Exchange Date will, at its expense, request the shareholders of the Acquired Fund to surrender their outstanding certificates of the Acquired Fund, or post adequate bond, as the case may be.

(e) The Acquiring Fund will assume all liabilities of the Acquired Fund, whether accrued or contingent, in connection with the acquisition of assets and subsequent dissolution of the Acquired Fund or otherwise.

(f) The Valuation Time is 4:00 p.m. Eastern Time on April 24, 2020 or such earlier or later time and day as may be mutually agreed upon in writing by the parties (the “Valuation Time”).

5. Expenses, fees, etc.

(a) All direct fees and expenses, including legal and accounting expenses, portfolio transfer taxes (if any), the costs of printing and mailing the prospectus/proxy statement, or other similar expenses incurred in connection with the consummation by the Acquiring Fund and the Acquired Fund of the transactions contemplated by this Agreement (together with the costs specified below, “Expenses”) will be apportioned evenly between the Acquiring Fund and the Acquired Fund as of the Valuation Time, except that (i) the costs of proxy solicitation will be borne and paid by Putnam Management, (ii) the costs of liquidating such of the Acquired Fund’s portfolio securities as the Acquiring Fund shall indicate it does not wish to acquire before the Exchange Date shall be borne and paid by the Acquired Fund, and (iii) the costs of SEC registration fees will be allocated to the Acquiring Fund and the Acquired Fund pro rata based on each fund’s assets; and provided that, pursuant to an existing contractual obligation, Putnam Management shall be required to bear and pay a portion of the Expenses

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apportioned to the Acquiring Fund under this Section 5(a) and that Putnam Management has agreed to pay the legal and accounting expenses, the costs of printing and mailing the prospectus/proxy statement, and other similar expenses, and the SEC registration fees allocated to the Acquired Fund; and, provided further that such Expenses will in any event be paid by the party bearing such Expenses.

(b) In the event that a transaction contemplated by this Agreement is not consummated by reason of (i) the Acquiring Fund’s being either unwilling or unable to go forward (other than by reason of the nonfulfillment or failure of any condition to the Acquiring Fund’s obligations referred to in Section 8) or (ii) the nonfulfillment or failure of any condition to the Acquired Fund’s obligations referred to in Section 9, the Acquiring Fund will pay directly all reasonable fees and expenses incurred by the Acquired Fund in connection with such transactions, including, without limitation, legal, accounting and filing fees.

(c) In the event that a transaction contemplated by this Agreement is not consummated by reason of (i) the Acquired Fund’s being either unwilling or unable to go forward (other than by reason of the nonfulfillment or failure of any condition to the Acquired Fund’s obligations referred to in Section 9) or (ii) the nonfulfillment or failure of any condition to the Acquiring Fund’s obligations referred to in Section 8, the Acquired Fund will pay directly all reasonable fees and expenses incurred by the Acquiring Fund in connection with such transactions, including without limitation legal, accounting and filing fees.

(d) In the event that a transaction contemplated by this Agreement is not consummated for any reason other than (i) the Acquiring Fund’s or the Acquired Fund’s being either unwilling or unable to go forward or (ii) the nonfulfillment or failure of any condition to the Acquiring Fund’s or the Acquired Fund’s obligations referred to in Section 8 or Section 9 of this Agreement, then each of the Acquiring Fund and the Acquired Fund will bear all of its own expenses incurred in connection with such transactions.

(e) Notwithstanding any other provisions of this Agreement, if for any reason a transaction contemplated by this Agreement is not consummated, no applicable party shall be liable to the other applicable party for any damages resulting therefrom, including without limitation consequential damages, except as specifically set forth above.

6. Exchange date.

Delivery of the assets of the Acquired Fund to be transferred, assumption of the liabilities of the Acquired Fund to be assumed and the delivery of the Merger Shares to be issued shall be made at the offices of The Putnam Funds, 100 Federal Street, Boston, Massachusetts, 02110, at 7:30 a.m. on the next full business day following the Valuation Time, or at such other time and date agreed to by the Acquiring Fund and the Acquired Fund, the date and time upon which such delivery is to take place being referred to herein as the “Exchange Date.”

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7. Dissolution.

(a) The Acquired Fund agrees to call a meeting of its shareholders as soon as is practicable after the effective date of the Registration Statement for, among other things, the purpose of considering the matters contemplated by this Agreement.

(b) The Acquired Fund agrees that the liquidation and dissolution of the Acquired Fund will be effected in the manner provided in the Trust’s Agreement and Declaration of Trust in accordance with applicable law and that on and after the Exchange Date, the Acquired Fund will not conduct any business except in connection with its liquidation and dissolution.

(c) The Acquiring Fund will, after the preparation and delivery to the Acquiring Fund by the Acquired Fund of a preliminary version of the Proxy Statement which was satisfactory to the Acquiring Fund and to Ropes & Gray LLP for inclusion in the Registration Statement, file the Registration Statement with the Commission. The Acquired Fund and the Acquiring Fund will cooperate with each other, and each will furnish to the other the information relating to itself required by the 1933 Act, the 1934 Act and the 1940 Act and the rules and regulations thereunder to be set forth in the Registration Statement, including the Prospectus and the Proxy Statement.

8. Conditions to the Acquiring Fund’s obligations.

The obligations of the Acquiring Fund hereunder, in respect of the Acquiring Fund’s acquisition of the Acquired Fund, are subject to the following conditions:

(a) That this Agreement is adopted and the transactions contemplated hereby are approved by the affirmative vote of (i) at least a majority of the Trustees of the Acquired Fund (including a majority of those Trustees who are not “interested persons” of the Acquired Fund, as defined in Section 2(a)(19) of the 1940 Act); (ii) at least a majority of the Trustees of the Acquiring Fund (including a majority of those Trustees who are not “interested persons” of the Acquiring Fund, as defined in Section 2(a)(19) of the 1940 Act); and (iii) at a duly constituted meeting, at least a majority of the outstanding shares of the Acquired Fund, as defined in Section 2(a)(42) of the 1940 Act. The approval of the merger of the Acquired Fund is not conditioned on the approval of the merger of the other Acquired Fund.

(b) That the Acquired Fund will have furnished to the Acquiring Fund (i) a statement of the Acquired Fund’s net assets, with values determined as provided in Section 4 of this Agreement, together with a list of Investments, all as of the Valuation Time, certified on the Acquired Fund’s behalf by the Acquired Fund’s President (or any Vice President) and Treasurer (or any Assistant or Associate Treasurer), and a certificate of both officers, dated the Exchange Date, to the effect that as of the Valuation Time and as of the Exchange Date there has been no material adverse change in the financial position of the Acquired Fund as of October 31, 2019, other than changes in the Investments and other assets and properties since that date or changes in the market value of the Investments and other assets of the Acquired Fund, changes due

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to net redemptions or changes due to dividends paid or losses from operations; (ii) a statement of the tax basis of each Investment transferred by the Acquired Fund to the Acquiring Fund; and (iii) copies of all relevant tax books and records.

(c) That the Acquired Fund will have furnished to the Acquiring Fund a statement, dated the Exchange Date, signed on behalf of the Acquired Fund by the Acquired Fund’s President (or any Vice President) and Treasurer (or any Assistant or Associate Treasurer) certifying that as of the Valuation Time and as of the Exchange Date all representations and warranties of the Acquired Fund made in this Agreement are true and correct in all material respects as if made at and as of such dates, and that the Acquired Fund has complied with all of the agreements and satisfied all of the conditions on its part to be performed or satisfied at or prior to each of such dates.

(d) That there is no material litigation pending with respect to the matters contemplated by this Agreement.

(e) That the Acquiring Fund will have received an opinion of Ropes & Gray LLP, in form satisfactory to the Acquiring Fund and dated the Exchange Date, to the effect that (i) the Acquired Fund is a series of the Trust, which is a voluntary association with transferable shares duly established and validly existing under the laws of The Commonwealth of Massachusetts, and, to the knowledge of such counsel, is not required to qualify to do business as a foreign association in any jurisdiction except as may be required by state securities or blue sky laws, (ii) this Agreement has been duly authorized, executed, and delivered by the Trust, on behalf of the Acquired Fund and, assuming that the Registration Statement, the Prospectus and the Proxy Statement comply with the 1933 Act, the 1934 Act and the 1940 Act and assuming due authorization, execution and delivery of this Agreement by the Trust, on behalf of the Acquiring Fund, is a valid and binding obligation of the Trust, on behalf of the Acquired Fund, (iii) the Acquired Fund has power to sell, assign, convey, transfer and deliver the assets contemplated hereby and, upon consummation of the transactions contemplated hereby in accordance with the terms of this Agreement, the Acquired Fund will have duly sold, assigned, conveyed, transferred and delivered such assets to the Acquiring Fund, (iv) the execution and delivery of this Agreement did not, and the consummation of the transactions contemplated hereby will not, violate the Trust’s Agreement and Declaration of Trust, as amended, or Bylaws or any provision of any agreement known to such counsel to which the Acquired Fund is a party or by which it is bound, it being understood that with respect to investment restrictions as contained in the Trust’s Agreement and Declaration of Trust, Bylaws, and the Acquired Fund’s then-current prospectus, statement of additional information, or Registration Statement, such counsel may rely upon a certificate of an officer of the Acquired Fund whose responsibility it is to advise the Acquired Fund with respect to such matters, (v) no consent, approval, authorization or order of any court or governmental authority is required for the consummation by the Trust, on behalf of the Acquired Fund, of the transactions contemplated hereby, except such as have

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been obtained under the 1933 Act, the 1934 Act, the 1940 Act and such as may be required under state securities or blue sky laws and the H-S-R Act, and (vi) such other matters as the Acquiring Fund may reasonably deem necessary or desirable.

(f) That the Acquiring Fund will have received an opinion of Ropes & Gray LLP dated the Exchange Date (which opinion would be based upon certain factual representations and customary assumptions and subject to certain qualifications), in a form reasonably satisfactory to each of the Acquired Fund and the Acquiring Fund, substantially to the effect that, although the matter is not free from doubt, on the basis of the existing provisions of the Code, Treasury regulations promulgated thereunder, current administrative rules and court decisions, generally for federal income tax purposes: (i) the acquisition by the Acquiring Fund of substantially all of the assets of the Acquired Fund solely in exchange for Merger Shares and the assumption by the Acquiring Fund of liabilities of the Acquired Fund followed by the distribution by the Acquired Fund to its shareholders of Merger Shares in complete liquidation of the Acquired Fund, all pursuant to this Agreement, will constitute a reorganization within the meaning of Section 368(a) of the Code and the Acquired Fund and the Acquiring Fund will be a “party to a reorganization” within the meaning of Section 368(b) of the Code, (ii) under Sections 361 and 357 of the Code, no gain or loss will be recognized by the Acquired Fund upon the transfer of its assets to the Acquiring Fund pursuant to this Agreement in exchange for Merger Shares and the assumption of the Acquired Fund’s liabilities by the Acquiring Fund or upon the distribution of Merger Shares by the Acquired Fund to its shareholders in liquidation of the Acquired Fund, except for (A) any gain or loss recognized on (1) “Section 1256 contracts” as defined in Section 1256(b) of the Code or (2) stock in a “passive foreign investment company” as defined in Section 1297(a) of the Code, and (B) any other gain or loss required to be recognized (1) as a result of the closing of the tax year of the Acquired Fund, (2) upon the termination of a position, or (3) upon the transfer of an asset regardless of whether such a transfer would otherwise be a nontaxable transaction under the Code, (iii) under Section 354 of the Code, no gain or loss will be recognized by shareholders of the Acquired Fund upon the exchange of their shares of the Acquired Fund for Merger Shares, (iv) under Section 358 of the Code, the aggregate tax basis of the Merger Shares a shareholder of the Acquired Fund receives pursuant to this Agreement will be the same as the aggregate tax basis of the Acquired Fund shares exchanged therefor, (v) under Section 1223(1) of the Code, a shareholder of the Acquired Fund’s holding period for the Merger Shares received pursuant to this Agreement will be determined by including the period during which such shareholder held or is treated for federal income tax purposes as having held the Acquired Fund shares exchanged therefor, provided that, the shareholder held those Acquired Fund shares as capital assets, (vi) under Section 1032 of the Code, no gain or loss will be recognized by the Acquiring Fund upon the receipt of the assets of the Acquired Fund in exchange for Merger Shares and the assumption by the Acquiring Fund of the liabilities of the Acquired Fund, (vii) under Section 362(b) of the Code, the Acquiring Fund’s tax basis

A-14 

 



in the assets of the Acquired Fund transferred to the Acquiring Fund pursuant to this Agreement will be the same as the Acquired Fund’s tax basis immediately prior to the transfer, increased by any gain or decreased by any loss required to be recognized as described in (ii) above, (viii) under Section 1223(2) of the Code, the holding period in the hands of the Acquiring Fund of each Acquired Fund asset transferred to the Acquiring Fund pursuant to this Agreement, other than certain assets with respect to which gain or loss is required to be recognized as described in (ii) above, will include the period during which such asset was held or treated for federal income tax purposes as held by the Acquired Fund, and (ix) the Acquiring Fund will succeed to and take into account the items of the Acquired Fund described in Section 381(c) of the Code, subject to the conditions and limitations specified in Sections 381, 382, 383 and 384 of the Code and the regulations thereunder.

(g) That the assets of the Acquired Fund to be acquired by the Acquiring Fund will include no assets which the Acquiring Fund, by reason of charter limitations or of investment restrictions disclosed in the Registration Statement in effect on the Exchange Date, may not properly acquire.

(h) That the Registration Statement will have become effective under the 1933 Act, and no stop order suspending such effectiveness will have been instituted or, to the knowledge of the Acquiring Fund, threatened by the Commission.

(i) That the Acquiring Fund will have received from the Commission, any relevant state securities administrator and the Department of Justice (the “Department”) such order or orders as Ropes & Gray LLP deems reasonably necessary or desirable under the 1933 Act, the 1934 Act, the 1940 Act and any applicable state securities or blue sky laws in connection with the transactions contemplated hereby, and that all such orders will be in full force and effect.

(j) That all proceedings taken by the Acquired Fund in connection with the transactions contemplated by this Agreement and all documents incidental thereto are satisfactory in form and substance to the Acquiring Fund and Ropes & Gray LLP.

(k) That, before the Exchange Date, the Acquired Fund declares a dividend or dividends which, together with all previous distributions qualifying for the dividends-paid deduction, has the effect of distributing to the shareholders of the Acquired Fund, in distributions qualifying for the dividends-paid deduction, (i) all of the excess of (X) the Acquired Fund’s investment income excludable from gross income under Section 103 of the Code over (Y) the Acquired Fund’s deductions disallowed under Sections 265 and 171 of the Code, (ii) all of the Acquired Fund’s investment company taxable income (as defined in Section 852 of the Code), and (iii) all of its net capital gain realized after reduction by any capital loss carryover; the amounts in (i), (ii) and (iii) shall in each case be computed without regard to the dividends-paid deduction and shall include amounts in respect of both (x) the Acquired Fund’s taxable year that will end on the Exchange Date and (y) any prior taxable year of the Acquired Fund, to

A-15 

 



the extent such dividend or dividends are eligible to be treated as paid during such prior year under Section 855(a) of the Code.

(l) That the Acquired Fund’s custodian has delivered to the Acquiring Fund a certificate identifying all of the assets of the Acquired Fund held by such custodian as of the Valuation Time.

(m) That the Acquired Fund’s transfer agent has provided to the Acquiring Fund (i) the originals or true copies of all of the records of the Acquired Fund in the possession of such transfer agent as of the Exchange Date, (ii) a certificate setting forth the number of shares of the Acquired Fund outstanding as of the Valuation Time, and (iii) the name and address of each holder of record of any such shares and the number of shares held of record by each such shareholder.

(n) That all of the issued and outstanding shares of beneficial interest of the Acquired Fund will have been offered for sale and sold in conformity with all applicable state securities or blue sky laws and, to the extent that any audit of the records of the Acquired Fund or its transfer agent by the Acquiring Fund or its agents will have revealed otherwise, either (i) the Acquired Fund will have taken all actions that in the opinion of the Acquiring Fund or its counsel are necessary to remedy any prior failure on the part of the Acquired Fund to have offered for sale and sold such shares in conformity with such laws or (ii) the Acquired Fund shall have furnished (or caused to be furnished) surety, or deposited (or caused to be deposited) assets in escrow, for the benefit of the Acquiring Fund in amounts sufficient and upon terms satisfactory, in the opinion of the Acquiring Fund or its counsel, to indemnify the Acquiring Fund against any expense, loss, claim, damage or liability whatsoever that may be asserted or threatened by reason of such failure on the part of the Acquired Fund to have offered and sold such shares in conformity with such laws.

(o) That the Acquired Fund will have executed and delivered to the Acquiring Fund an instrument of transfer dated as of the Exchange Date pursuant to which the Acquired Fund will assign, transfer and convey all of the assets and other property to the Acquiring Fund at the Valuation Time in connection with the transactions contemplated by this Agreement.

9. Conditions to the Acquired Fund’s obligations.

The obligations of the Acquired Fund hereunder, in respect of the acquisition of the Acquired Fund by the Acquiring Fund, shall be subject to the following conditions:

(a) That this Agreement is adopted and the transactions contemplated hereby are approved by the affirmative vote of (i) at least a majority of the Trustees of the Acquired Fund (including a majority of those Trustees who are not “interested persons” of the Acquired Fund, as defined in Section 2(a)(19) of the 1940 Act); (ii) at least a majority of the Trustees of the Acquiring Fund (including a majority of those Trustees who are not “interested persons” of the Acquiring Fund, as defined in Section 2(a)(19) of the 1940 Act); and (iii) at a duly constituted meeting at least a majority of the outstanding

A-16 

 



shares of the Acquired Fund, as defined in Section 2(a)(42) of the 1940 Act. The approval of the merger of the Acquired Fund is not conditioned on the approval of the merger of the other Acquired Fund.

(b) That the Acquiring Fund will have furnished to the Acquired Fund a statement of the Acquiring Fund’s net assets, together with a list of portfolio holdings with values determined as provided in Section 4 of this Agreement, all as of the Valuation Time, certified on behalf of the Acquiring Fund by the Acquiring Fund’s President (or any Vice President) and Treasurer (or any Assistant or Associate Treasurer), and a certificate of both such officers, dated the Exchange Date, to the effect that as of the Valuation Time and as of the Exchange Date there has been no material adverse change in the financial position of the Acquiring Fund since October 31, 2019, other than changes in its portfolio securities since that date, changes in the market value of its portfolio securities, changes due to net redemptions or changes due to dividends paid or losses from operations.

(c) That the Acquiring Fund will have executed and delivered to the Acquired Fund an Assumption of Liabilities dated as of the Exchange Date pursuant to which the Acquiring Fund will assume all of the liabilities of the Acquired Fund existing at the Valuation Time in connection with the transactions contemplated by this Agreement.

(d) That the Acquiring Fund will have furnished to the Acquired Fund a statement, dated the Exchange Date, signed on behalf of the Acquiring Fund by the Acquiring Fund’s President (or any Vice President) and Treasurer (or any Assistant or Associate Treasurer) certifying that as of the Valuation Time and as of the Exchange Date all representations and warranties of the Acquiring Fund made in this Agreement are true and correct in all material respects as if made at and as of such dates, and that the Acquiring Fund has complied with all of the agreements and satisfied all of the conditions on its part to be performed or satisfied at or prior to each of such dates.

(e) That there is no material litigation pending or threatened with respect to the matters contemplated by this Agreement.

(f) That the Acquired Fund will have received an opinion of Ropes & Gray LLP, in form satisfactory to the Acquired Fund and dated the Exchange Date, to the effect that (i) the Acquiring Fund is a series of the Trust, which is a voluntary association with transferable shares duly established and validly existing in conformity with the laws of The Commonwealth of Massachusetts, and, to the knowledge of such counsel, is not required to qualify to do business as a foreign association in any jurisdiction except as may be required by state securities or blue sky laws, (ii) this Agreement has been duly authorized, executed and delivered by the Acquiring Fund, and, assuming that the Prospectus, the Registration Statement and the Proxy Statement comply with the 1933 Act, the 1934 Act and the 1940 Act and assuming due authorization, execution and delivery of this Agreement by the Acquired Fund, is a valid and binding obligation of the Acquiring Fund, (iii) the Merger Shares to be delivered to the Acquired Fund as provided for by this Agreement are duly authorized and upon such delivery will be

A-17 

 



validly issued and will be fully paid and nonassessable by the Acquiring Fund and no shareholder of the Acquiring Fund has any preemptive right to subscription or purchase in respect thereof, (iv) the execution and delivery of this Agreement did not, and the consummation of the transactions contemplated hereby will not, violate the Trust’s Agreement and Declaration of Trust, as amended, or Bylaws, or any provision of any agreement known to such counsel to which the Acquiring Fund is a party or by which it is bound, it being understood that with respect to investment restrictions as contained in the Trust’s Agreement and Declaration of Trust, Bylaws, then current prospectus or statement of additional information or the Registration Statement, such counsel may rely upon a certificate of an officer of the Acquiring Fund whose responsibility it is to advise the Acquiring Fund with respect to such matters, (v) no consent, approval, authorization or order of any court or governmental authority is required for the consummation by the Acquiring Fund of the transactions contemplated herein, except such as have been obtained under the 1933 Act, the 1934 Act and the 1940 Act and such as may be required under state securities or blue sky laws and the H-S-R Act, and (vi) the Registration Statement has become effective under the 1933 Act, and, to the best of the knowledge of such counsel, no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose have been instituted or are pending or contemplated under the 1933 Act.

(g) That the Acquired Fund will have received an opinion of Ropes & Gray LLP dated the Exchange Date (which opinion would be based upon certain factual representations and customary assumptions and subject to certain qualifications), in a form reasonably satisfactory to each of the Acquired Fund and the Acquiring Fund, substantially to the effect that, although the matter is not free from doubt, on the basis of the existing provisions of the Code, Treasury regulations promulgated thereunder, current administrative rules and court decisions, generally for federal income tax purposes: (i) the acquisition by the Acquiring Fund of substantially all of the assets of the Acquired Fund solely in exchange for Merger Shares and the assumption by the Acquiring Fund of liabilities of the Acquired Fund followed by the distribution by the Acquired Fund to its shareholders of Merger Shares in complete liquidation of the Acquired Fund, all pursuant to this Agreement, will constitute a reorganization within the meaning of Section 368(a) of the Code and the Acquired Fund and the Acquiring Fund will each be a “party to a reorganization” within the meaning of Section 368(b) of the Code, (ii) under Sections 361 and 357 of the Code, no gain or loss will be recognized by the Acquired Fund upon the transfer of its assets to the Acquiring Fund pursuant to this Agreement in exchange for Merger Shares and the assumption of the Acquired Fund’s liabilities by the Acquiring Fund or upon the distribution of Merger Shares by the Acquired Fund to its shareholders in liquidation of the Acquired Fund, except for (A) any gain or loss recognized on (1) “Section 1256 contracts” as defined in Section 1256(b) of the Code or (2) stock in a “passive foreign investment company” as defined in Section 1297(a) of the Code, and (B) any other

A-18 

 



gain or loss required to be recognized (1) as a result of the closing of the tax year of the Acquired Fund, (2) upon the termination of a position, or (3) upon the transfer of an asset regardless of whether such a transfer would otherwise be a nontaxable transaction under the Code, (iii) under Section 354 of the Code, no gain or loss will be recognized by shareholders of the Acquired Fund upon the exchange of their shares of the Acquired Fund for Merger Shares, (iv) under Section 358 of the Code, the aggregate tax basis of the Merger Shares received by a shareholder of the Acquired Fund pursuant to this Agreement will be the same as the aggregate tax basis of the Acquired Fund shares exchanged therefor, (v) under Section 1223(1) of the Code, the holding period for the Merger Shares received pursuant to this Agreement by a shareholder of the Acquired Fund will be determined by including the period during which such shareholder held or is treated for federal income tax purposes as having held the shares of the Acquired Fund exchanged therefor, provided that, the shareholder held those shares of the Acquired Fund as capital assets, (vi) under Section 1032 of the Code, no gain or loss will be recognized by the Acquiring Fund upon the receipt of the assets of the Acquired Fund in exchange for Merger Shares and the assumption by the Acquiring Fund of the liabilities of the Acquired Fund, (vii) under Section 362(b) of the Code, the Acquiring Fund’s tax basis in the assets of the Acquired Fund transferred to the Acquiring Fund pursuant to this Agreement will be the same as the Acquired Fund’s tax basis immediately prior to the transfer, increased by any gain or decreased by any loss required to be recognized as described in (ii) above, (viii) under Section 1223(2) of the Code, the holding period in the hands of the Acquiring Fund of each Acquired Fund asset transferred to the Acquiring Fund pursuant to this Agreement, other than certain assets with respect to which gain or loss is required to be recognized as described in (ii) above, will include the period during which such asset was held or treated for federal income tax purposes as held by the Acquired Fund, and (ix) the Acquiring Fund will succeed to and take into account the items of the Acquired Fund described in Section 381(c) of the Code, subject to the conditions and limitations specified in Sections 381, 382, 383 and 384 of the Code and the regulations thereunder.

(h) That all proceedings taken by or on behalf of the Acquiring Fund in connection with the transactions contemplated by this Agreement and all documents incidental thereto will be satisfactory in form and substance to the Acquired Fund and Ropes & Gray LLP.

(i) That the Registration Statement is effective under the 1933 Act, and no stop order suspending such effectiveness will have been instituted or, to the knowledge of the Acquiring Fund, threatened by the Commission.

(j) That the Acquired Fund shall have received from the Commission, any relevant state securities administrator and the Department such order or orders as Ropes & Gray LLP deems reasonably necessary or desirable under the 1933 Act, the 1934 Act, the 1940 Act

A-19 

 



and any applicable state securities or blue sky laws in connection with the transactions contemplated hereby, and that all such orders shall be in full force and effect.

10. Indemnification.

(a) The Acquired Fund agrees to indemnify and hold harmless, out of the assets of the Acquired Fund but no other assets, the Acquiring Fund, its Trustees and its officers (for purposes of this subparagraph, the “Indemnified Parties”) against any and all expenses, losses, claims, damages and liabilities at any time imposed upon or reasonably incurred by any one or more of the Indemnified Parties in connection with, arising out of, or resulting from any claim, action, suit or proceeding in which any one or more of the Indemnified Parties may be involved or with which any one or more of the Indemnified Parties may be threatened by reason of any untrue statement or alleged untrue statement of a material fact relating to the Acquired Fund contained in the Registration Statement, the Prospectus, the Proxy Statement, or any amendment or supplement to any of the foregoing, or arising out of or based upon the omission or alleged omission to state in any of the foregoing a material fact relating to the Acquired Fund required to be stated therein or necessary to make the statements relating to the Acquired Fund therein not misleading, including, without limitation, any amounts paid by any one or more of the Indemnified Parties in a reasonable compromise or settlement of any such claim, action, suit or proceeding, or threatened claim, action, suit or proceeding made with the consent of the Acquired Fund. The Indemnified Parties will notify the Acquired Fund in writing within ten days after the receipt by any one or more of the Indemnified Parties of any notice of legal process or any suit brought against or claim made against such Indemnified Party as to any matters covered by this Section 10(a). The Acquired Fund shall be entitled to participate at its own expense in the defense of any claim, action, suit or proceeding covered by this Section 10(a), or, if it so elects, to assume at its expense by counsel satisfactory to the Indemnified Parties the defense of any such claim, action, suit or proceeding, and if the Acquired Fund elects to assume such defense, the Indemnified Parties shall be entitled to participate in the defense of any such claim, action, suit or proceeding at their expense. The Acquired Fund’s obligation under this Section 10(a) to indemnify and hold harmless the Indemnified Parties constitutes a guarantee of payment so that the Acquired Fund will pay in the first instance any expenses, losses, claims, damages and liabilities required to be paid by it under this Section 10(a) without the necessity of the Indemnified Parties’ first paying the same.

(b) The Acquiring Fund agrees to indemnify and hold harmless, out of the assets of the Acquiring Fund but no other assets, the Acquired Fund, its Trustees and its officers (for purposes of this subparagraph, the “Indemnified Parties”) against any and all expenses, losses, claims, damages and liabilities at any time imposed upon or reasonably incurred by any one or more of the Indemnified Parties in connection with, arising out of, or resulting from any claim, action, suit or proceeding in which

A-20 

 



any one or more of the Indemnified Parties may be involved or with which any one or more of the Indemnified Parties may be threatened by reason of any untrue statement or alleged untrue statement of a material fact relating to the Acquiring Fund contained in the Registration Statement, the Prospectus, the Proxy Statement, or any amendment or supplement to any of the foregoing, or arising out of, or based upon, the omission or alleged omission to state in any of the foregoing a material fact relating to the Acquiring Fund required to be stated therein or necessary to make the statements relating to the Acquiring Fund therein not misleading, including without limitation any amounts paid by any one or more of the Indemnified Parties in a reasonable compromise or settlement of any such claim, action, suit or proceeding, or threatened claim, action, suit or proceeding made with the consent of the Acquiring Fund. The Indemnified Parties will notify the Acquiring Fund in writing within ten days after the receipt by any one or more of the Indemnified Parties of any notice of legal process or any suit brought against or claim made against such Indemnified Party as to any matters covered by this Section 10(b). The Acquiring Fund shall be entitled to participate at its own expense in the defense of any claim, action, suit or proceeding covered by this Section 10(b), or, if it so elects, to assume at its expense by counsel satisfactory to the Indemnified Parties the defense of any such claim, action, suit or proceeding, and, if the Acquiring Fund elects to assume such defense, the Indemnified Parties shall be entitled to participate in the defense of any such claim, action, suit or proceeding at their own expense. The Acquiring Fund’s obligation under this Section 10(b) to indemnify and hold harmless the Indemnified Parties constitutes a guarantee of payment so that the Acquiring Fund will pay in the first instance any expenses, losses, claims, damages and liabilities required to be paid by it under this Section 10(b) without the necessity of the Indemnified Parties’ first paying the same.

11. No broker, etc.

Each Acquired Fund and the Acquiring Fund represents that there is no person who has dealt with it who by reason of such dealings is entitled to any broker’s or finder’s or other similar fee or commission arising out of the transactions contemplated by this Agreement.

12. Termination.

The Trust, on behalf of the Acquired Fund and the Acquiring Fund, may, by consent of its Trustees, terminate this Agreement, and either the Acquired Fund or the Acquiring Fund, after consultation with counsel and by consent of their Trustees or an officer authorized by such Trustees, may waive any condition to their respective obligations hereunder. If the transactions contemplated by this Agreement have not been substantially completed by December 31, 2020, this Agreement shall automatically terminate on that date unless a later date is agreed to by the Trust, on behalf of the Acquired Fund and the Acquiring Fund.

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13. Covenants, etc. deemed material.

All covenants, agreements, representations and warranties made under this Agreement and any certificates delivered pursuant to this Agreement shall be deemed to have been material and relied upon by each of the parties, notwithstanding any investigation made by them or on their behalf.

14. Sole agreement; amendments.

This Agreement supersedes all previous correspondence and oral communications between the parties regarding the subject matter hereof, constitutes the only understanding with respect to such subject matter, may not be changed except by a letter of agreement signed by each party hereto, and shall be construed in accordance with and governed by the laws of The Commonwealth of Massachusetts.

15. Agreement and Declaration of Trust.

A copy of the Trust’s Agreement and Declaration of Trust, as amended, is on file with the Secretary of State of The Commonwealth of Massachusetts, and notice is hereby given that this instrument is executed by the Trustees or officers of the Trust as Trustees or officers and not individually and that the obligations of this instrument are not binding upon any of the Trustees, officers, or shareholders of the Trust individually but are binding only upon the assets and property of Capital Spectrum Fund, Equity Spectrum Fund, and the Acquiring Fund.

This Agreement may be executed in any number of counterparts, each of which, when executed and delivered, shall be deemed to be an original.

PUTNAM FUNDS TRUST, on behalf of its PUTNAM FOCUSED EQUITY FUND, 
PUTNAM CAPITAL SPECTRUM FUND, and PUTNAM EQUITY SPECTRUM FUND 
series 
By:_______________________ 
Jonathan S. Horwitz 
Executive Vice President, Principal Executive Officer and Compliance Liaison 
 
PUTNAM INVESTMENT MANAGEMENT, LLC, solely for the purposes of Section 5 
By:_______________________ 
James Clark 
Chief Compliance Officer 

 

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Appendix B 

 

Financial intermediary specific sales charge waiver information:

As described in the prospectus, class A shares may be subject to an initial sales charge and class B and C shares may be subject to a CDSC. Certain financial intermediaries may impose different initial sales charges or waive the initial sales charge or CDSC in certain circumstances. This Appendix details the variations in sales charge waivers by financial intermediary. Not all financial intermediaries specify financial intermediary-specific sales charge waiver categories for every share class. For information about sales charges and waivers available for share classes other than those listed below, please see the section “Additional reductions and waivers of sales charges” in the prospectus. You should consult your financial representative for assistance in determining whether you may qualify for a particular sales charge waiver.

AMERIPRISE FINANCIAL

Class A Shares Front-End Sales Charge Waivers Available at Ameriprise Financial

The following information applies to class A share purchases if you have an account with or otherwise purchase class A shares through Ameriprise Financial:

Effective June 1, 2018, shareholders purchasing class A shares of the fund through Ameriprise Financial will be eligible for the following front-end sales charge waivers only, which may differ from those disclosed elsewhere in this prospectus or the SAI:

• Employer-sponsored retirement plans (e.g., 401(k) plans, 457 plans, employer-sponsored 403(b) plans, profit sharing and money purchase pension plans and defined benefit plans). For purposes of this provision, employer-sponsored retirement plans do not include SEP IRAs, Simple IRAs or SAR-SEPs

• Shares purchased through an Ameriprise Financial investment advisory program

• Shares purchased by third party investment advisors on behalf of their advisory clients through Ameriprise Financial’s platform

• Shares purchased through reinvestment of capital gains distributions and dividend reinvestment when purchasing shares of the same fund (but not any other Putnam fund)

• Shares exchanged from Class C shares of the same fund in the month of or following the 10-year anniversary of the purchase date. To the extent that this prospectus elsewhere provides for a waiver with respect to such shares following a shorter holding period, that waiver will apply to exchanges following such shorter period. To the extent that this prospectus elsewhere provides for a waiver with respect to exchanges of Class C shares for load waived shares, that waiver will also apply to such exchanges

• Employees and registered representatives of Ameriprise Financial or its affiliates and their immediate family members

B-1 

 



• Shares purchased by or through qualified accounts (including IRAs, Coverdell Education Savings Accounts, 401(k)s, 403(b) TSCAs subject to ERISA and defined benefit plans) that are held by a covered family member, defined as an Ameriprise financial advisor and/or the advisor’s spouse, advisor’s lineal ascendant (mother, father, grandmother, grandfather, great grandmother, great grandfather), advisor’s lineal descendant (son, step-son, daughter, step-daughter, grandson, granddaughter, great grandson, great granddaughter) or any spouse of a covered family member who is a lineal descendant

• Shares purchased from the proceeds of redemptions within the same fund family, provided (1) the repurchase occurs within 90 days following the redemption, (2) the redemption and purchase occur in the same account, and (3) redeemed shares were subject to a front-end or deferred sales load (i.e. Rights of Reinstatement)

MERRILL LYNCH

Effective April 10, 2017, if you purchase fund shares through a Merrill Lynch platform or account held at Merrill Lynch, you will be eligible only for the following sales charge waivers (front-end sales charge waivers and CDSC waivers) and discounts, which may differ from those disclosed elsewhere in the fund’s prospectus or SAI. It is your responsibility to notify your financial representative at the time of purchase of any relationship or other facts qualifying you for sales charge waivers or discounts.

Front-end Sales Charge Waivers on Class A Shares available through Merrill Lynch

• Employer-sponsored retirement, deferred compensation and employee benefit plans (including health savings accounts) and trusts used to fund those plans, provided that the shares are not held in a commission-based brokerage account and shares are held for the benefit of the plan

• Shares purchased by college savings plans that qualify for tax-exempt treatment under Section 529 of the Internal Revenue Code of 1986, as amended

• Shares purchased through a Merrill Lynch-affiliated investment advisory program

• Shares purchased by third party investment advisors on behalf of their advisory clients through Merrill Lynch’s platform

• Shares of funds purchased through the Merrill Edge Self-Directed platform

• Shares purchased through reinvestment of capital gains distributions and dividend reinvestment when purchasing shares of the fund (but not any other Putnam fund)

• Shares exchanged from Class C shares of the same fund in the month of or following the 10-year anniversary of the purchase date

• Employees and registered representatives of Merrill Lynch or its affiliates and their family members

• Trustees of the fund, and employees of Putnam Management or any of its affiliates, as described in the fund’s prospectus

B-2 

 



• Shares purchased from the proceeds of redemptions from a Putnam fund, provided (1) the repurchase occurs within 90 days following the redemption, (2) the redemption and purchase occur in the same account, and (3) redeemed shares were subject to a front-end or deferred sales charge (known as Rights of Reinstatement)

CDSC Waivers on A, B and C Shares available through Merrill Lynch

• Death or disability of the shareholder

• Shares sold as part of a systematic withdrawal plan as described in the fund’s prospectus

• Return of excess contributions from an IRA Account

• Shares sold as part of a required minimum distribution for IRA and retirement accounts due to the shareholder reaching age 70½

• Shares sold to pay Merrill Lynch fees but only if the transaction is initiated by Merrill Lynch

• Shares acquired through a right of reinstatement

• Shares held in retirement brokerage accounts that are exchanged for a share class with lower operating expenses due to transfer to certain fee-based accounts or platforms (applicable to A and C shares only)

Front-end Sales Charge Discounts available through Merrill Lynch: Breakpoints, Rights of Accumulation & Letters of Intent

• Breakpoints as described in the fund’s prospectus and SAI

• Rights of Accumulation (ROA), which entitle you to breakpoint discounts, will be automatically calculated based on the aggregated holding of fund family assets held by accounts within your household at Merrill Lynch. Eligible Putnam fund assets not held at Merrill Lynch may be included in the ROA calculation only if you notify your financial representative about such assets

• Letters of Intent (LOI), which allow for breakpoint discounts based on anticipated purchases of Putnam funds, through Merrill Lynch, over a 13-month period

MORGAN STANLEY WEALTH MANAGEMENT

Effective July 1, 2018, shareholders purchasing fund shares through a Morgan Stanley Wealth Management transactional brokerage account will be eligible only for the following front-end sales charge waivers with respect to class A shares, which may differ from and may be more limited than those disclosed elsewhere in this fund’s Prospectus or SAI.

Front-end Sales Charge Waivers on class A Shares available at Morgan Stanley Wealth Management:

• Employer-sponsored retirement plans (e.g., 401(k) plans, 457 plans, employer-sponsored 403(b) plans, profit sharing and money purchase pension plans and defined benefit plans). For purposes of this provision, employer-sponsored retirement plans do not include SEP IRAs, Simple IRAs, SAR-SEPs or Keogh plans

B-3 

 



• Morgan Stanley employee and employee-related accounts according to Morgan Stanley’s account linking rules

• Shares purchased through reinvestment of dividends and capital gains distributions when purchasing shares of the same fund

• Shares purchased through a Morgan Stanley self-directed brokerage account

• Class C (i.e., level-load) shares that are no longer subject to a contingent deferred sales charge and are converted to Class A shares of the same fund pursuant to Morgan Stanley Wealth Management’s share class conversion program

• Shares purchased from the proceeds of redemptions within the same fund family, provided (i) the repurchase occurs within 90 days following the redemption, (ii) the redemption and purchase occur in the same account, and (iii) redeemed shares were subject to a front-end or deferred sales charge

RAYMOND JAMES & ASSOCIATES, INC., RAYMOND JAMES FINANCIAL SERVICES, INC. AND EACH ENTITY’S AFFILIATES (“RAYMOND JAMES”)

Effective March 1, 2019, shareholders purchasing fund shares through a Raymond James platform or account, or through an introducing broker-dealer or independent registered investment adviser for which Raymond James provides trade execution, clearance, and/or custody services, will be eligible only for the following load waivers (front-end sales charge waivers and contingent deferred, or back-end, sales charge waivers) and discounts, which may differ from those disclosed elsewhere in this fund’s prospectus or SAI.

In all instances, it is the purchaser’s responsibility to notify the fund or the purchaser’s financial intermediary at the time of purchase of any relationship or other facts qualifying the purchaser for sales charge waivers or discounts. For waivers and discounts not available through a particular intermediary, shareholders will have to purchase fund shares directly from the fund or through another intermediary to receive these waivers or discounts.

Front-end sales load waivers on Class A shares available at Raymond James

• Shares purchased in an investment advisory program.

• Shares purchased within the same fund family through a systematic reinvestment of capital gains and dividend distributions.

• Employees and registered representatives of Raymond James or its affiliates and their family members as designated by Raymond James.

• Shares purchased from the proceeds of redemptions within the same fund family, provided (1) the repurchase occurs within 90 days following the redemption, (2) the

B-4 

 



redemption and purchase occur in the same account, and (3) redeemed shares were subject to a front-end or deferred sales load (known as Rights of Reinstatement).

• A shareholder in the Fund’s Class C shares will have their shares converted at net asset value to Class A shares of the Fund if the shares are no longer subject to a CDSC and the conversion is in line with the policies and procedures of Raymond James.

CDSC Waivers on Classes A, B and C shares available at Raymond James

• Death or disability of the shareholder.

• Shares sold as part of a systematic withdrawal plan as described in the fund’s prospectus.

• Return of excess contributions from an IRA Account.

• Shares sold as part of a required minimum distribution for IRA and retirement accounts due to the shareholder reaching age 70½ as described in the fund’s prospectus.

• Shares sold to pay Raymond James fees but only if the transaction is initiated by Raymond James.

• Shares acquired through a right of reinstatement.

Front-end load discounts available at Raymond James: breakpoints, rights of accumulation, and/or letters of intent

• Breakpoints as described in this prospectus.

• Rights of accumulation which entitle shareholders to breakpoint discounts will be automatically calculated based on the aggregated holding of fund family assets held by accounts within the purchaser’s household at Raymond James. Eligible fund family assets not held at Raymond James may be included in the calculation of rights of accumulation calculation only if the shareholder notifies his or her financial advisor about such assets.

• Letters of intent which allow for breakpoint discounts based on anticipated purchases within a fund family, over a 13-month time period. Eligible fund family assets not held at Raymond James may be included in the calculation of letters of intent only if the shareholder notifies his or her financial advisor about such assets.

B-5 

 



Class A Sales Charge Waivers Available Only Through Specified Intermediaries

As described in the prospectus, class A shares may be purchased at net asset value without payment of a sales charge through a broker-dealer, financial institution, or financial intermediary that has entered into an agreement with Putnam Retail Management to offer shares through a retail self-directed brokerage account with or without the imposition of a transaction fee.

The following intermediaries have entered into such an agreement:

National Financial Services LLC
Charles Schwab & Co., Inc.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
J.P. Morgan Securities LLC
TD Ameritrade, Inc. and TD Ameritrade Clearing, Inc.
Morgan Stanley Smith Barney LLC

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B-7 

 



Putnam Investments
100 Federal Street
Boston, MA 02110
1-800-225-1581

Address correspondence to:
Putnam Investments
P.O. Box 219697
Kansas City, MO 64121-9697

putnam.com  320216 2/20 

 















Putnam Focused Equity Fund
A series of Putnam Funds Trust
 
FORM N-14
 
PART B
 
STATEMENT OF ADDITIONAL INFORMATION 
 
March 2, 2020

 

This Statement of Additional Information (“SAI”) contains additional information to that included in the Prospectus/Proxy Statement of Putnam Focused Equity Fund dated March 2, 2020 (the “Prospectus/Proxy Statement”) relating to the sale of all or substantially all of the assets of Putnam Capital Spectrum Fund and Putnam Equity Spectrum Fund (the “Acquired Funds”) to Putnam Focused Equity Fund. Unaudited narrative pro forma financial information for Putnam Capital Spectrum Fund, Putnam Equity Spectrum Fund, and Putnam Focused Equity Fund for the twelve-month period ended August 31, 2019 is included in this SAI. Putnam Focused Equity Fund’s Statement of Additional Information dated December 30, 2019, as supplemented, is attached to this SAI as an Appendix. This SAI is not a prospectus and is authorized for distribution only when it accompanies or follows delivery of the Prospectus/Proxy Statement. This SAI should be read in conjunction with the Prospectus/Proxy Statement. Investors may obtain a free copy of the Prospectus/Proxy Statement by writing Putnam Investments, P.O. Box 219697, Kansas City, MO 64121-9697 or by calling 1-800-225-1581.



TABLE OF CONTENTS  
 
ADDITIONAL INFORMATION ABOUT THE ACQUIRING FUND 
SHARE OWNERSHIP 
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 
PRO FORMA FINANCIAL INFORMATION 
APPENDIX – STATEMENT OF ADDITIONAL INFORMATION I-1 

 

ADDITIONAL INFORMATION ABOUT THE ACQUIRING FUND

The Statement of Additional Information of Putnam Focused Equity Fund dated December 30, 2019, as supplemented (the “Acquiring Fund SAI”), which has been filed with the Securities and Exchange Commission, is included as the Appendix to this SAI. The information regarding Putnam Focused Equity Fund contained in the Acquiring Fund SAI is hereby incorporated by reference into this SAI.

UPDATED CALENDAR YEAR-END INFORMATION 

 

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, 2019.

Name of Trustee Dollar range of Putnam Aggregate dollar range of shares 
 Focused Equity Fund held in all of the Putnam funds 
 shares owned overseen by Trustee 
Independent Trustees   
Liaquat Ahamed $1- $10,000 over $100,000 
Ravi Akhoury $1- $10,000 over $100,000 
Barbara M. Baumann $1- $10,000 over $100,000 
Katinka Domotorffy $1- $10,000 over $100,000 
*Catharine Bond Hill $1- $10,000 over $100,000 
Paul L. Joskow $10,001- $50,000 over $100,000 
Kenneth R. Leibler $1- $10,000 over $100,000 
Robert E. Patterson $10,001-$50,000 over $100,000 
George Putnam, III over $100,000 over $100,000 
*Manoj P. Singh $1-$10,000 over $100,000 
Interested Trustee   
** Robert L. Reynolds $1- $10,000 over $100,000 

 

*Appointed to the Board of Trustees on March 16, 2017.

** Trustee who is an “interested person” (as defined in the Investment Company Act of 1940) of the fund and Putnam Management. Mr. Reynolds is deemed an “interested person” by virtue of his positions as an officer of the fund and Putnam Management. Mr. Reynolds is the President and Chief Executive Officer of Putnam Investments, LLC and President of your fund and each of the

 



other Putnam funds. None of the other Trustees is an “interested person.”

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 2019, and the fees paid to each Trustee by all of the Putnam funds for services rendered during calendar year 2019:

 



 COMPENSATION TABLE  
   
  Pension orEstimated 
retirement annual Total
  benefitsbenefits fromcompensation 
 Aggregateaccrued as all Putnam from all
 compensation part of fund funds upon Putnam 
Trustee/Yearfrom the fund expenses retirement(1) funds(2) 
Independent Trustees     
Liaquat Ahamed/2012(3) $444 N/A N/A $318,750 
Ravi Akhoury/2009 $451 N/A N/A $325,000 
Barbara M.     
Baumann/2010(3)(4) $484 N/A N/A $350,000 
Katinka Domotorffy/2012(3) $451 N/A N/A $325,000 
Catharine Bond Hill/2017(3) $451 N/A N/A $325,000 
Paul L. Joskow/1997(3) $451 $41 $113,417 $325,000 
Kenneth R. Leibler/2006(5) $613 N/A N/A $445,000 
Robert E. Patterson/1984 $397 $63 $106,542 $293,750 
George Putnam, III/1984(6) $484 $67 $130,333 $350,000 
Manoj P. Singh/2017 $451 N/A N/A $325,000 
Interested Trustee     
Robert L. Reynolds/2008(7) N/A N/A N/A N/A 

 

(1) Estimated benefits for each Trustee are based on Trustee fee rates for calendar years 2003, 2004 and 2005.

(2) As of December 31, 2019, there were 91 funds in the Putnam family.

(3) Certain Trustees are also owed compensation deferred pursuant to a Trustee Compensation Deferral Plan. As of August 31, 2019, the total amounts of deferred compensation payable by the fund, including income earned on such amounts, to these Trustees were: Mr. Ahamed - $2,437; Ms. Baumann - $2,382; Ms. Domotorffy - $2,272; Dr. Hill - $592; and Dr. Joskow - $11,316.

(4) Includes additional compensation to Ms. Baumann for service as Chair of the Audit, Compliance and Distributions Committee.

(5) Includes additional compensation to Mr. Leibler for service as Chair of the Trustees of the Putnam funds.

(6) Includes additional compensation to Mr. Putnam for service as Chair of the Contract Committee.

(7) Mr. Reynolds is an "interested person" of the fund and Putnam Management.

 



SHARE OWNERSHIP

At January 31, 2020, the officers and Trustees of the fund as a group owned less than 1% of the outstanding shares of each class of the fund, except class R6 of the fund, of which they owned 1.06%, 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.

  Percentage 
Class Shareholder name and address owned 
PERSHING, LLC  
 1 PERSHING PLZ  
 JERSEY CITY NJ, 07399-0001 7.65% 
NATIONAL FINANCIAL SERVICES LLC  
 FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS  
 499 WASHINGTON BLVD  
 ATTN: MUTUAL FUNDS DEPT 4TH FL  
 JERSEY CITY NJ, 07310-1995 7.20% 
PERSHING, LLC  
 1 PERSHING PLZ  
 JERSEY CITY NJ, 07399-0001 29.34% 
AMERICAN ENTERPRISE INVESTMENT SVC  
 707 2ND AVE S  
 MINNEAPOLIS MN, 55402-2405 21.19% 
NATIONAL FINANCIAL SERVICES LLC  
 FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS  
 499 WASHINGTON BLVD  
 ATTN: MUTUAL FUNDS DEPT 4TH FL  
 JERSEY CITY NJ, 07310-1995 6.01% 
PERSHING, LLC  
 1 PERSHING PLZ  
 JERSEY CITY NJ, 07399-0001 17.02% 
WELLS FARGO CLEARING SERVICES, LLC  
 SPECIAL CUSTODY ACCT FOR THE  
 EXCLUSIVE BENEFIT OF CUSTOMER  
 2801 MARKET ST  
 SAINT LOUIS MO, 63103-2523 16.53% 
RAYMOND JAMES  
 OMNIBUS FOR MUTUAL FUNDS  
 ATTN: COURTNEY WALLER  
 880 CARILLON PKWY  
 ST PETERSBURG FL, 33716-1100 15.31% 

 

 



NATIONAL FINANCIAL SERVICES LLC  
 FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS  
 499 WASHINGTON BLVD  
 ATTN: MUTUAL FUNDS DEPT 4TH FL  
 JERSEY CITY NJ, 07310-1995 8.55% 
MLPF&S FOR THE SOLE BENEFIT OF IT'S CUSTOMERS  
 ATTN FUND ADMINISTRATION  
 4800 DEER LAKE DR E FL 3  
 JACKSONVILLE FL, 32246-6484 13.19% 
STATE STREET BK & TR TTEE &/OR CUST  
 ADP ACCESS PRODUCT  
 1 LINCOLN ST  
 BOSTON MA, 02111-2901 9.20% 
CHARLES MCCOMB & LOWELL KAHN TTEE  
 HARTLAND BUILDING & RESTORATION COM  
 C/O FASCORE LLC  
 8515 E ORCHARD RD # 2T2  
 GREENWOOD VLG CO, 80111-5002 6.49% 
ANASTASIA OLSON TTEE FBO  
 EXTREME COATINGS INC 401K  
 C/O FASCORE LLC  
 8515 E ORCHARD RD # 2T2  
 GREENWOOD VLG CO, 80111-5002 5.27% 
R6 GREAT WEST TR CO LLC FBO PFTC FBO  
 THE PUTNAM RETIREMENT PLAN  
 C/O FASCORE LLC  
 8515 E ORCHARD RD # 2T2  
 GREENWOOD VLG CO, 80111-50026 99.50% 
LPL FINANCIAL  
 --OMNIBUS CUSTOMER ACCOUNT—  
 ATTN: LINDSAY O'TOOLE  
 4707 EXECUTIVE DRIVE  
 SAN DIEGO CA, 92121-3091 20.27% 
NATIONAL FINANCIAL SERVICES LLC  
 FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS  
 499 WASHINGTON BLVD  
 ATTN: MUTUAL FUNDS DEPT 4TH FL  
 JERSEY CITY NJ, 07310-1995 18.37% 
WELLS FARGO CLEARING SERVICES, LLC  
 SPECIAL CUSTODY ACCT FOR THE  
 EXCLUSIVE BENEFIT OF CUSTOMER  
 2801 MARKET ST  
 SAINT LOUIS MO, 63103-2523 12.01% 
PERSHING, LLC  
 1 PERSHING PLZ  
 JERSEY CITY NJ, 07399-0001 11.25% 

 

 



RAYMOND JAMES  
 OMNIBUS FOR MUTUAL FUNDS  
 ATTN: COURTNEY WALLER  
 880 CARILLON PKWY  
 ST PETERSBURG FL, 33716-1100 10.86% 
MORGAN STANLEY SMITH BARNEY LLC  
 FOR THE EXCLUSIVE BENEFIT OF ITS CUSTOMERS  
 1 NEW YORK PLAZA FL 12  
 NEW YORK NY, 10004-1901 6.59% 

 

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

KPMG LLP, Two Financial Center, 60 South Street, Boston, Massachusetts 02111, is Putnam Equity Spectrum Fund and Putnam Focused Equity 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. PricewaterhouseCoopers LLP, 101 Seaport Boulevard, Boston, Massachusetts 02210, is Putnam Capital Spectrum 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 following documents are incorporated by reference into this SAI: (i) Report of Independent Registered Public Accounting Firm, financial highlights and financial statements included in Putnam Capital Spectrum Fund’s Annual Report to shareholders for the fiscal year ended April 30, 2019, (ii) Report of Independent Registered Public Accounting Firm, financial highlights and financial statements included in Putnam Equity Spectrum Fund’s Annual Report to shareholders for the fiscal year ended April 30, 2019, and (iii) Report of Independent Registered Public Accounting Firm, financial highlights and financial statements included in Putnam Focused Equity Fund’s Annual Report to shareholders for the fiscal year ended August 31, 2019. The audited financial statements for Putnam Capital Spectrum Fund, Putnam Equity Spectrum Fund, and Putnam Focused Equity Fund incorporated by reference into the Prospectus/Proxy Statement and SAI have been so included and incorporated in reliance upon the reports of the independent registered public accounting firm, given on their authority as experts in auditing and accounting.

 



PRO FORMA FINANCIAL INFORMATION 
 
Putnam Capital Spectrum Fund
Putnam Equity Spectrum Fund
AND
Putnam Focused Equity Fund

 

Putnam Capital Spectrum Fund, Putnam Equity Spectrum Fund and Putnam Focused Equity Fund are open-end management investment companies registered under the Investment Company Act of 1940, as amended. The funds are managed by Putnam Investment Management, LLC (“Putnam Management”).

The unaudited pro forma information provided herein should be read in conjunction with the separate financial statements of Putnam Capital Spectrum Fund, Putnam Equity Spectrum Fund and Putnam Focused Equity Fund incorporated by reference into this SAI. The funds follow generally accepted accounting principles (GAAP) in the United States of America applicable to management investment companies, which are disclosed in the separate financial statements of each fund.

1. Narrative Description of the Pro Forma Effects of the Reorganization

The unaudited pro forma information set forth below for the twelve months ended August 31, 2019 is intended to present ratios and supplemental data for Putnam Focused Equity Fund (the accounting survivor) as if the combination with Putnam Capital Spectrum Fund and Putnam Equity Spectrum Fund (the “Reorganization”) had been consummated on August 31, 2019.

Putnam Focused Equity Fund offers six classes of shares: Class A, Class B, Class C, Class R, Class R6 and Class Y. Putnam Capital Spectrum Fund and Putnam Equity Spectrum Fund offer five classes of shares: Class A, Class B, Class C, Class R, and Class Y. The Reorganization provides for the proposed exchange of assets of each class of shares of Putnam Capital Spectrum Fund and Putnam Equity Spectrum Fund for Class A, Class B, Class C, Class R, and Class Y shares of Putnam Focused Equity Fund. Putnam Focused Equity Fund will be the surviving entity for accounting purposes with its results of operations being carried forward.

As of August 31, 2019, the net assets of Putnam Capital Spectrum Fund, Putnam Equity Spectrum Fund and Putnam Focused Equity Fund were $661,683,938, $371,539,116, and $182,297,591, respectively. Assuming the three funds merged on August 31, 2019, the net assets of the combined fund would have been $1,213,421,950, which reflects the impact of non-recurring merger costs of $98,695 allocated to Putnam Focused Equity Fund. Putnam Management has voluntarily agreed to pay the legal and accounting expenses, the costs of printing and mailing this prospectus/proxy statement, proxy solicitation costs, and SEC filing fees allocated to Putnam Capital Spectrum Fund and Putnam Equity Spectrum Fund. In addition, as a result of a contractual expense limitation of 20 basis points on so-called “other expenses” (i.e., all expenses exclusive of management fees, distribution fees, investor servicing fees, investment-related expenses, interest, taxes, brokerage commissions, acquired fund fees and expenses and extraordinary expenses) applicable to Putnam Focused Equity Fund, Putnam

 



Management will bear $104,033 of the merger costs allocated to Putnam Focused Equity Fund. The net asset value per share after the reorganization assumes the issuance, by Putnam Focused Equity Fund, of the following shares for the respective Putnam Capital Spectrum Fund and Putnam Equity Spectrum Fund net assets at August 31, 2019:

 Shares Issued Putnam Capital Spectrum net assets 
Class A 10,072,664 $218,354,043 
Class B 1,104,911 $22,349,475 
Class C 9,055,637 $183,463,642 
Class M* 157,857 $3,323,518 
Class R 166,147 $3,555,853 
Class Y 10,489,334 $230,637,407 
 
 Shares Issued Putnam Equity Spectrum Fund net assets 
Class A 6,439,586 $139,596,608 
Class B 593,427 $12,003,479 
Class C 3,594,522 $72,823,590 
Class M* 85,095 $1,791,589 
Class R 121,293 $2,595,901 
Class Y 6,491,233 $142,727,949 

 

* Effective November 25, 2019 all Class M shares were converted to Class A shares.

Assuming the reorganization had occurred at the beginning of the twelve-month period ended August 31, 2019, the proposed reorganization would have resulted in a decrease in other operating expenses of $416,685. The proposed reorganization would have also resulted in an increase of $13,765,701 to the net management fee for the combined fund due to the elimination of Putnam Capital Spectrum Fund’s and Putnam Equity Spectrum Fund’s negative performance fees and Putnam Focused Equity Fund’s effective base management fee being 0.10% lower at each tier level than Putnam Capital Spectrum Fund’s and Putnam Equity Spectrum Fund’s base management fee.

The significant accounting policies, including valuation policies, of Putnam Focused Equity Fund, Putnam Capital Spectrum Fund, and Putnam Equity Spectrum Fund are substantially identical and are not expected to change as a result of the merger.

Security Valuation

Portfolio securities and other investments are valued using policies and procedures adopted by the Board of Trustees. The Trustees have formed a Pricing Committee to oversee the implementation of these procedures and have delegated responsibility for valuing the fund’s assets in accordance with these procedures to Putnam Management. Putnam Management has established an internal Valuation Committee that is responsible for making fair value determinations, evaluating the effectiveness of the pricing policies of the fund and reporting to the Pricing Committee.

 



Investments for which market quotations are readily available are valued at the last reported sales price on their principal exchange, or official closing price for certain markets, and are classified as Level 1 securities under Accounting Standards Codification 820 Fair Value Measurements and Disclosures (ASC 820). If no sales are reported, as in the case of some securities that are traded OTC, a security is valued at its last reported bid price and is generally categorized as a Level 2 security .

Investments in open-end investment companies (excluding exchange-traded funds), if any, which can be classified as Level 1 or Level 2 securities are valued based on their net asset value. The net asset value of such investment companies equals the total value of their assets less their liabilities and divided by the number of their outstanding shares.

Market quotations are not considered to be readily available for certain debt obligations (including short-term investments with remaining maturities of 60 days or less) and other investments; such investments are valued on the basis of valuations furnished by an independent pricing service approved by the Trustees or dealers selected by Putnam Management. Such services or dealers determine valuations for normal institutional-size trading units of such securities using methods based on market transactions for comparable securities and various relationships, generally recognized by institutional traders, between securities (which consider such factors as security prices, yields, maturities and ratings). These securities will generally be categorized as Level 2.

Many securities markets and exchanges outside the U.S. close prior to the scheduled close of the New York Stock Exchange and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the scheduled close of the New York Stock Exchange. Accordingly, on certain days, the fund will fair value certain foreign equity securities taking into account multiple factors including movements in the U.S. securities markets, currency valuations and comparisons to the valuation of American Depository Receipts, exchange-traded funds and futures contracts. The foreign equity securities, which would generally be classified as Level 1 securities, will be transferred to Level 2 of the fair value hierarchy when they are valued at fair value. The number of days on which fair value prices will be used will depend on market activity and it is possible that fair value prices will be used by the fund to a significant extent. Securities quoted in foreign currencies, if any, are translated into U.S. dollars at the current exchange rate. Short-term securities with remaining maturities of 60 days or less are valued using an independent pricing service approved by the Trustees, and are classified as Level 2 securities.

To the extent a pricing service or dealer is unable to value a security or provides a valuation that Putnam Management does not believe accurately reflects the security's fair value, the security will be valued at fair value by Putnam Management in accordance with policies and procedures approved by the Trustees. Certain investments, including certain restricted and illiquid securities and derivatives, are also valued at fair value following procedures approved by the Trustees. These valuations consider such factors as significant market or specific security events such as interest rate or credit quality changes, various relationships with other securities, discount rates, U.S. Treasury, U.S. swap and credit yields, index levels, convexity exposures, recovery rates, sales and other multiples and resale restrictions. These securities are classified as Level 2 or as Level 3 depending on the priority of the significant inputs.

10 

 



To assess the continuing appropriateness of fair valuations, the Valuation Committee reviews and affirms the reasonableness of such valuations on a regular basis after considering all relevant information that is reasonably available. Such valuations and procedures are reviewed periodically by the Trustees. The fair value of securities is generally determined as the amount that the fund could reasonably expect to realize from an orderly disposition of such securities over a reasonable period of time. By its nature, a fair value price is a good faith estimate of the value of a security in a current sale and does not reflect an actual market price, which may be different by a material amount.

2. Merger costs

The costs associated with the proposed mergers are estimated to be $1,039,700. These fees and expenses, representing legal and accounting expenses, portfolio transfer taxes (if any), the costs of printing and mailing this prospectus/proxy statement, proxy solicitation costs, SEC filing fees, and other similar expenses incurred in connection with the consummation of the proposed mergers, will be allocated evenly between the three funds, except that relevant proxy solicitation costs will be allocated to the applicable Acquired Fund and that SEC filing fees (if any) will be allocated between the three funds pro rata based on fund assets. Because each fund is expected to benefit from the mergers, Putnam Management has determined that the allocation described above is a fair and objective manner of allocating the merger expenses. However, Putnam Management has voluntarily agreed to pay the legal and accounting expenses, the costs of printing and mailing this prospectus/proxy statement, proxy solicitation costs, and SEC filing fees allocated to each Acquired Fund. In addition, as a result of a contractual expense limitation of 20 basis points on so-called “other expenses” ( i.e. , all expenses exclusive of management fees, distribution fees, investor servicing fees, investment-related expenses, interest, taxes, brokerage commissions, acquired fund fees and expenses and extraordinary expenses) applicable to Putnam Focused Equity Fund, Putnam Management will bear $104,033 of the costs allocated to Putnam Focused Equity Fund. Thus, an estimated $941,005 will be paid by Putnam Management, an estimated $98,695 will be paid by Putnam Focused Equity Fund, $0 will be paid by Putnam Capital Spectrum Fund, and $0 will be paid by Putnam Equity Spectrum Fund. Of the total fees and expenses associated with the proposed mergers, if not for the expense limitation and voluntary payment described above, an estimated $202,728 would be paid by Putnam Focused Equity Fund, an estimated $477,936 would be paid by Putnam Capital Spectrum Fund, and an estimated $359,036 would be paid by Putnam Equity Spectrum Fund.

3. Tax implications

It is the policy of each fund to distribute all of its income within the prescribed time and otherwise comply with the provisions of the Internal Revenue Code of 1986, as amended (the “Code”), applicable to regulated investment companies. As of August 31, 2019, Putnam Focused Equity Fund had $86,942,649 of capital loss carryforwards available, to the extent allowed by the Code, to offset future net capital gain, if any. As of April 30, 2019, Putnam Capital Spectrum Fund and Putnam Equity Spectrum Fund had $0 and $101,168,928 of capital loss

11 

 



carryforwards available, to the extent allowed by the Code, to offset future net capital gain, if any.

The merger is expected to be a tax-free reorganization for federal income tax purposes.

4. Portfolio Realignment

Independent of the mergers and in the ordinary course of managing the Funds, Putnam Management expects that Putnam Capital Spectrum Fund’s and Putnam Equity Spectrum Fund’s portfolio manager will sell a significant percentage of each Acquired Fund’s currently held securities and significantly reduce each Acquired Fund’s cash position and invest that cash and the proceeds from the sales in accordance with each Acquired Fund’s investment guidelines. In addition, if the proposed mergers are approved, Putnam Management expects that, following the approval, the portfolio manager will sell additional securities to more closely align each Acquired Fund’s portfolio with the portfolio of Putnam Focused Equity Fund, the acquiring fund. Specifically, Putnam Management expects that a significant portion of Putnam Capital Spectrum Fund’s and Putnam Equity Spectrum Fund’s holdings will be sold before the mergers. This is expected to include the sale of all non-cash fixed income securities, convertible preferred stocks, exchange traded funds, and a substantial reduction or complete sale of a significant number of common stocks held by Putnam Capital Spectrum Fund and Putnam Equity Spectrum Fund. Based on the Acquired Funds’ portfolios as of December 31, 2019, Putnam Management currently anticipates that the Acquired Funds will dispose of approximately the following percentages of their portfolio holdings in connection with the mergers (including both ordinary course and portfolio realignment sales before the mergers and a reduction in each Acquired Fund’s cash position before and shortly following consummation of the mergers); however, these percentages are estimates and the funds’ actual portfolio realignment may differ:

• Putnam Capital Spectrum Fund – 80% of the portfolio

• Putnam Equity Spectrum Fund – 82% of the portfolio

Dispositions of portfolio holdings result in brokerage commissions and other transaction costs, and may result in the realization of capital gains that will be distributed to shareholders as taxable distributions after reduction by any available capital losses. In the case of sales taking place before the date of the proposed mergers, any net capital gains recognized in these sales will be distributed to shareholders of the applicable Acquired Fund as capital gain dividends (to the extent of net realized long-term capital gains over net-realized short-term capital losses) and/or ordinary dividends (to the extent of net realized short-term capital gains over net realized long-term capital losses) during or with respect to the year of sale. If all of the anticipated sales (including both ordinary course sales and sales in connection with the proposed mergers) had occurred on December 31, 2019, Putnam Capital Spectrum Fund would have had net realized capital gains of $73,642,865 ($3.25 per share). Putnam Equity Spectrum Fund would not have had any net realized capital gains as a result of such sales.

However, the actual amount of capital gains realized as a result of any sales will depend on the facts and circumstances at the time of the sales. Any net capital gain distribution would be taxable to shareholders, unless the shares are held through a qualified retirement plan or other tax-advantaged arrangement.

12 

 



Putnam Capital Spectrum Fund is expected to realize net capital gains with respect to its anticipated portfolio dispositions. As a result, Putnam Management currently anticipates that the fund’s portfolio dispositions will result in increased taxable distributions to shareholders of Putnam Capital Spectrum Fund before the merger. However, the effects of any disposition of portfolio holdings will depend on the facts and circumstances at the time of the disposition, and therefore it is possible that these dispositions might not result in the realization of capital gains that would be distributed to shareholders of Putnam Capital Spectrum Fund as taxable distributions.

Putnam Equity Spectrum Fund is expected to have net capital losses with respect to its anticipated portfolio dispositions, after taking into account capital loss carryforwards. As a result, Putnam Management does not currently anticipate that the fund’s portfolio dispositions will result in increased taxable distributions to shareholders of Putnam Equity Spectrum Fund before the merger. However, the effects of any disposition of portfolio holdings will depend on the facts and circumstances at the time of the disposition, and therefore it is possible that such dispositions could result in the realization of capital gains that would be distributed to shareholders of Putnam Equity Spectrum Fund as taxable distributions.

If the sales of each Acquired Fund’s securities had occurred on December 31, 2019, Putnam Management estimates that the Funds would have paid the following amounts in brokerage commissions (brokerage commissions paid by each Acquired Fund in connection with the merger may be higher or lower than this estimate ):

• Putnam Capital Spectrum Fund: $110,000 in brokerage commissions on those sales (0.02% of total fund)

• Putnam Equity Spectrum Fund: $65,000 in brokerage commissions on those sales (0.02% of total fund)

If any sales take place after the date of the proposed mergers, any net capital gains recognized in these sales will be distributed to shareholders of the combined fund and will likewise be taxable in the manner described above.

13 

 


APPENDIX A

SAI Part I 

 

FUND CLASS CLASS CLASS CLASS CLASS CLASS 
SYMBOLS A B C R R6 Y 
 PGIAX PGIVX PGIEX PGIOX PGWTX PGILX 

 

Putnam Focused Equity Fund 
 
A Series of Putnam Funds Trust 
 
FORM N-1A 
 
PART B 
 
STATEMENT OF ADDITIONAL INFORMATION (SAI) 
12/30/19 

 

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 includes all of the fund's prospectuses, unless otherwise noted. The SAI should be read together with the applicable prospectus. For a free copy of the fund's annual report or a prospectus dated 12/30/19, as revised from time to time, call Putnam Investor Services at 1-800-225-1581, visit Putnam's website at putnam.com or write Putnam Investments, P.O. Box 219697, Kansas City, MO 64121-9697.

Part I of this SAI contains specific information about the fund. Part II includes information about the fund and the other Putnam funds.

I-1 

 



Table of Contents 

 

PART I  
 
FUND ORGANIZATION AND CLASSIFICATION I-3 
INVESTMENT RESTRICTIONS I-4 
CHARGES AND EXPENSES I-6 
PORTFOLIO MANAGER I-17 
SECURITIES LENDING ACTIVITIES I-18 
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AND FINANCIAL  
STATEMENTS I-20 
 
 
PART II  
 
HOW TO BUY SHARES II-1 
DISTRIBUTION PLANS II-12 
MISCELLANEOUS INVESTMENTS, INVESTMENT PRACTICES AND RISKS II-18 
TAXES II-76 
MANAGEMENT II-92 
DETERMINATION OF NET ASSET VALUE II-113 
INVESTOR SERVICES II-115 
SIGNATURE GUARANTEES II-120 
REDEMPTIONS II-120 
POLICY ON EXCESSIVE SHORT-TERM TRADING II-120 
SHAREHOLDER LIABILITY II-120 
DISCLOSURE OF PORTFOLIO INFORMATION II-121 
INFORMATION SECURITY RISKS II-124 
PROXY VOTING GUIDELINES AND PROCEDURES II-124 
SECURITIES RATINGS II-125 
APPENDIX A - PROXY VOTING GUIDELINES OF THE PUTNAM FUNDS II-131 
APPENDIX B - FINANCIAL STATEMENTS II-153 

 

I-2 

 



SAI
 
PART I 

 

FUND ORGANIZATION AND CLASSIFICATION

Putnam Focused Equity Fund is a non-diversified series of Putnam Funds Trust, a Massachusetts business trust organized on January 22, 1996 (the "Trust"). A copy of the Trust's Amended and Restated Agreement and Declaration of Trust (the "Agreement and Declaration of Trust"), which is governed by Massachusetts law, is on file with the Secretary of The Commonwealth of Massachusetts. Prior to June 24, 2019, the fund was known as Putnam Global Industrials Fund.

The Trust 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 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 series and classes will vote together as a single class on all matters except (i) when required by the Investment Company Act of 1940 or when the Trustees have determined that a matter affects one or more series or classes materially differently, shares are voted by individual series or class; and (ii) when the Trustees determine that such a matter affects only the interests of a particular series or class, then only shareholders of that series or class are entitled to vote. The Trustees may take many actions affecting the fund without shareholder approval, including under certain circumstances merging your fund into another Putnam fund. 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.

I-3 

 



Information about the Summary Prospectus, Prospectus, and SAI

The fund has entered into contractual arrangements with an investment adviser, administrator, distributor, shareholder servicing agent, and custodian who each provide services to the fund. Unless expressly stated otherwise, shareholders are not parties to, or intended beneficiaries of these contractual arrangements, and these contractual arrangements are not intended to create any shareholder right to enforce them against the service providers or to seek any remedy under them against the service providers, either directly or on behalf of the fund.

Under the Trust's Agreement and Declaration of Trust, any claims asserted against or on behalf of the Putnam Funds, including claims against Trustees and Officers, must be brought in courts of The Commonwealth of Massachusetts.

INVESTMENT RESTRICTIONS

As fundamental investment restrictions, which may not be changed without a vote of a majority of the outstanding voting securities of a fund created under the Trust, the fund may not and will not:

(1) With respect to 50% 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.

(2) With respect to 50% of its total assets, acquire more than 10% of the outstanding voting securities of any issuer.

(3) 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.

(4) 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.

(5) Purchase or sell real estate, although it may purchase securities of issuers which deal in real estate, securities which are secured by interests in real estate, and securities which represent interests in real estate, and it may acquire and dispose of real estate or interests in real estate acquired through the exercise of its rights as a holder of debt obligations secured by real estate or interests therein.

(6) Purchase or sell commodities, except as permitted by applicable law.

I-4 

 



(7) 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.

(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.

The Investment Company Act of 1940 provides that a "vote of a majority of the outstanding voting securities" of a 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.

For purposes of the fund’s fundamental policy on industry concentration (#8 above), Putnam Investment Management, LLC ("Putnam Management"), the fund’s investment manager, determines the appropriate industry categories and assigns issuers to them, informed by a variety of considerations, including relevant third party categorization systems. Industry categories and issuer assignments may change over time as industry sectors and issuers evolve. Portfolio allocations shown in shareholder reports and other communications may use broader investment sectors or narrower sub-industry categories.

The following non-fundamental investment policy may be changed by the Trustees without shareholder approval:

The fund will not acquire any securities of registered open-end investment companies or registered unit investment trusts in reliance on Sections 12(d)(1)(F) or (G) of the Investment Company Act of 1940, as amended.

All percentage limitations on investments 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.

The Trust has filed an election under Rule 18f-1 under the Investment Company Act of 1940 committing each fund that is a series of the Trust to pay all redemptions of fund shares by a single shareholder during any 90-day period in cash, up to the lesser of (i) $250,000 or (ii) 1% of such fund's net assets measured as of the beginning of such 90-day period.

I-5 

 



CHARGES AND EXPENSES

Management fees

Under the fund's management contract (the "Management Contract"), the fund pays a monthly fee to Putnam Management. The fee is calculated by applying a rate to the fund’s average net assets for the month. The rate is based on the monthly average of the aggregate net assets of all open-end funds sponsored by Putnam Management (excluding net assets of funds that are invested in, or that are invested in by, other Putnam funds to the extent necessary to avoid "double counting" of those assets) (“Total Open-End Mutual Fund Average Net Assets”), as determined at the close of each business day during the month, as set forth below:

0.780% of the first $5 billion of Total Open-End Mutual Fund Average Net Assets;
0.730% of the next $5 billion of Total Open-End Mutual Fund Average Net Assets;
0.680% of the next $10 billion of Total Open-End Mutual Fund Average Net Assets;
0.630% of the next $10 billion of Total Open-End Mutual Fund Average Net Assets;
0.580% of the next $50 billion of Total Open-End Mutual Fund Average Net Assets;
0.560% of the next $50 billion of Total Open-End Mutual Fund Average Net Assets;
0.550% of the next $100 billion of Total Open-End Mutual Fund Average Net Assets;
and 0.545% of any excess thereafter.

For the past three fiscal years, pursuant to the Management Contract, the fund incurred the following fees:

  Amount of Amount management fee 
  management would have been without 
Fiscal year Management fee paid fee waived waivers 
2019 $313,111 $342,354 $655,465 
2018 $638,205 $0 $638,205 
2017 $205,637 $134,164 $339,801 

 

The amount of management fee waived for the 2017 and 2019 fiscal years resulted from arrangements set forth in “General expense limitation” under “Management – The Management Contract” in Part II of this SAI.

I-6 

 



Brokerage commissions

The following table shows brokerage commissions paid during the fiscal years indicated:

 Brokerage 
Fiscal year commissions 
2019 $176,347 
2018 $274,964 
2017 $176,322 

 

The brokerage commissions for the fund’s 2018 fiscal year were higher than the brokerage commissions for the 2017 and 2019 fiscal years due to increased market volatility.

The following table shows transactions placed with brokers and dealers during the most recent fiscal year through which Putnam Management and its affiliates receive brokerage or research services:

Dollar value of these Percentage of total Amount of 
transactions transactions commissions 
$91,386,846 16.28% $23,189 

 

At the end of fiscal 2019, the fund held the following securities of its regular broker-dealers (or affiliates of such broker-dealers):

Broker-dealer or affiliate Value of securities held 
Goldman Sachs Group, Inc. (The) $6,144,420 

 

I-7 

 



Administrative expense reimbursement

The fund reimbursed Putnam Management for administrative services during fiscal 2019, including compensation of certain Trust officers and contributions to the Putnam Retirement Plan for their benefit, as follows:

Total Portion of total reimbursement for 
reimbursement compensation and contributions 
$2,876 $1,987 

 

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, 2018.

I-8 

 



  Aggregate dollar range of shares 
 Dollar range of Putnam held in all of the Putnam funds 
 Focused Equity Fund overseen by Trustee 
Name of Trustee shares owned  
Independent Trustees   
Liaquat Ahamed $1 - $10,000 over $100,000 
Ravi Akhoury $1 - $10,000 over $100,000 
Barbara M. Baumann $1 - $10,000 over $100,000 
Katinka Domotorffy $1 - $10,000 over $100,000 
* Catharine Bond Hill $1 - $10,000 over $100,000 
Paul L. Joskow $1 - $10,000 over $100,000 
Kenneth R. Leibler $1 - $10,000 over $100,000 
Robert E. Patterson $10,001 - $50,000 over $100,000 
George Putnam, III $10,001 - $50,000 over $100,000 
* Manoj P. Singh none none 
Interested Trustee   
** Robert L. Reynolds $1 - $10,000 over $100,000 

 

*Appointed to the Board of Trustees on March 16, 2017.

** Trustee who is an "interested person" (as defined in the Investment Company Act of 1940) of the fund and Putnam Management. Mr. Reynolds is deemed an "interested person" by virtue of his positions as an officer of the fund and Putnam Management. Mr. Reynolds is the President and Chief Executive Officer of Putnam Investments, LLC and President of your fund and each of the other Putnam funds. None of the other Trustees is an "interested person".

Each Independent Trustee of the fund receives an annual retainer fee and an additional fee for each Trustee meeting attended. Independent Trustees also are reimbursed for expenses they incur relating to their services as Trustees. All of the current Independent Trustees of the fund are Trustees of all the Putnam funds and receive fees for their services.

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

I-9 

 



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 four business days per regular Trustee meeting. The standing committees of the Board of Trustees, and the number of times each committee met during your fund’s most recently completed fiscal year, are shown in the table below:

Audit, Compliance and Distributions Committee 10 
Board Policy and Nominating Committee 
Brokerage Committee 
Contract Committee 
Executive Committee 
Investment Oversight Committees  
Investment Oversight Committee A 
Investment Oversight Committee B 
Pricing Committee 

 

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 2019, and the fees paid to each Trustee by all of the Putnam funds for services rendered during calendar year 2018.

I-10 

 



COMPENSATION TABLE 

 

  Pension or Estimated annual  
  retirement benefits from all Total 
 Aggregate benefits accrued Putnam funds compensation 
 compensation as part of fund upon from all Putnam 
Trustee/Year from the fund expenses retirement(1) funds(2) 
Independent Trustees     
Liaquat Ahamed/2012(3) $444 N/A N/A $318,750 
Ravi Akhoury/2009 $451 N/A N/A $325,000 
Barbara M. $484 N/A N/A $350,000 
Baumann/2010(3)(4)     
Jameson A. Baxter/1994(3)(5) N/A $53 $110,533 $328,594 
Katinka Domotorffy/2012(3) $451 N/A N/A $325,000 
Catharine Bond Hill/2017(3) $451 N/A N/A $325,000 
Paul L. Joskow/1997(3) $451 $41 $113,417 $325,000 
Kenneth R. Leibler/2006(6) $613 N/A N/A $395,000 
Robert E. Patterson/1984 $397 $63 $106,542 $325,000 
George Putnam, III/1984(7) $484 $67 $130,333 $337,500 
Manoj P. Singh/2017 $451 N/A N/A $318,750 
Interested Trustee     
Robert L. Reynolds/2008(8) N/A N/A N/A N/A 

 

(1) Estimated benefits for each Trustee are based on Trustee fee rates for calendar years 2003, 2004 and 2005.

(2) As of December 31, 2018, there were 99 funds in the Putnam family.

(3) Certain Trustees are also owed compensation deferred pursuant to a Trustee Compensation Deferral Plan. As of August 31, 2019, the total amounts of deferred compensation payable by the fund, including income earned on such amounts, to these Trustees were: Mr. Ahamed - $2,437; Ms. Baumann - $2,382; Ms. Baxter - $11,412; Ms. Domotorffy - $2,272; Dr. Hill - $592; and Dr. Joskow - $11,316.

(4) Includes additional compensation to Ms. Baumann for service as Chair of the Audit, Compliance and Distributions Committee.

(5) Includes additional compensation to Ms. Baxter for service as Chair of the Trustees of the Putnam funds. Ms. Baxter retired from the Board of Trustees on June 30, 2018.

I-11 

 



(6) Includes additional compensation to Mr. Leibler for service as Chair of the Trustees of the Putnam funds.

(7) Includes additional compensation to Mr. Putnam for service as Chair of the Contract Committee.

(8) Mr. Reynolds is an "interested person" of the fund and Putnam Management.

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 attendance and retainer fees paid to such Trustee for calendar years 2003, 2004 and 2005. This retirement benefit is payable during a Trustee's lifetime, beginning the year following retirement, for the number of years of service through December 31, 2006. 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 November 30, 2019, the officers and Trustees of the fund as a group owned less than 1% of the outstanding shares of each class of the fund, except class R6 of the fund, of which they owned 1.06%, 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.

I-12 

 



   
Share Class Shareholder name and address Percentage owned 
PERSHING, LLC 7.79% 
 1 PERSHING PLZ  
 JERSEY CITY NJ, 07399-0001  
NATIONAL FINANCIAL SERVICES LLC 7.08% 
 FOR THE EXCLUSIVE BENEFIT OF OUR  
 CUSTOMERS  
 499 WASHINGTON BLVD  
 ATTN: MUTUAL FUNDS DEPT 4TH FL  
 JERSEY CITY NJ, 07310-1995  
PERSHING, LLC 30.96% 
 1 PERSHING PLZ  
 JERSEY CITY NJ, 07399-0001  
AMERICAN ENTERPRISE INVESTMENT SVC 20.03% 
 707 2ND AVE S  
 MINNEAPOLIS MN, 55402-2405  
NATIONAL FINANCIAL SERVICES LLC 5.05% 
 FOR THE EXCLUSIVE BENEFIT OF OUR  
 CUSTOMERS  
 499 WASHINGTON BLVD  
 ATTN: MUTUAL FUNDS DEPT 4TH FL  
 JERSEY CITY NJ, 07310-1995  
PERSHING, LLC 18.41% 
 1 PERSHING PLZ  
 JERSEY CITY NJ, 07399-0001  
WELLS FARGO CLEARING SERVICES, LLC 16.28% 
 SPECIAL CUSTODY ACCT FOR THE  
 EXCLUSIVE BENEFIT OF CUSTOMER  
 2801 MARKET ST  
 SAINT LOUIS MO, 63103-2523  
RAYMOND JAMES 15.19% 
 OMNIBUS FOR MUTUAL FUNDS  
 ATTN: COURTNEY WALLER  
 880 CARILLON PKWY  
 ST PETERSBURG FL, 33716-1100  
NATIONAL FINANCIAL SERVICES LLC 7.99% 
 FOR THE EXCLUSIVE BENEFIT OF OUR  
 CUSTOMERS  
 499 WASHINGTON BLVD  
 ATTN: MUTUAL FUNDS DEPT 4TH FL  
 JERSEY CITY NJ, 07310-1995  

 

I-13 

 



   
MLPF&S FOR THE SOLE BENEFIT OF IT'S 21.76% 
 CUSTOMERS  
 ATTN FUND ADMINISTRATION  
 4800 DEER LAKE DR E FL 3  
 JACKSONVILLE FL, 32246-6484  
STATE STREET BK & TR TTEE &/OR CUST 11.13% 
 ADP ACCESS PRODUCT  
 1 LINCOLN ST  
 BOSTON MA, 02111-2901  
CHARLES MCCOMB & LOWELL KAHN TTEE 5.93% 
 HARTLAND BUILDING & RESTORATION COM  
 C/O FASCORE LLC  
 8515 E ORCHARD RD # 2T2  
 GREENWOOD VLG CO, 
 80111-5002  
R6 GREAT WEST TR CO LLC FBO PFTC FBO 99.67% 
 THE PUTNAM RETIREMENT PLAN  
 C/O FASCORE LLC  
 8515 E ORCHARD RD # 2T2  
 GREENWOOD VLG CO, 80111-5002  
LPL FINANCIAL 17.45% 
 --OMNIBUS CUSTOMER ACCOUNT—  
 ATTN: LINDSAY O'TOOLE  
 4707 EXECUTIVE DRIVE  
 SAN DIEGO CA, 92121-3091  
NATIONAL FINANCIAL SERVICES LLC 16.20% 
 FOR THE EXCLUSIVE BENEFIT OF OUR  
 CUSTOMERS  
 499 WASHINGTON BLVD  
 ATTN: MUTUAL FUNDS DEPT 4TH FL  
 JERSEY CITY NJ, 07310-1995  
PERSHING, LLC 16.13% 
 1 PERSHING PLZ  
 JERSEY CITY NJ, 07399-0001  
WELLS FARGO CLEARING SERVICES, LLC 10.77% 
 SPECIAL CUSTODY ACCT FOR THE  
 EXCLUSIVE BENEFIT OF CUSTOMER  
 2801 MARKET ST  
 SAINT LOUIS MO, 63103-2523  
RAYMOND JAMES 9.97% 
 OMNIBUS FOR MUTUAL FUNDS  
 ATTN: COURTNEY WALLER  
 880 CARILLON PKWY  
 ST PETERSBURG FL, 33716-1100  

 

I-14 

 



   
CHARLES SCHWAB & CO INC 7.55% 
 CLEARING ACCOUNT FOR THE EXCLUSIVE  
 BENEFIT OF THEIR CUSTOMERS  
 101 MONTGOMERY ST  
 SAN FRANCISCO CA, 94104-4151  
MORGAN STANLEY SMITH BARNEY LLC 5.52% 
 FOR THE EXCLUSIVE BENEFIT OF ITS  
 CUSTOMERS  
 1 NEW YORK PLAZA FL 12  
 NEW YORK NY, 10004-1901  

 

Distribution fees

During fiscal 2019, the fund paid the following 12b-1 fees to Putnam Retail Management:

Class A* Class B Class C Class R 
$132,948 $41,934 $116,877 $6,927 

 

* Effective November 25, 2019, all class M shares were converted into class A shares

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:

 Total front- Sales charges retained by Putnam Contingent 
 end sales Retail Management after dealer deferred sales 
Fiscal year charges concessions charges 
2019 $88,800 $15,643 $10 
2018 $275,755 $48,686 $0 
2017 $109,193 $51,530 $0 

 

* Effective November 25, 2019, all class M shares were converted into class A shares.

I-15 

 



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:

 Contingent deferred sales 
Fiscal year charges 
2019 $227 
2018 $3,679 
2017 $2,272 

 

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:

 Contingent deferred sales 
Fiscal year charges 
2019 $384 
2018 $28 
2017 $276 

 

I-16 

 



Investor servicing fees

During the 2019 fiscal year, the fund incurred $220,134 in fees for investor servicing provided by Putnam Investor Services, Inc.

PORTFOLIO MANAGER

Other accounts managed

The following table shows the number and approximate assets of other investment accounts (or portions of investment accounts) that the fund's portfolio manager managed as of the fund's most recent fiscal year-end. The other accounts may include accounts for which the individual was not designated as a portfolio manager. Unless noted, none of the other accounts pays a fee based on the account's performance.

       
     Other accounts 
     (including separate 
     accounts, managed 
     account programs 
 Other SEC-registered Other accounts that and single-sponsor 
Portfolio open-end and closed- pool assets from more defined contribution 
manager end funds than one client plan offerings) 
 Number  Number  Number  
 of  of  of  
 accounts Assets accounts Assets accounts Assets 
Daniel Schiff $0 $58,700,000 $300,000 

 

See “Management—Portfolio Transactions—Potential conflicts of interest in managing multiple accounts” in Part II of this SAI for information on how Putnam Management addresses potential conflicts of interest resulting from an individual’s management of more than one account.

Compensation of portfolio manager

Putnam’s goal for its products and investors is to deliver strong performance versus peers or performance ahead of the applicable benchmark, depending on the product, over a rolling 3-year period. Portfolio managers are evaluated and compensated, in part, based on their performance relative to this goal across specified products they manage. In addition to their individual performance, evaluations take into account the performance of their group and a subjective component.

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The portfolio manager is assigned an industry-competitive incentive compensation target consistent with this goal and evaluation framework. Actual incentive compensation may be higher or lower than the target, based on individual, group, and subjective performance, and may also reflect the performance of Putnam as a firm. Typically, performance is measured over the lesser of three years or the length of time a portfolio manager has managed a product.

Incentive compensation includes a cash bonus and may also include grants of deferred cash, stock or options. In addition to incentive compensation, portfolio managers receive fixed annual salaries typically based on level of responsibility and experience.

For this fund, Putnam evaluates performance based on the fund’s pre-tax return relative to its benchmarks, the MSCI World Industrials Index (ND) (for periods prior to June 24, 2019) and the S&P 500 Index (for periods beginning June 24, 2019), over the 3-year period.

Ownership of securities

The dollar range of shares of the fund owned by the portfolio manager at the end of the fund’s last fiscal year, including investments by immediate family members and amounts invested through retirement and deferred compensation plans, was $50,001-$100,000.

SECURITIES LENDING ACTIVITIES

The following table provides the dollar amounts of income and fees and/or compensation related to the fund's securities lending activities during the most recent fiscal year:

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Gross income from securities lending activities $64,723 
Fees and/or compensation for securities lending activities and related services:  
Fees paid to securities lending agent from a  
revenue split ($3,134) 
Fees paid for any cash collateral management  
service (including fees deducted from a pooled $0 
cash collateral reinvestment vehicle) that are not  
included in the revenue split  
Administrative fees not included in revenue split $0 
Indemnification fee not included in revenue split $0 
Rebate (paid to borrower) ($33,377) 
Other fees not included in revenue split (specify) $0 
Aggregate fees/compensation for securities lending activities ($36,511) 
Net income from securities lending activities $28,212 

 

Goldman Sachs Bank USA (d/b/a Goldman Sachs Agency Lending, or “GSAL”) acts as the securities lending agent for the Putnam funds. As securities lending agent, during the last fiscal year, GSAL located borrowers for fund securities, monitored daily the value of the loaned securities and collateral, required additional collateral as necessary, negotiated loan terms, provided certain limited recordkeeping and account servicing, monitored dividend activity and material proxy votes relating to loaned securities, and arranged for return of loaned securities to the fund at loan termination, and, as applicable, in connection with proxy votes.

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INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AND FINANCIAL STATEMENTS

KPMG LLP, Two Financial Center, 60 South Street, Boston, Massachusetts 02111, 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 fund's most recent fiscal year are included as Appendix B to this SAI. The financial highlights included in the prospectus and this SAI and the financial statements included in this SAI (which is incorporated by reference into the prospectus) have been so included in reliance upon the Report of Independent Registered Public Accounting Firm, given on their authority as experts in auditing and accounting.

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APPENDIX B

THE PUTNAM FUNDS
STATEMENT OF ADDITIONAL INFORMATION (“SAI”) 
PART II

 

 

HOW TO BUY SHARES

Each prospectus or private placement memorandum of a fund (collectively, a “prospectus”) describes briefly how investors may buy shares of the fund and identifies the share classes offered by that prospectus. For a fund that offers multiple classes of shares, the investment performance of the classes will vary because of different sales charges and expenses. This section of the SAI contains more information on how to buy shares. For more information, including your eligibility to purchase certain classes of shares, contact your investment dealer or Putnam Investor Services, Inc., the funds’ investor servicing agent (“Putnam Investor Services”), at 1-800-225-1581. Investors who purchase shares at net asset value through employer-sponsored retirement plans (including, for example, 401(k) plans, employer-sponsored 403(b) plans, and 457 plans) should also consult their employer for information about the extent to which the matters described in this section and in the sections that follow apply to them.

Except as set forth below, the fund does not accept new accounts or additional investments (including by way of exchange from another fund) into existing accounts held in the name of persons or entities that do not have both a residential or business address within the United States (including APO/FPO addresses) and a valid U.S. tax identification number. Any existing account that is updated to reflect a non-U.S. address will also be restricted from making additional investments. Individuals resident in the European Economic Area (“EEA”), in particular, should take note that the fund’s shares are not offered for sale in the EEA.

Non-U.S. institutional clients may invest in a fund, provided that the client is acting for its own account and is not a financial institution (e.g., a broker-dealer purchasing shares on behalf of its customers), and has provided Putnam with documentation (i) that is appropriate to the type of entity seeking to establish the account and (ii) sufficient to enable Putnam Investor Services to determine that the investment would not violate any applicable securities laws or regulations, including non-U.S. laws and regulations.

In addition, Class M shares are only available (1) to certain employer-sponsored retirement plans investing in George Putnam Balanced Fund and (2) for Putnam Diversified Income Trust, Putnam Global Income Trust, Putnam High Yield Fund, Putnam Income Fund, and Putnam Mortgage Securities Fund, for public offering in Japan through certain Japanese registered broker-dealers with whom Putnam Retail Management Limited Partnership has an agreement. Effective November 25, 2019, all other class M shares of the Putnam funds were converted into class A shares.

In addition, the fund does not accept new accounts or additional investments (including by way of exchange from another fund) into existing accounts by entities that Putnam Investor Services has reason to believe are involved in the sale or distribution of marijuana, even if such sale or distribution is licensed by a state.

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 current offering price based on the net asset value per share next determined after the order is placed. In the case of class A shares, class M shares and class N shares, the offering price is the net asset value plus the applicable sales charge, if any. (The 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 offering price of other classes of shares. In the case of orders for purchase of shares placed through dealers, the 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

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the close of regular trading on the New York Stock Exchange (the “NYSE”). If the dealer or registered transfer agent or registered clearing agent receives the order after the close of the NYSE, 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 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 purchases are subject to the minimums stated in the prospectus, except that (i) individual investments under certain employer-sponsored retirement plans or Tax Qualified Retirement Plans may be lower, and (ii) the minimum investment is waived for investors participating in systematic investment plans or military allotment plans. Information about these plans is available from investment dealers or Putnam Investor Services. Currently Putnam is waiving the minimum for all initial purchases, but reserves the right to reject initial purchases under the minimum in the future, except as noted in the first sentence of this paragraph.

Systematic investment plan. As a convenience to investors, shares (other than shares of Putnam Income Strategies Portfolio) may be purchased through a systematic investment plan. Pre-authorized periodic (e.g., monthly, quarterly, semi-annually, or annually) bank drafts for a fixed amount ($200,000 or less) are used to purchase fund shares at the applicable offering price next determined after Putnam Retail Management Limited Partnership (“Putnam Retail Management”) receives the proceeds from the draft. A shareholder may choose any day of the month for these investments; however, if the selected date falls on a weekend or holiday, the investment will be processed on the next business day. For February, April, June, September and November, if the selected date does not occur (the 29th, 30 th, or 31st, as applicable), the investment will be processed the prior business day. Further information and application forms are available from the investment dealers or from Putnam Retail Management.

Reinvestment of distributions. Distributions to be reinvested are reinvested without a sales charge in shares of any Putnam fund the shareholder is eligible to invest in under the shareholder's account 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.

Purchasing shares with securities (“in-kind” purchases). In addition to cash, the fund will consider accepting 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 Investment Management, LLC (“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 that are delivered in proper form. The fund will not accept certain securities, for example, 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

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securities to the fund except when authorized to do so and in accordance with specific instructions received from Putnam Retail Management.

Sales Charges and Other Share Class Features —Retail Investors

This section describes certain key features of share classes offered to retail investors and retirement plans that do not purchase shares at net asset value. Much of this information addresses the sales charges, including initial sales charges and contingent deferred sales charges (“CDSCs”) imposed on the different share classes and various commission payments made by Putnam to dealers and other financial intermediaries facilitating shareholders’ investments. This information supplements the descriptions of these share classes and payments included in the prospectus.

Initial sales charges, dealer commissions and CDSCs on shares sold outside the United States may differ from those applied to U.S. sales.

Initial sales charges for class A, class M and class N shares. The offering price of class A, class M and class N 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 tables below indicate the sales charges applicable to purchases of class A, class M and class N shares of the funds by style category.

The sales charge for class A, class M and class N shares is allocated between your investment dealer and Putnam Retail Management as shown in the tables below, except when Putnam Retail Management, in its discretion, allocates the entire amount to your investment dealer.

The underwriter's commission, or dealer reallowance, 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. The Putnam Funds require that a broker-dealer be associated with every account (a “broker-dealer of record”). In instances where the registered account owner has not designated a broker-dealer of record, Putnam Retail Management will be defaulted as the broker-dealer of record for the account. Putnam Retail Management is not a full service broker-dealer, and does not provide investment advice. As default broker-dealer of record, Putnam Retail Management will not be able to provide services that are typically offered by a brokerage firm, such as assisting with financial planning or providing recommendations, or otherwise assisting with investment decisions. Where Putnam Retail Management is listed as the default broker-dealer of record for an account, it will receive all applicable sales charges and service fees associated with the account.

For purchases of class A shares by retail investors that qualify for the highest sales charge breakpoint described in the prospectus, Putnam Retail Management pays commissions on sales during the one-year period beginning with the date of the initial purchase qualifying for that breakpoint. Each subsequent one-year measuring period for these purposes begins with the first qualifying purchase following the end of the prior period. These commissions are paid at the rate of 1.00% of the amount of qualifying purchases up to $4 million, 0.50% of the next $46 million of qualifying purchases and 0.25% of qualifying purchases thereafter.

For purchases of class N shares over $250,000, Putnam Retail Management pays commissions on sales during the one-year period beginning with the date of the initial purchase. Each subsequent one-year measuring period for these purposes begins with the first qualifying purchase following the end of the prior period. Commissions for these purchases are paid at the rate of 0.25% of the amount of qualifying purchases up to $4 million, 0.15% of the next $46 million of qualifying purchases and 0.10% of qualifying purchases thereafter.

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For Growth Funds, Blend Funds, Value Funds, Asset Allocation Funds (excluding George Putnam Balanced Fund, Retirement Income Fund Lifestyle 1, Putnam PanAgora Managed Futures Strategy, Putnam PanAgora Market Neutral Fund and Putnam PanAgora Risk Parity Fund), Global Sector Funds and RetirementReady® Funds only:

 CLASS A 
  Amount of sales 
  charge 
  reallowed to 
 Sales charge as dealers as a 
Amount of transaction at a percentage of percentage of 
offering price ($) offering price offering price 
Under 50,000 5.75% 5.00% 
50,000 but under 100,000 4.50 3.75 
100,000 but under 250,000 3.50 2.75 
250,000 but under 500,000 2.50 2.00 
500,000 but under 1,000,000 2.00 1.75 
1,000,000 and above NONE NONE 

 

For Putnam PanAgora Managed Futures Strategy, Putnam PanAgora Market Neutral Fund, Putnam PanAgora Risk Parity Fund and Putnam Multi-Asset Absolute Return Fund only:

 CLASS A 
  Amount of sales 
  charge 
  reallowed to 
 Sales charge as dealers as a 
Amount of transaction at a percentage of percentage of 
offering price ($) offering price offering price 
Under 50,000 5.75% 5.00% 
50,000 but under 100,000 4.50 3.75 
100,000 but under 250,000 3.50 2.75 
250,000 but under 500,000 2.50 2.00 
500,000 and above NONE NONE 

 

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For Retirement Income Fund Lifestyle 1, Taxable Income Funds (except for Putnam Diversified Income Trust, Putnam Global Income Trust, Putnam High Yield Fund, Putnam Income Fund and Putnam Mortgage Securities Fund) and Tax-Exempt Funds (except for Money Market Funds, Putnam Short-Term Municipal Income Fund, Putnam Floating Rate Income Fund, and Putnam Ultra Short Duration Income Fund):

 CLASS A 
  Amount of sales 
  charge 
  reallowed to 
 Sales charge as dealers as a 
Amount of transaction at a percentage of percentage of 
offering price ($) offering price offering price 
Under 50,000 4.00% 3.50% 
50,000 but under 100,000 4.00 3.50 
100,000 but under 250,000 3.25 2.75 
250,000 but under 500,000 2.50 2.00 
500,000 and above NONE NONE 

 

For Putnam Fixed Income Absolute Return Fund and Putnam Floating Rate Income Fund only:

 CLASS A 
  Amount of sales 
  charge 
  reallowed to 
 Sales charge as dealers as a 
Amount of transaction at a percentage of percentage of 
offering price ($) offering price offering price 
Under 100,000 2.25% 2.00% 
100,000 but under 250,000 1.75% 1.50% 
250,000 but under 500,000 1.25% 1.00% 
500,000 and above NONE 1.00% 

 

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For Putnam Short Duration Bond Fund and Putnam Short-Term Municipal Income Fund only:

 CLASS A 
  Amount of sales 
  charge 
  reallowed to 
 Sales charge as dealers as a 
Amount of transaction at a percentage of percentage of 
offering price ($) offering price offering price 
Under 100,000 2.25% 2.00% 
100,000 – 249,999 1.25% 1.00% 
250,000 and above NONE 1.00% 

 

For George Putnam Balanced Fund only:

 CLASS A CLASS M 
  Amount of sales  Amount of sales 
  charge  charge 
  reallowed to  reallowed to 
 Sales charge as dealers as a Sales charge as dealers as a 
Amount of transaction at a percentage of percentage of a percentage of percentage of 
offering price ($) offering price offering price offering price offering price 
 
Under 50,000 5.75% 5.00% 3.50% 3.00% 
50,000 but under 100,000 4.50 3.75 2.50 2.00 
100,000 but under 250,000 3.50 2.75 1.50 1.00 
250,000 but under 500,000 2.50 2.00 1.00 1.00 
500,000 but under 1,000,000 2.00 1.75 1.00 1.00 
1,000,000 and above NONE NONE N/A N/A 

 

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For Putnam Diversified Income Trust, Putnam Global Income Trust, Putnam High Yield Fund, Putnam Income Fund and Putnam Mortgage Securities Fund only:

 CLASS A CLASS M 
  Amount of sales  Amount of sales 
  charge  charge 
  reallowed to  reallowed to 
 Sales charge as dealers as a Sales charge as dealers as a 
Amount of transaction at a percentage of percentage of a percentage of percentage of 
offering price ($) offering price offering price offering price offering price 
 
Under 50,000 4.00% 3.50% 3.25% 3.00% 
50,000 but under 100,000 4.00 3.50 2.25 2.00 
100,000 but under 250,000 3.25 2.75 1.25 1.00 
250,000 but under 500,000 2.50 2.00 1.00 1.00 
500,000 and above NONE NONE N/A* N/A* 

 

*The funds will not accept purchase orders for class M shares (other than by employer-sponsored retirement plans) where the total of the current purchase, plus existing account balances that are eligible to be linked under a right of accumulation (as described below) is $500,000 or more.

For all Putnam funds that offer class N shares:  
 
 CLASS N  
 
  Amount of sales 
  charge reallowed to 
 Sales charge as a dealers as a 
Amount of transaction at percentage of percentage of 
offering price ($) offering price offering price 
Under 50,000 1.50% 1.25% 
50,000 but under 100,000 1.25% 1.00% 
100,000 but under 250,000 1.00% 0.75% 
250,000 and above NONE 0.25% 

 

Purchases of class A and class N shares without an initial sales charge. Class A shares of any Putnam fund (other than Putnam Short Duration Bond Fund, Putnam Ultra Short Duration Income Fund, Putnam Short-Term Municipal Income Fund, Putnam Government Money Market Fund, and Putnam Money Market Fund) purchased by retail investors on or after March 1, 2018 that are not subject to an initial sales charge (in accordance with the schedules stated above) are subject to a CDSC of 1.00% if redeemed before the first day of the month in which the twelve-month anniversary of that purchase occurs. Class A shares of Putnam Short Duration Bond Fund and Putnam Short-Term Municipal Income Fund purchased by retail investors that are not subject to an initial sales charge (in accordance with the schedules stated above) are subject to a CDSC of 1.00% if redeemed before the first day of the month in which the nine-month anniversary of that purchase occurs. Class A shares of Putnam Ultra Short Duration Income Fund, Putnam Money Market Fund and Putnam Government Money Market Fund purchased by retail investors on or after March 1, 2018 by exchanging shares from another Putnam fund that were not subject to an initial sales charge (in accordance with the schedules stated above) are subject to a CDSC of 1.00% if redeemed before the first day of the month in which the twelve-month anniversary of the original purchase occurs. Class N shares of any Putnam Fund

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purchased by retail investors that are not subject to an initial sales charge (in accordance with the schedules stated above) are subject to a CDSC of 0.25% if redeemed before the first day of the month in which the nine-month anniversary of that purchase occurs.

The CDSC assessed on redemptions of fewer than all of an investor's class A shares or class N shares subject to a CDSC will be based on the amount of the redemption minus the amount of any appreciation on the investor's CDSC-subject shares since the purchase of such shares. The CDSC assessed on full redemptions of CDSC-subject shares will be based on the lower of the shares' cost and current NAV. Class A shares that are exchanged between Putnam funds will maintain the CDSC time period for the fund in which the initial purchase was made. Putnam Retail Management will retain any CDSC imposed on redemptions of such shares to compensate it for the up-front commissions paid to financial intermediaries for such share sales.

Purchases of class A shares for rollover IRAs. Purchases of class A shares for a Putnam Rollover IRA or a rollover IRA of a Putnam affiliate, from a retirement plan for which an affiliate of Putnam Management or a business partner of such affiliate is the administrator, including subsequent contributions, are not subject to an initial sales charge or CDSC. Putnam Retail Management 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 or other third party.

Commission payments and CDSCs for class B and class C shares. Except in the case of Putnam Money Market Fund, Putnam Government Money Market Fund and Putnam Ultra Short Duration Income Fund, 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 Tax-Free High Yield Fund and Putnam AMT-Free Municipal Fund, each of which has a 0.25% pre-paid service fee). For Putnam Floating Rate Income Fund, Putnam Short Duration Bond Fund, Putnam Fixed Income Absolute Return Fund and Putnam Short-Term Municipal Income Fund, Putnam Retail Management will pay a 1.00% commission to financial intermediaries selling class B shares of the fund.

Except in the case of Putnam Money Market Fund, Putnam Government Money Market Fund and Putnam Ultra Short Duration Income Fund, Putnam Retail Management pays financial intermediaries a 1.00% commission on sales of class C 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.

Conversion of class B shares into class A shares. Class B shares will automatically convert to class A shares during the month eight years after the purchase date (for Putnam Small Cap Value Fund, during the month six years after the purchase date, and for Putnam Sustainable Future Fund, during the month five years after the purchase date). Class B shares acquired by exchanging class B shares of another Putnam fund will convert to class A shares based on the time of the initial purchase, and the holding period of the fund of initial purchase will apply. Any CDSC for such shares will be calculated using the schedule of the fund into or from which shares have been exchanged that would result in the highest CDSC applicable to such shares. Class B shares acquired through reinvestment of distributions will convert to 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. Shareholders should consult with their tax advisers regarding the state and local tax consequences of the conversion of class B shares to class A shares, or any other exchange or conversion of shares. Average annual total return performance information for class B shares shown in the fund's prospectus assumes conversion to class A shares after the applicable period described in the fund’s prospectus.

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Conversion of class C shares into class A shares. Effective April 1, 2018, Class C shares will automatically convert to class A shares during the month ten years after the purchase date, provided that the fund or the financial intermediary through which a shareholder purchased class C shares has records verifying that the class C shares have been held for at least ten years, and that class A shares are available for purchase by residents in the shareholder’s jurisdiction. Group retirement plan recordkeeping platforms of certain broker-dealer intermediaries who hold class C shares with the fund in an omnibus account do not track participant level share lot aging. These class C shares would not satisfy the conditions for the conversion. Class C shares acquired by exchanging class C shares of another Putnam fund will convert to class A shares based on the time of the initial purchase. Any CDSC for such shares will be calculated using the schedule of the fund into or from which shares have been exchanged that would result in the highest CDSC applicable to such shares. Class C shares acquired through reinvestment of distributions will convert to class A shares based on the date of the initial purchase to which such shares relate. For this purpose, class C shares acquired through reinvestment of distributions will be attributed to particular purchases of class C shares in accordance with such procedures as the Trustees may determine from time to time. The conversion of class C shares to class A shares is subject to the condition that such conversions will not constitute taxable events for federal tax purposes. Shareholders should consult with their tax advisers regarding the state and local tax consequences of the conversion of class C shares to class A shares, or any other exchange or conversion of shares.

Sales without sales charges or contingent deferred sales charges

In addition to the categories of investors eligible to purchase fund shares without a sales charge or CDSC set forth in the fund’s prospectus, in connection with settlements reached between certain firms and the Financial Industry Regulatory Authority (“FINRA”) and/or Securities and Exchange Commission (the “SEC”) regarding sales of class B and class C shares in excess of certain dollar thresholds, the fund will permit shareholders who are clients of these firms (and applicable affiliates of such firms) to redeem class B and class C shares of the fund and concurrently purchase class A shares (in an amount to be determined by the dealer of record and Putnam Retail Management in accordance with the terms of the applicable settlement) without paying a sales charge.

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.

In the case of certain sales charge waivers described in the prospectus 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 current and former corporate affiliates, their family members, business and personal associates; employer-sponsored retirement plans for the foregoing; and partnerships, trusts or other entities in which any of the foregoing has a substantial interest and (ii) shareholders reinvesting the proceeds from a Putnam Corporate IRA Plan distribution into a nonretirement plan account, the availability of shares at NAV has been determined to be appropriate because involvement by Putnam Retail Management and other brokers in purchases by these investors is typically minimal.

As described in the prospectus, specific sales charge waivers may be available through your particular financial intermediary. Please see the prospectus for additional information about financial intermediary-specific waivers.

Application of CDSC to Systematic Withdrawal Plans (“SWP”). The SWP provisions relating to CDSC waivers described below do not apply to customers purchasing shares of the fund through a Specified Intermediary, unless otherwise specified in the Appendix to the fund’s prospectus. Please refer to the Appendix to the fund’s prospectus for the SWP provisions that are applicable to each Specified Intermediary.

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Investors who set up a SWP for a share account (see "INVESTOR SERVICES — 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.

Other exceptions to application of CDSC. For purposes of the waiver categories set forth in subparagraphs (ii) – (iv) of the fund’s prospectus under the sub-section Additional reductions and waivers of sales charges –Class B and class C shares, shares not subject to a CDSC are redeemed first in determining whether the CDSC applies to each redemption.

For purposes of the waiver categories set forth in subparagraph (v) of the fund’s prospectus under the subsection Additional reductions and waivers of sales charges – Class B and class C shares , 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.

Ways to Reduce Initial Sales Charges — Class A, Class M and Class N Shares

There are several ways in which an investor may obtain reduced sales charges on purchases of class A shares, class M shares and class N shares. These provisions may be altered or discontinued at any time. The breakpoint discounts described below do not apply to customers purchasing shares of the fund through any of the financial intermediaries specified in the Appendix to the fund’s prospectus (each, a “Specified Intermediary”). Please refer to the Appendix to the fund’s prospectus for the breakpoint discounts that are applicable to each Specified Intermediary.

Right of accumulation. A purchaser of class A shares, class M shares or class N 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. The applicable sales charge is based on the total of:

(i) the investor's current purchase(s); and

(ii) the higher of (x) the maximum offering price (at the close of business on the previous day) or (y) the initial value of total purchases (less the value of shares redeemed on the applicable redemption date) of:

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(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.

For shares held on December 31, 2007, the initial value will be the value of those shares at the maximum offering price on that date.

The following persons may qualify for a right of accumulation discount:

(i) an individual, or a "company" as defined in Section 2(a)(8) of the Investment Company Act of 1940, as amended (the “1940 Act”) (which includes corporations which are corporate affiliates of each other);

(ii) an individual, his or her spouse and their children under age 21, 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 Code and Simplified Employer Pension Plans (SEPs) created pursuant to Section 408(k) of the Code);

(iv) tax-exempt organizations qualifying under Section 501(c)(3) of the Code, (not including tax-exempt organizations qualifying under Section 403(b)(7) (a "403(b) plan") of the Code; and

(v) employer-sponsored retirement 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, Putnam Income Strategies Portfolio, and class A shares of Putnam Ultra Short Duration Income Fund) purchased at the same time, if the dealer places the order for such shares directly with Putnam Retail Management.

For individual investors, Putnam Investor Services automatically links accounts the registrations of which are under the same last name and address. 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 Code (“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.

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Shares owned by a plan participant as part of an employer-sponsored retirement 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 Code) are not eligible for linking to other accounts attributable to such person to qualify for the right of accumulation discount, although all current purchases made by each such plan may be combined with existing aggregate balances of such plan in Putnam funds 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 for right of accumulation purposes 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, class M or class N shares shown in the prospectus for investments of a particular amount by means of a written Statement of Intention (also referred to as a Letter 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 Putnam money market funds, Putnam Income Strategies Portfolio, and Putnam Ultra Short Duration Income Fund), including through an account established as part of a Section 529 college savings plan managed by Putnam Management. Each purchase of class A shares, class M shares or class N shares under a Statement of Intention will be made at the lesser of (i) the offering price applicable at the time of such purchase and (ii) the offering price applicable on the date the Statement of Intention is executed to a single transaction of the total dollar amount indicated in the Statement of Intention.

An investor may receive a credit toward the amount indicated in the Statement of Intention equal to the maximum offering price as of the close of business on the previous day of all shares he or she owns, or which are eligible to be linked for purposes of the right of accumulation described above, 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 and Putnam Ultra Short Duration Income Fund acquired by exchange of such eligible shares, and any class N shares of Putnam Ultra Short Duration Income Fund). 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, class M shares or class N 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.

If 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 by Putnam Retail Management 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 to Putnam Retail Management any excess commissions previously received.

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If 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. 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 employer-sponsored retirement 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.

Commissions on Sales to Employee Retirement Plans

Purchases of class A and class R shares. On sales of class A shares at net asset value to certain employer-sponsored retirement plans and health reimbursement accounts and sales of class R shares, Putnam Retail Management may, at its discretion, pay commissions to the dealer of record on net monthly purchases up to the following rates for purchases before April 1, 2017: 1.00% of the first $1 million, 0.75% of the next $1 million and 0.50% thereafter. Effective April 1, 2017, Putnam Retail Management no longer makes such payments.

For commission payments made by Putnam Retail Management to dealers and other financial intermediaries with respect to other classes of shares offered to employer-sponsored retirement plans and other tax-favored plan investors, see the corresponding sub-heading under “—Sales Charges and Other Share Class Features—Retail Investors.”

DISTRIBUTION PLANS

If the fund or a class of shares of the fund has adopted a distribution (12b-1) 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.

The fund makes payments under each plan to Putnam Retail Management to compensate Putnam Retail Management for services provided and expenses incurred by it for purposes of promoting the sale of the relevant class of shares, reducing redemptions of shares or maintaining or improving services provided to shareholders by Putnam Retail Management and investment dealers.

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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 FINRA. Unless noted below or where Putnam Retail Management and the applicable dealer have agreed otherwise, these payments commence in the first year after purchase.

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 up to 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 the amount required to be eligible for the highest sales charge breakpoint as disclosed in the fund’s prospectus, unless, in the case of dealers of record for an employer-sponsored retirement plan investing at least $1 million, where such dealer has agreed to a reduced sales commission. In addition, no payments are made during the first year after purchase for shares purchased prior to April 1, 2017 where PRM has paid a commission as described above in “Commissions on Sales to Employee Retirement Plans.”

Rate* Fund 
0.25% All funds currently making payments under a class A 
 distribution plan, except for those listed below 
0.20% for shares purchased before 3/21/05; Putnam Tax-Free High Yield Fund 
0.25% for shares purchased on or after 3/21/05**  
0.20% for shares purchased before 4/1/05; Putnam AMT-Free Municipal Fund 
0.25% for shares purchased on or after 4/1/05  
0.20% for shares purchased on or before 12/31/89; Putnam Convertible Securities Fund 
0.25% for shares purchased after 12/31/89 George Putnam Balanced Fund 
 Putnam Global Equity Fund 
 Putnam Global Health Care Fund 
0.20% for shares purchased on or before 3/31/90; Putnam Mortgage Securities Fund 
0.25% for shares purchased after 3/31/90  
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;  
0.10% Putnam Ultra Short Duration Income Fund 

 

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Rate* Fund 
0.20% for shares purchased after 3/6/92 but before Putnam Minnesota Tax Exempt Income Fund 
4/1/05; Putnam Ohio Tax Exempt Income Fund 
0.25% for shares purchased on or after 4/1/05  
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 but before  
4/1/05;  
0.25% for shares purchased on or after 4/1/05  
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 but Putnam New Jersey Tax Exempt Income Fund 
before 4/1/05; Putnam New York Tax Exempt Income Fund 
0.25% for shares purchased on or after 4/1/05 Putnam Tax Exempt Income Fund 
0.15% for shares purchased on or before 7/8/93; Putnam Pennsylvania Tax Exempt Income Fund 
0.20% for shares purchased after 7/8/93 but before  
4/1/05;  
0.25% for shares purchased on or after 4/1/05  
0.00% Putnam Government Money Market Fund 
 Putnam Money Market Fund 

 

*For purposes of this table, shares are deemed to be purchased on date of settlement (i.e., once purchased and paid for). Shares issued in connection with dividend reinvestments are considered to be purchased on the date of their issuance, not the issuance of the original shares.

**Shares of Putnam Tax-Free High Yield Fund issued in connection with the merger of Putnam Municipal Income Fund into that fund pay a commission at the annual rate of 0.20% or 0.25%, based on the date of the original purchase of the shareholder’s corresponding shares of Putnam Municipal Income Fund, as set forth below: 0.20% for shares purchased on or before 5/7/92; 0.25% for shares purchased after 5/7/92.

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 years’ service fees of Putnam AMT-Free Municipal Fund 
0.25% are prepaid at time of sale Putnam Tax-Free High Yield Fund 
0.20%, except that the first years’ service fees of Putnam California Tax Exempt Income Fund 
0.20% are prepaid at time of sale Putnam Massachusetts 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 Ohio Tax Exempt Income Fund 
 Putnam Pennsylvania Tax Exempt Income Fund 
 Putnam Tax Exempt Income Fund 
0.50% Putnam Government Money Market Fund* 
 Putnam Money Market Fund* 
 Putnam Ultra Short Duration Income Fund 

 

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* Effective as of the close of business on March 31, 2017, Putnam Money Market Fund and Putnam Government Money Market Fund limit the 12b-1 fees payable by class B shares to 0.00% of the average net asset value of class B shares for which such dealers are designated the dealer of record.

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 shares were initially purchased without a CDSC, except that payments for Putnam Money Market Fund, Putnam Government Money Market Fund and Putnam Ultra Short Duration Income Fund will be made beginning in the first year.

Rate Fund 
1.00% All funds currently making payments under a class C 
 distribution plan, except for those listed below 
0.50% Putnam Government Money Market Fund * 
 Putnam Money Market Fund* 
 Putnam Ultra Short Duration Income Fund 

 

* Effective as of the close of business on March 31, 2017, Putnam Money Market Fund and Putnam Government Money Market Fund limit the 12b-1 fees payable by class C shares to 0.00% of the average net asset value of class C shares for which such dealers are designated the dealer of record.

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).

Rate Fund 
0.65% George Putnam Balanced Fund 
 
 
 
0.40% Putnam Diversified Income Trust, Putnam Global 
 Income Trust, Putnam High Yield Fund, Putnam 
 Income Fund, and Putnam Mortgage Securities Fund, 

 

Putnam Retail Management’s payments to dealers for plans investing in class M shares for which such dealers are designated the dealer of record may equal up to the annual rate of 0.75% of the average net asset value of such class M shares for George Putnam Balanced Fund and up to the annual rate of 0.50% of the average net asset value of such class M shares for Putnam Diversified Income Trust, Putnam Global Income Trust, Putnam High Yield Fund, Putnam Income Fund, and Putnam Mortgage Securities Fund.

Different rates may apply to shares sold outside the United States.

December 30, 2019 II-17 

 



Class R shares:

Putnam Retail Management makes quarterly (or in certain cases monthly) payments to dealers at up to the annual rate 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). No payments are made to dealers during the first year after purchase, with respect to shares purchased before April 1, 2017, if Putnam Retail Management paid a commission to the dealer at purchase as described above in “Commissions on Sales to Employee Retirement Plans.”

Rate Fund 
0.50% All funds currently making payments under a class R 
 distribution plan* 

 

* Effective as of the close of business on March 31, 2017, Putnam Money Market Fund and Putnam Government Money Market Fund limit the 12b-1 fees payable by class R shares to 0.00% of the average net asset value of class R shares for which such dealers are designated the dealer of record.

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 N shares:

Putnam Retail Management makes quarterly (or in certain cases monthly) payments to dealers at the annual rate set forth below (as a percentage of the average net asset value of class N shares for which such dealers are designated the dealer of record).

Rate Fund 
0.25% All funds currently making payments under a class N 
 distribution plan 

 

Additional Dealer Payments

As described earlier in this section, dealers may receive different commissions, sales charge reallowances and other payments with respect to sales of different classes of shares of the funds. These payments may include servicing payments to retirement plan administrators and other institutions up to the same levels as described above. For purposes of this section the term “dealer” includes any broker, dealer, bank, bank trust department, registered investment advisor, financial planner, retirement plan administrator and any other institution having a selling, services, or any similar agreement with Putnam Retail Management or one of its affiliates.

Putnam Retail Management and its affiliates pay additional compensation to selected dealers under the categories described below. These categories are not mutually exclusive, and a single dealer may receive payments under all categories. These payments may create an incentive for a dealer firm or its representatives to recommend or offer shares of the fund or other Putnam funds to its customers. These additional payments are made pursuant to agreements with dealers and do not change the price paid by investors for the purchase of a share or the amount a fund will receive as proceeds from such sales or the distribution (12b-1) fees and the expenses paid by the fund as shown under the heading “Fees and Expenses” in the prospectus.

Marketing Support Payments. Putnam Retail Management and its affiliates make payments to certain dealers for marketing support services. These payments are individually negotiated with each dealer firm, taking into account the marketing support services provided by the dealer, including business planning assistance, educating dealer personnel about the Putnam funds and shareholder financial planning needs,

December 30, 2019 II-18 

 



placement on the dealer’s preferred or recommended fund company list, access to sales meetings, sales representatives and management representatives of the dealer, market data, as well as the size of the dealer’s relationship with Putnam Retail Management. Putnam Retail Management and its affiliates compensate dealers differently depending upon, among other factors, the level and/or type of marketing support provided by the dealer. Payments are generally based on one or more of the following factors: average net assets of Putnam’s retail mutual funds attributable to that dealer, gross or net sales of Putnam’s retail mutual funds attributable to that dealer, reimbursement of ticket charges (fees that a dealer firm charges its representatives for effecting transactions in fund shares) or a negotiated lump sum payment for services rendered. In addition, payments typically apply to retail sales and assets, but may not, in certain situations, apply to other specific types of sales or assets, such as to retirement plans or fee-based advisory programs.

Although the total of marketing support payments made to dealers in any year may vary, on average, the aggregate payments are not expected, on an annual basis, to exceed 0.085% of the average assets of Putnam’s retail mutual funds attributable to the dealers.

The following dealers (and such dealers’ respective affiliates) received marketing support payments from Putnam Retail Management and its affiliates during the calendar year ended December 31, 2018:

American Enterprise Investment Services Inc. LPL Financial LLC 
American Portfolios Financial Services, Inc. Merrill Lynch, Pierce, Fenner & Smith, Inc. 
AXA Advisors, LLC Morgan Stanley Smith Barney LLC 
Cadaret, Grant and Co. Inc. OneAmerica Securities, Inc. 
Cambridge Investment Research, Inc. Oppenheimer & Co. Inc. 
Cetera Advisor Networks LLC Raymond James & Associates, Inc. 
Cetera Advisors LLC Raymond James Financial Services, Inc. 
Cetera Financial Specialists LLC RBC Capital Markets, LLC 
Cetera Investment Services LLC Retirement Plan Advisory Group 
Citigroup Global Markets Inc. Royal Alliance Associates 
Commonwealth Equity Services SagePoint Financial, Inc. 
First Allied Securities, Inc. Securities America, Inc. 
FSC Securities Corporation Securities Service Network, Inc. 
HD Vest Investment Securities, Inc. Stifel, Nicolaus & Company, Incorporated 
Investacorp, Inc. Summit Brokerage Services, Inc. 
J.P. Morgan Securities LLC TD Ameritrade, Inc. 
Janney Montgomery Scott LLC TD Ameritrade Clearing, Inc. 
Kestra Investment Services, LLC Triad Advisors, Inc. 
KMS Financial Services, Inc. U.S. Bancorp Investments, Inc. 
Lincoln Financial Advisors Corp. UBS Financial Services, Inc. 
Lincoln Financial Distributors, Inc. Voya Financial Advisors, Inc. 
Lincoln Financial Securities Corporation Wells Fargo Clearing Services, LLC 
Lincoln Investment Planning, LLC Woodbury Financial Services, Inc. 

 

Additional dealers may receive marketing support payments in 2019 and in future years. Any additions, modifications or deletions to the list of dealers identified above that have occurred since December 31, 2018 are not reflected. You can ask your dealer about any payments it receives from Putnam Retail Management and its affiliates.

Program Servicing Payments. Putnam Retail Management and its affiliates also make payments to certain dealers that sell Putnam fund shares through dealer platforms and other investment programs to compensate dealers for a variety of services they provide. A dealer may perform program services itself or may arrange with a third party to perform program services. In addition to shareholder recordkeeping, reporting, or

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transaction processing, program services may include services rendered in connection with dealer platform development and maintenance, fund/investment selection and monitoring, or other similar services. Payments by Putnam Retail Management and its affiliates for program servicing support to any one dealer are not expected, with certain limited exceptions, to exceed 0.20% of the total assets in the program on an annual basis. In addition, Putnam Retail Management and its affiliates make one-time or annual payments to selected dealers receiving program servicing payments in reimbursement of printing costs for literature for shareholders, account maintenance fees or fees for establishment of Putnam funds on the dealer’s system. The amounts of these payments may, but will not normally (except in cases where the aggregate assets in the program are small), cause the aggregate amount of the program servicing payments to such dealer on an annual basis to exceed the amounts set forth above.

The following dealers (and such dealers’ respective affiliates) received program servicing payments from Putnam Retail Management and its affiliates during the calendar year ended December 31, 2018:

Charles Schwab & Co., Inc. Pershing LLC 
GWFS Equities, Inc. RBC Capital Markets, LLC 
Merrill Lynch, Pierce, Fenner & Smith, Inc. Transamerica Advisors Life Insurance Company 
National Financial Services LLC Trust Company of America 

 

Additional or different dealers may also receive program servicing payments in 2019 and in future years. Any additions, modifications or deletions to the list of dealers identified above that have occurred since December 31, 2018 are not reflected. You can ask your dealer about any payments it receives from Putnam Retail Management and its affiliates.

Other Payments. From time to time, Putnam Retail Management, at its expense, may provide additional compensation to dealers which sell or arrange for the sale of shares of the fund to the extent not prohibited by laws or the rules of any self-regulatory agency, such as FINRA. Such compensation provided by Putnam Retail Management may include financial assistance to dealers that enables Putnam Retail Management to participate in and/or present at dealer-sponsored conferences or seminars, sales or training programs for invited registered representatives and other dealer employees, dealer entertainment, and other dealer-sponsored events, and travel expenses, including lodging incurred by registered representatives and other employees in connection with prospecting, retention and due diligence trips. Putnam Retail Management makes payments for entertainment events it deems appropriate, subject to Putnam Retail Management’s internal guidelines and applicable law. These payments may vary upon the nature of the event.

Sub-accounting payments. Certain dealers or other financial intermediaries also receive payments from Putnam Investor Services or its affiliates in recognition of sub-accounting or other services they provide to shareholders or plan participants who invest in the fund or other Putnam funds through their retirement plan. The amount paid for these services varies depending on the share class selected and by dealer or other financial intermediary, and may also take into account the extent to which the services provided by the dealer replace services that Putnam Investor Services or its affiliates would otherwise have to provide. There are no such payments in respect of class R6 shares, and payments in respect of class R5 shares are generally made at an annual rate of up to 0.10% of a fund’s average net assets attributable to class R5 shares held by a dealer or other financial intermediary, except that an annual rate of up to 0.07% of a fund’s average net assets attributable to class R5 shares held by a dealer or other financial intermediary applies to Putnam Dynamic Asset Allocation Conservative Fund, Putnam Global Income Trust, Putnam Income Fund and Putnam Ultra Short Duration Income Fund. Payments for other classes vary. See the discussion under the heading “MANAGEMENT – Investor Servicing Agent” for more details.

You can ask your dealer for information about payments it receives from Putnam Retail Management or its affiliates and the services it provides for those payments.

December 30, 2019 II-20 

 



MISCELLANEOUS INVESTMENTS, INVESTMENT PRACTICES AND RISKS

As noted in the prospectus, in addition to the main 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 or limited by the investment restrictions discussed in the fund’s prospectus or in this SAI, or by applicable law, the fund may engage in each of the practices described below without limit. This section contains information on the investments and investment practices listed below. With respect to funds for which Putnam Investments Limited (“PIL”), The Putnam Advisory Company, LLC (“PAC”) and/or PanAgora Asset Management, Inc. (“PanAgora”) serve as sub-adviser (as described in the fund’s prospectus), references to Putnam Management in this section include PIL, PAC and/or PanAgora, as appropriate.

Temporary Defensive Strategies Market Risk 
Bank Loans, Loan Participations, and Assignments Master Limited Partnerships (MLPs) 
Borrowing and Other Forms of Leverage Money Market Instruments 
Commodities and Commodity-Related Investments Mortgage-backed and Asset-backed Securities 
Derivatives Options on Securities 
Exchange-Traded Notes Preferred Stocks and Convertible Securities 
Floating Rate and Variable Rate Demand Notes Private Placements and Restricted Securities 
Foreign Currency Transactions Real Estate Investment Trusts (REITs) 
Foreign Investments and Related Risks Redeemable Securities 
Forward Commitments and Dollar Rolls Repurchase Agreements 
Futures Contracts and Related Options Securities Loans 
Hybrid Instruments Securities of Other Investment Companies 
Illiquid Investments Short Sales 
Inflation-Protected Securities Short-Term Trading 
Initial Public Offerings (IPOs) Special Purpose Acquisition Companies 
Interfund Borrowing and Lending Structured Investments 
Inverse Floaters Swap Agreements 
Investments in Wholly-Owned Subsidiaries Tax-exempt Securities 
Legal and Regulatory Risk Relating to Investment Strategy Warrants 
Lower-rated Securities Zero-coupon and Payment-in-kind Bonds 

 

Temporary Defensive Strategies

In response to adverse market, economic, political or other conditions, the fund may take temporary defensive positions that are inconsistent with its principal investment strategies. However, a fund may choose not to use these temporary defensive strategies for a variety of reasons, even in very volatile market conditions. In implementing temporary defensive strategies, the fund may invest primarily in, among other things, debt securities, preferred stocks, U.S. government and agency obligations, cash or money market instruments (including, to the extent permitted by law or applicable exemptive relief, money market funds), or any other securities Putnam Management considers consistent with such defensive strategies. When the fund takes temporary defensive positions, the fund may miss out on investment opportunities, and the fund may not achieve its investment objective. In addition, while temporary defensive strategies are mainly designed to limit losses, such strategies may not work as intended.

December 30, 2019 II-21 

 



Bank Loans, Loan Participations, and Assignments

The fund may invest in bank loans. Bank loans are typically senior debt obligations of borrowers (issuers) and, as such, are considered to hold a senior position in the capital structure of the borrower. These may include loans that hold the most senior position, that hold an equal ranking with other senior debt, or loans that are, in the judgment of Putnam Management, in the category of senior debt of the borrower. This capital structure position generally gives the holders of these loans a priority claim on some or all of the borrower’s assets in the event of a default. Many loans are either partially or fully secured by the assets of the borrower, and most impose restrictive covenants which must be met by the borrower. 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.

By purchasing a loan, the fund acquires some or all of the interest of a bank or other lending institution in a loan to a particular borrower. The fund may acquire a loan interest directly by acting as a member of the original lending syndicate. The fund may also invest in a loan in other ways, including through 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. In an assignment, the fund purchases 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. Participation interests typically result in a contractual relationship only with the lending institution, not with the borrower. In such case, the fund 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. In addition, with a participation interest, the fund generally will have no rights of set-off against the borrower, and the fund may not directly benefit from the collateral supporting the loan in which it has purchased the participation.

The fund’s ability to receive payments of principal and interest and other amounts in connection with loan interests held by it will depend primarily on the financial condition of the borrower (and, in some cases, the lending institution from which it purchases the loan). Adverse changes in the creditworthiness of the borrower may affect the borrower’s ability to pay principal and interest, and borrowers that are in bankruptcy or restructuring may never pay off their indebtedness, or may pay only a small fraction of the amount owed. The value of collateral, if any, securing a loan can decline, or may be insufficient to meet the borrower’s obligations or difficult to liquidate. In addition, the fund’s access to collateral may be limited by bankruptcy or other insolvency laws. The failure by the fund to receive scheduled interest or principal payments on a loan 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 interests 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 generally not have access to non-public information to which other investors in syndicated loans may have access. Because loans 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 will depend almost exclusively on Putnam Management’s, and the original lending institution’s, credit analysis of the borrower. Investments in loans may be of any quality, including “distressed” loans, and will be subject to the fund’s credit quality policy. The loans in which the fund may invest include

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those that pay fixed rates of interest and those that pay floating rates – i.e., rates that adjust periodically based on a known lending rate, such as a bank’s prime rate.

The fund will in many cases be required to rely upon the lending institution from which it purchases the loan interest to collect and pass on to the fund such payments and to enforce the fund’s rights under the loan. This may subject the fund to greater delays, expenses, and risks than if the fund could enforce its rights directly against the borrower. For example, 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 an interest may, either at its own election or pursuant to terms of the loan documentation, prepay amounts of the loan from time to time. The rate of such prepayments may be affected by, among other things, general business and economic conditions, as well as the financial status of the borrower. Prepayment would cause the actual duration of a loan to be shorter than its stated maturity. 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.

Corporate loans in which the fund may invest are generally made to finance internal growth, mergers, acquisitions, stock repurchases, leveraged buy-outs and other corporate activities. A significant portion of the corporate loan interests purchased by the fund may represent interests in loans made to finance highly leveraged corporate acquisitions, known as “leveraged buy-out” transactions, leveraged recapitalization loans and other types of acquisition financing. 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.

The market for bank loans may not be highly liquid. In addition, loan interests generally are subject to restrictions on transfer, and only limited opportunities may exist to sell such interests in secondary markets. As a result, the fund may be unable to sell loan interests 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. The fund may hold investments in loans for a very short period of time when opportunities to resell the investments that Putnam Management believes are attractive arise.

Certain of the loan interests acquired by the fund may involve letters of credit, revolving credit facilities, or other standby financing commitments obligating the fund to make additional loans upon demand by the borrower pursuant to the terms specified in the loan documentation. This obligation may have the effect of requiring the fund to increase its investment in a borrower at a time when it would not otherwise have done so. To the extent that the fund is committed to make additional loans under the loan documentation, it will at all times set aside on its books liquid assets in an amount sufficient to meet such commitments.

Certain of the loan interests acquired by the fund may also involve loans made in foreign (i.e., non-U.S.) currencies. The fund’s investment in such interests would involve the risks of currency fluctuations described in this SAI with respect to investments in the foreign securities.

With respect to its management of investments in bank loans, Putnam Management will normally seek to avoid receiving material, non-public information (“Confidential Information”) about the issuers of bank loans being considered for acquisition by the fund or held in the fund’s portfolio. In many instances, borrowers may offer to furnish Confidential Information to prospective investors, and to holders, of the issuer’s loans. Putnam Management’s decision not to receive Confidential Information may place Putnam Management at a disadvantage relative to other investors in 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 loans are asked to grant amendments, waivers or consent, Putnam Management’s ability to assess their significance or desirability may be adversely affected. For these and other reasons, it is possible that Putnam Management’s decision not to

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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 loans, Putnam Management may from time to time come into possession of material, non-public information about the issuers of loan interests that may be held in the fund’s portfolio. Possession of such information may in some instances occur despite Putnam Management’s efforts to avoid such possession, but in other instances Putnam Management 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 Management’s ability to trade in these loan interests for the account of the fund could potentially be limited by its possession of such information. Such limitations on Putnam Management’s ability to trade could have an adverse effect on the fund by, for example, preventing the fund from selling a loan interest 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 Management or an affiliate may hold other securities issued by borrowers in whose loans the fund may hold an interest. These other securities may include, for example, debt securities that are subordinate to the loan interests 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 loans. In such cases, Putnam Management may owe conflicting fiduciary duties to the fund and other client accounts. Putnam Management will endeavor to carry out its obligations to all of its clients (including the fund) 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 Management’s client accounts collectively held only a single category of the issuer’s securities.

The settlement period (the period between the execution of the trade and the delivery of cash to the purchaser) for some bank loan transactions may be significantly longer than the settlement period for other investments, and in some cases longer than seven days. Requirements to obtain the consent of the borrower and/or agent can delay or impede the fund’s ability to sell bank loan interests and can adversely affect the price that can be obtained. It is possible that sale proceeds from bank loan transactions will not be available to meet redemption obligations, in which case the fund may be required to utilize other sources to meet the redemption obligations, such as cash balances or proceeds from the sale of its more liquid investments or investments with shorter settlement periods.

Some loan interests may not be considered “securities” for certain purposes under the federal securities laws, and, as a result, purchasers, such as the fund, may not be entitled to rely on the anti-fraud protections of the federal securities laws.

If legislation or federal or state regulators impose additional requirements or restrictions on the ability of financial institutions to make loans that are considered highly leveraged transactions, the availability of bank loans for investment by a fund may be adversely affected. In addition, such requirements or restrictions could reduce or eliminate sources of financing for certain borrowers. This would increase the risk of default. If legislation or federal or state regulators require financial institutions to dispose of bank loans that are considered highly leveraged transactions or subject such bank loans to increased regulatory scrutiny, financial institutions may determine to sell such bank loans. If a fund attempts to sell a bank loan at a time when a financial institution is engaging in such a sale, the price a fund could get for the bank loan may be adversely affected.

December 30, 2019 II-24 

 



Borrowing and Other Forms of Leverage

The fund may borrow money to the extent permitted by its investment policies and restrictions and applicable law. When the fund borrows money, it must pay interest and other fees, which will reduce the fund’s returns if such costs exceed the returns on the portfolio securities purchased or retained with such borrowings. In addition, if the fund makes additional investments while borrowings are outstanding, this may be considered a form of leverage.

Each Putnam fund (other than Putnam RetirementReady® Funds, Putnam Retirement Income Fund Lifestyle 1, and Putnam Short-Term Investment Fund) participates in a committed line of credit provided by State Street Bank and Trust Company and an uncommitted line of credit provided by State Street Bank and Trust Company. These lines of credit are intended to provide a temporary source of cash in extraordinary or emergency circumstances, such as unexpected shareholder redemption requests. The fund may pay a commitment or other fee to maintain a line of credit, in addition to the stated interest rate. Each participating fund in the committed line of credit is required to maintain a specified asset coverage ratio.

In addition to borrowing money from banks, the fund may engage in certain other investment transactions that may be viewed as forms of financial leverage – for example, using dollar rolls, investing collateral from loans of portfolio securities, entering into when-issued, delayed-delivery or forward commitment transactions or using derivatives such as swaps, futures, forwards, and options. Because the fund either (1) sets aside cash (or other assets determined to be liquid by Putnam Management in accordance with procedures established by the Trustees) on its books in respect of such transactions during the period in which the transactions are open or (2) otherwise “covers” its obligations under the transactions, such as by holding offsetting investments, the fund does not consider these transactions to be borrowings for purposes of its investment restrictions or “senior securities” for purposes of the 1940 Act. In some cases (e.g., with respect to futures, options, forwards and certain swaps such as total return swaps that are contractually required to “cash-settle”), the fund is permitted under relevant guidance from the Securities and Exchange Commission (the “SEC”) or SEC staff to set aside assets with respect to an investment transaction in the amount of its net (marked-to-market) obligations thereunder, rather than the full notional amount of the transaction. By setting aside assets equal only to its net (marked-to-market) obligations, the fund will have the ability to employ leverage to a greater extent than if it set aside assets equal to the notional amount of the transaction, which may increase the risk associated with such investments. When the fund is a seller of credit protection under a credit default swap, the fund will set aside the full notional amount of the swap transaction.

Leveraging tends to exaggerate the effect of any increase or decrease in the value of the fund’s holding. When the fund borrows money or otherwise leverages its portfolio, the value of an investment in the fund will be more volatile and other investment risks will tend to be compounded. Leveraging also may require that the fund liquidate portfolio securities when it may not be advantageous to do so, to satisfy its obligations or to meet segregation requirements. Leveraging may expose the fund to losses in excess of the amounts invested. Furthermore, if the fund uses leverage through purchasing derivative instruments, the fund has the risk that losses may exceed the net assets of the fund.

Commodities and Commodity-Related Investments

Some funds may gain exposure to commodity markets by investing in physical commodities or commodity-related instruments directly or indirectly. Such instruments include, but are not limited to, futures contracts, swaps, options, forward contracts, and structured notes and equities, debt securities, convertible securities, and warrants of issuers in commodity-related industries.

Commodity prices can be extremely volatile and may be directly or indirectly affected by many factors, including changes in overall market movements, real or perceived inflationary trends, commodity index volatility, changes in interest rates or currency exchange rates, population growth and changing demographics, and factors affecting a particular industry or commodity, such as drought, floods, or other weather conditions

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or natural disasters, livestock disease, trade embargoes, economic sanctions, competition from substitute products, transportation bottlenecks or shortages, fluctuations in supply and demand, tariffs, and international regulatory, political, and economic developments (e.g., regime changes and changes in economic activity levels). In addition, some commodities are subject to limited pricing flexibility because of supply and demand factors, and others are subject to broad price fluctuations as a result of the volatility of prices for certain raw materials and the instability of supplies of other materials.

Actions of and changes in governments, and political and economic instability, in commodity-producing and -exporting countries may affect the production and marketing of commodities. In addition, commodity-related industries throughout the world are subject to greater political, environmental, and other governmental regulation than many other industries. Changes in government policies and the need for regulatory approvals may adversely affect the products and services of companies in the commodities industries. For example, the exploration, development, and distribution of coal, oil, and gas in the United States are subject to significant federal and state regulation, which may affect rates of return on coal, oil, and gas and the kinds of services that the federal and state governments may offer to companies in those industries. In addition, compliance with environmental and other safety regulations has caused many companies in commodity-related industries to incur production delays and significant costs. Government regulation also may impede the development of new technologies. The effect of future regulations affecting commodity-related industries cannot be predicted. The value of commodity-related derivatives fluctuates based on changes in the values of the underlying commodity, commodity index, futures contract, or other economic variable to which they are related. Additionally, economic leverage will increase the volatility of these instruments as they may increase or decrease in value more quickly than the underlying commodity or other relevant economic variable. See “Derivatives,” “Forward Commitments and Dollar Rolls,” “Futures Contracts and Related Options,” “Hybrid Instruments,” “Investments in Wholly-Owned Subsidiaries,” “Short Sales,” “Structured Investments,” “Swap Agreements” and “Warrants” herein for more information on the fund’s investments in derivatives, including commodity-related derivatives such as swap agreements, commodity futures contracts, and options on commodity futures contracts.

In order for a fund to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”) the fund must derive at least 90 percent of its gross income each taxable year from certain sources of “qualifying income” specified in the Code. Each of Putnam PanAgora Managed Futures Strategy’s and Putnam PanAgora Risk Parity Fund’s investment in a wholly-owned foreign subsidiary is expected to provide the fund with exposure to the commodities markets within the limitations of the federal income tax requirements of Subchapter M of the Code. Each of Putnam PanAgora Managed Futures Strategy’s and Putnam PanAgora Risk Parity Fund’s pursuit of its investment strategy may be limited by the fund’s intention to qualify for treatment as a regulated investment company under Subchapter M of the Code. See the “Investments in Wholly-Owned Subsidiaries” and “Taxes” sections for more information.

Derivatives

Certain of the instruments in which the fund may invest, such as futures contracts, certain foreign currency transactions, options, warrants, hybrid instruments, forward contracts, swap agreements and structured investments, are considered to be “derivatives.” Derivatives are financial instruments whose value depends upon, or is derived from, the value or other attributes of one or more underlying investments, pools of investments, indexes or currencies. 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.

The value of derivatives may move in unexpected ways due to unanticipated market movements, the use of leverage, imperfect correlation between the derivatives instrument and the reference asset, or other factors, especially in unusual market conditions, and may result in increased volatility. Derivatives may be difficult to value and may increase the fund’s transactions costs. The successful use of derivatives depends on the ability to manage these sophisticated instruments. There is no assurance that the fund’s use of derivative instruments

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will enable the fund to achieve its investment objective or that Putnam Management will be able to predict correctly the direction of securities prices, interest rates, currency exchange rates and other economic factors.

The fund’s use of derivatives may cause the fund to recognize higher amounts of short-term capital gains, which are generally taxed to individual shareholders at ordinary income tax rates, and higher amounts of ordinary income, and more generally may affect the timing, character and amount of a fund’s distributions to shareholders. The fund’s use of commodity-linked derivatives can be limited by the fund’s intention to qualify as a “regulated investment company” under the Code or bear adversely on the fund’s ability to so qualify, as discussed in “Taxes” below.

The fund’s use of certain derivatives may in some cases involve forms of financial leverage, which means they provide the fund with investment exposure greater than the value of the fund’s investment in the derivatives. The use of leverage involves risk and may increase the volatility of the fund’s net asset value. See “Borrowing and Other Forms of Leverage.”

In its use of derivatives, the fund may take both long positions (the values of which move in the same direction as the prices of the underlying investments, pools of investments, indexes or currencies), and short positions (the values of which move in the opposite direction from the prices of the underlying investments, pools of investments indexes or currencies). Short positions may involve greater risks than long positions, as the risk of loss may be theoretically unlimited (unlike a long position, in which the risk of loss may be limited to the amount invested). The fund may use derivatives that combine “long” and “short” positions in order to capture the difference between underlying investments, pools of investments, indexes or currencies.

Some derivatives transactions are required to be centrally cleared, and a party to a cleared derivatives transaction is subject to the credit risk of the clearing house and the clearing member through which it holds its cleared position. Credit risk of market participants with respect to derivatives that are centrally cleared is concentrated in a few clearing houses, and it is not clear how an insolvency proceeding of a clearing house would be conducted and what impact an insolvency of a clearing house would have on the financial system or on the fund’s ability to exercise remedies. Also, the fund is subject to risk if it enters into a derivatives transaction that is required to be cleared, and no clearing member is willing or able to clear the transaction on the fund’s behalf.

Some derivative contracts may be privately negotiated in the over-the-counter market. These contracts also involve exposure to credit risk, since contract performance depends in part on the financial condition of the counterparty, and counterparty risk, since the counterparty may be unable or unwilling to perform its obligations under the contract for reasons unrelated to its financial condition, such as operational issues, business interruptions or contract disputes. If a privately negotiated over-the-counter contract calls for payments by the fund, the fund must be prepared to make the payments when due. If a counterparty’s creditworthiness declines or the counterparty is otherwise unable or unwilling to perform its obligations under the contract, the fund may not receive payments owed under the contract, or the payments may be delayed and the value of the agreements with the counterparty may decline, potentially resulting in losses to the fund.

Derivatives also are subject to the risk that the fund may be delayed or prevented from recovering margin or other amounts deposited with a clearinghouse, futures commission merchant or other counterparty. If the fund has insufficient cash, it may have to sell securities to meet daily variation margin requirements at a time when it may be disadvantageous to do so.

To the extent the fund is required to segregate or “set aside” (often referred to as “asset segregation”) liquid assets or otherwise cover open positions with respect to certain derivative instruments, the fund may be required to sell portfolio instruments to meet these asset segregation requirements. There is a possibility that segregation involving a large percentage of the fund’s assets could impede portfolio management or the fund’s ability to meet redemption requests or other current obligations.

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Other risks arise from the potential inability to terminate or sell derivatives positions. A liquid secondary market may not always exist for the fund’s derivatives positions. In fact, some over-the-counter instruments may be considered illiquid, and it may not be possible for the fund to liquidate a derivative position at an advantageous time or price, which may result in significant losses.

Legislation and regulation of derivatives in the U.S. and other countries, including asset segregation, margin, clearing, trading and reporting requirements, and leveraging and position limits, may make derivatives more costly and/or less liquid, limit the availability of certain types of derivatives, cause the Fund to change its use of derivatives, or otherwise adversely affect a Fund’s use of derivatives.

Further information about these instruments and the risks involved in their use is included elsewhere in the prospectus and in this SAI.

Combined Positions

A fund may purchase and write options in combination with each other, or in combination with futures or forward contracts, options on futures contracts, indexed securities, swap agreements or other derivative instruments, to adjust the risk and return characteristics of its overall position. For example, a fund may purchase a put option and write a call option on the same underlying instrument, in order to construct a combined position whose risk and return characteristics are similar to selling a futures contract. Another possible combined position would involve writing a call option at one strike price and buying a call option at a lower price, in order to reduce the risk of the written call option in the event of a substantial price increase. Because combined options positions involve multiple trades, they result in higher transaction costs and may be more difficult to open and close out.

Exchange-Traded Notes

The fund may invest in exchange-traded notes (“ETNs”). An ETN is a type of senior, unsecured, unsubordinated debt security whose returns are linked to the performance of a particular market index or other reference assets less applicable fees and expenses. ETNs are listed on an exchange and traded in the secondary market. Investors may hold the ETN until maturity, at which time the issuer is obligated to pay a return linked to the performance of the relevant market index less applicable fees and expenses. ETNs typically do not make periodic interest payments and principal typically is not protected.

The market value of an ETN may be influenced by, among other things, time to maturity, level of supply and demand of the ETN, economic, legal, political or geographic events that affect the reference assets, volatility and lack of liquidity in the reference assets, changes in the applicable interest rates, the current performance of the market index to which the ETN is linked, and the credit rating of the ETN issuer. The market value of an ETN may differ from the performance of the applicable market index, and there may be times when an ETN trades at a premium or discount. This difference in price may be due to the fact that the supply and demand in the market for ETNs at any point in time is not always identical to the supply and demand in the market for the securities underlying the market index that the ETN seeks to track. A change in the issuer’s credit rating may also impact the value of an ETN despite the underlying market index remaining unchanged.

ETNs are also subject to tax risk. No assurance can be given that the Internal Revenue Service (the “IRS”) will accept, or a court will uphold, how the fund characterizes and treats ETNs for tax purposes.

An ETN that is tied to a specific market index may not be able to replicate and maintain exactly the composition and relative weighting of securities, commodities or other components in the applicable market index. ETNs also incur certain expenses not incurred by their applicable market index, and the fund would bear a proportionate share of any fees and expenses borne by the ETN in which it invests.

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The fund’s ability to sell its ETN holdings may be limited by the availability of a secondary market. In addition, although an ETN may be listed on an exchange, the issuer may not be required to maintain the listing, and there can be no assurance that a secondary market will exist for an ETN. Some ETNs that use leverage in an effort to amplify the returns of an underlying market index can, at times, be relatively illiquid and may therefore be difficult to purchase or sell at a fair price. Leveraged ETNs may offer the potential for greater return, but the potential for loss and speed at which losses can be realized also are greater. The extent of the fund’s investment in commodity-linked ETNs, if any, is limited by tax considerations. For more information regarding the tax treatment of commodity-linked ETNs, please see “Taxes” below.

ETNs are generally similar to structured investments and hybrid instruments. For discussion of these investments and the risks generally associated with them, see “Hybrid Instruments” and “Structured Investments” in this SAI.

Floating Rate and Variable Rate Demand Notes

The fund may purchase taxable or tax-exempt floating rate and variable rate demand notes for short-term cash management or other investment purposes. Floating rate and variable rate demand notes are debt instruments that provide for periodic adjustments in the interest rate. The interest rate on these instruments may be reset daily, weekly or on some other reset period and may have a floor or ceiling on interest rate changes. 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. Interest rate adjustments are designed to help stabilize the instrument’s price or maintain a fixed spread to a predetermined benchmark. While this feature may protect against a decline in the instrument’s market price when interest rates or benchmark rates rise, it lowers the fund’s income when interest rates or benchmark rates fall. The fund’s income from its floating rate and variable rate investments also may increase if interest rates rise. Floating rate and variable rate obligations are less effective than fixed rate instruments at locking in a particular yield. Nevertheless, such obligations may fluctuate in value in response to interest rate changes if there is a delay between changes in market interest rates and the interest reset date for the obligation, or for other reasons.

The fund’s ability to receive payments of principal and interest and other amounts in connection with loans held by it will depend primarily on the financial condition of the issuer. The failure by the fund to receive scheduled interest or principal payments on a loan 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 NAV.

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. If these obligations are not secured by letters of credit or other credit support arrangements, the fund’s right to demand payment will be dependent on the ability of the issuer to pay principal and interest on demand. In addition, these obligations frequently are not rated by credit rating agencies and may involve heightened risk of default by the issuer. The issuer of such obligations normally 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. There is no assurance that the fund will be able to reinvest the proceeds of any prepayment at the same interest rate or on the same terms as those of the original instrument.

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The absence of an active secondary market for floating rate and variable rate demand notes could make it difficult for the fund to dispose of the instruments, and the fund could suffer a loss if the issuer defaults or during periods in which the fund is not entitled to exercise its demand rights. When a reliable trading market for the floating rate and variable rate instruments held by the fund does not exist and the fund may not demand payment of the principal amount of such instruments within seven days, the instruments may be deemed illiquid and therefore subject to the fund’s limitation on investments in illiquid securities.

Foreign Currency Transactions

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. The fund may engage in these transactions for a variety of reasons, including to manage the exposure to foreign currencies inherent in the fund’s investments, to increase its returns, and to offset some of the costs of hedging transactions. Foreign currency transactions involve costs, and, if unsuccessful, may reduce the fund’s return.

Generally, the fund may engage in both “transaction hedging” and “position hedging” (the sale of forward currency with respect to portfolio security positions). 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 fund’s 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 also engage in position hedging, in which the fund enters into foreign currency transactions on a particular currency with respect to portfolio positions denominated or quoted in that currency. By position hedging, the fund attempts 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 securities the fund intends to buy are denominated or quoted). While such a transaction would generally offset both positive and negative currency fluctuations, such currency transactions would not offset changes in security values caused by other factors.

The fund may purchase or sell a foreign currency on a spot (i.e.,cash) basis at the prevailing spot rate in connection with the settlement of transactions in portfolio securities denominated in that foreign currency or for other hedging or non-hedging purposes. If conditions warrant, for hedging or non-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. 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.

A foreign currency futures contract is a standardized exchange-traded 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 Commodity Futures Trading Commission (the “CFTC”), such as the New York Mercantile Exchange, and have margin requirements.

A foreign currency forward contract is a negotiated agreement to exchange currency at a future time, 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. The contract price may be higher or lower than the current spot rate. 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. 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

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contracts may be in any amount agreed upon by the parties rather than predetermined amounts. In addition, forward contracts are traded in the interbank market conducted directly between currency traders (usually large commercial banks) and their customers, so that no intermediary is required. A forward contract generally has no deposit requirement, and no commissions are charged at any stage for trades.

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 may be effected only on a commodities exchange or board of trade which provides a secondary market in such contracts; a clearing corporation associated with the exchange assumes responsibility for closing out such contracts.

Positions in foreign currency futures contracts may be closed out only on an exchange or board of trade that provides a secondary market in such contracts or options. 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 on its futures positions.

The precise matching of the amounts of foreign currency exchange transactions and the value of the portfolio securities involved will not generally be possible since the future value of such securities in foreign currencies will change as a consequence of market movements in the value of those securities between the dates the currency exchange transactions are entered into and the dates they mature. It is also 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.

As noted above, the fund may purchase or sell 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.

Options on foreign currencies operate similarly to options on securities, and 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 may be affected by all of those factors which influence foreign exchange rates and investments generally.

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

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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.

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 involve costs to the fund and tend to limit any potential gain which might result from the increase in value of such currency.

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 this situation, 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 set aside liquid assets on its books to cover forward contracts used for non-hedging purposes.

In addition, 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 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. 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. 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, the fund 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.

Numerous regulatory changes related to foreign currency transactions are expected to occur over time and could materially and adversely affect the ability of the fund to enter into foreign currency transactions or could increase the cost of foreign currency transactions. In the future, certain foreign currency transactions may be

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required to be subject to initial as well as variation margin requirements. Foreign currency transactions that are not centrally cleared are subject to the creditworthiness of the counterparty to the foreign currency transaction (usually large commercial banks), and their values may decline substantially if the counterparty’s creditworthiness deteriorates. In a cleared foreign currency transaction, performance of the transaction will be effected by a central clearinghouse rather than by the original counterparty to the transaction. Foreign currency transactions that are centrally cleared will be subject to the creditworthiness of the clearing member and the clearing organization involved in the transaction.

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. There can be no assurance that suitable foreign currency transactions will be available for the fund at any time or that the fund will engage in foreign currency exchange transactions at any time or under any circumstances even if suitable transactions are available to it.

Successful use of currency management strategies will depend on Putnam Management’s skill in analyzing currency values. Currency management strategies may increase the volatility of the fund’s returns and could result in significant losses to the fund if currencies do not perform as Putnam Management anticipates. There is no assurance that Putnam Management’s use of currency management strategies will be advantageous to the fund or that it will hedge at appropriate times.

Foreign Investments and Related Risks

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. In addition, the fund is required to compute and distribute its income in U.S. dollars. Therefore, if the exchange rate for a foreign currency declines after a fund’s income has been earned and translated into U.S. dollars (but before payment), the fund could be required to liquidate portfolio securities to make such distributions. Similarly, if an exchange rate declines between the time a fund incurs expenses in U.S. dollars and the time such expenses are paid, the amount of such currency required to be converted into U.S. dollars in order to pay such expenses in U.S. dollars will be greater than the equivalent amount in any such currency of such expenses at the time they were incurred.

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, custody, disclosure and financial reporting standards and practices comparable to those in the United States. In addition, there may be less (or less effective) regulation of exchanges, brokers and listed companies in some foreign countries. The securities of some foreign issuers are less liquid and at times more volatile than securities of comparable U.S. issuers. Foreign brokerage commissions, custodial expenses and other fees are also generally higher than in the United States.

Foreign settlement procedures and trade regulations may be more complex and 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. For example, settlement of transactions involving foreign securities or foreign currencies (see below) may occur within a foreign country, and the fund may accept or make delivery of the underlying securities or currency in conformity with any applicable U.S. or foreign restrictions or regulations, and may pay fees, taxes or charges associated with such delivery. In addition, local market holidays or other factors may extend the time for settlement of purchases and sales of the Fund’s investments in securities that trade on foreign markets. Such investments may also involve the risk that an entity involved in the settlement may not meet its obligations. Extended settlement cycles or other delays in settlement may increase the fund’s liquidity risk and require the fund to employ alternative methods (e.g., through borrowings) to satisfy redemption requests during periods of large redemption activity in Fund shares.

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In addition, foreign securities may be subject to the risk of nationalization or expropriation of assets, imposition of economic sanctions or embargoes (whether imposed by the United States. or another country or other governmental or non-governmental organization), currency exchange controls, foreign withholding or other taxes or restrictions on the repatriation of foreign currency, confiscatory taxation, political, social or financial instability and diplomatic developments which could affect the value of the fund’s investments in certain foreign countries. Such actions could result in the devaluation of a country’s currency or a decline in the value and liquidity of securities of issuers in that country. In some cases (including in the case of sanctions), such actions also could result in a freeze on an issuer’s securities which would prevent the fund from selling securities it holds. Governments of many countries have exercised and continue to exercise substantial influence over many aspects of the private sector through the ownership or control of many companies, including some of the largest in these countries. As a result, government actions in the future could have a significant effect on economic conditions which may adversely affect prices of certain portfolio securities. There is also generally less government supervision and regulation of stock exchanges, brokers, and listed companies than in the United States. Moreover, foreign economies may differ favorably or unfavorably from the U.S. economy in such respects as growth of gross national product, rate of inflation, capital reinvestment, resource self-sufficiency and balance of payments position. Dividends or interest on, or proceeds from the sale of, foreign securities may be subject to foreign withholding or other taxes, and special U.S. tax considerations may apply.

Note on MSCI indices. Due to the potential for foreign withholding taxes, MSCI, Inc. (MSCI) publishes two versions of its indices reflecting the reinvestment of dividends using two different methodologies: gross dividends and net dividends. While both versions reflect reinvested dividends, they differ with respect to the manner in which taxes associated with dividend payments are treated. In calculating the net dividends version, MSCI incorporates reinvested dividends applying the withholding tax rate applicable to foreign non-resident institutional investors that do not benefit from double taxation treaties. Putnam Management believes that the net dividends version of MSCI indices better reflects the returns U.S. investors might expect were they to invest directly in the component securities of an MSCI index.

Many foreign countries are heavily dependent upon exports, particularly to developed countries, and, accordingly, have been and may continue to be adversely affected by trade barriers, managed adjustments in relative currency values, and other protectionist measures imposed or negotiated by the United States and other countries with which they trade. These economies also have been and may continue to be negatively impacted by economic conditions in the United States and other trading partners, which can lower the demand for goods produced in those countries.

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. These restrictions may take the form of prior governmental approval requirements, limits on the amount or type of securities held by foreigners and limits on the types of companies in which foreigners may invest (e.g., limits on investment in certain industries). Some countries also limit the investment of foreign persons to only a specific class of securities of an issuer that may have less advantageous terms or rights or preferences than securities of the issuer available for purchase by domestic parties (and such securities may be less liquid than other classes of securities of an issuer), or may directly limit foreign investors’ rights (such as voting rights). Although securities subject to such restrictions may be marketable abroad, they may be less liquid than foreign securities of the same class that are not subject to such restrictions. Foreign laws may also impact the availability of derivatives or hedging techniques relating to a foreign country’s government securities. In each of these situations, the funds’ ability to invest significantly in desired issuers, or the terms of such investments, could be negatively impacted as a result of the relevant legal restriction. Sanctions imposed by the United States government on other countries or persons or issuers operating in such countries could restrict the fund’s ability to buy affected securities or to sell any affected securities it has previously purchased, which may subject the fund to greater risk of loss in

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those securities. Foreign countries may have reporting requirements with respect to the ownership of securities, and those reporting requirements may be subject to interpretation or change without prior notice to investors. No assurance can be given that the fund will satisfy applicable foreign reporting requirements at all times.

For purposes of some foreign holding limits or disclosure thresholds, all positions owned or controlled by the same person or entity, even if in different accounts, may be aggregated for purposes of determining whether the applicable limits or thresholds have been exceeded. Thus, even if the fund does not intend to exceed applicable limits, it is possible that different clients managed by Putnam Management and its affiliates (including separate affiliates owned by Power Corporation of Canada outside the Putnam Investments group) may be aggregated for this purpose. These limits may adversely affect the fund’s ability to invest in the applicable security.

The risks described above, including the risks of nationalization or expropriation of assets, typically are increased in connection with investments in developing countries, also known as “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. In such a dynamic environment, there can be no assurance that any or all of these capital markets will present viable investment opportunities for the fund. 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. In such an event, it is possible that the fund could lose the entire value of its investments in the affected market. High rates of inflation or currency devaluations may adversely affect the economies and securities markets of such countries. In addition, the economies of certain developing or emerging market countries may be dependent on a single industry or limited group of industries, which may increase the risks described above and make those countries particularly vulnerable to global economic and market changes. 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 for many years, and future inflation may adversely affect the economies and securities markets of such countries. When debt and similar obligations issued by foreign issuers are denominated in a currency (e.g., the U.S. dollar or the Euro) other than the local currency of the issuer, the subsequent strengthening of the nonlocal currency against the local currency will generally increase the burden of repayment on the issuer and may increase significantly the risk of default by the issuer.

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 or prospects of an investment in such securities. In certain countries with emerging capital markets, reporting standards vary widely. As a result, traditional investment measurements used in the United States, such as price/earnings ratios, may not be applicable.

Practices in relation to settlement of securities transactions in emerging markets involve higher risks than those in developed markets, in part because the fund may need to use brokers and counterparties that are less well capitalized, and custody and registration of assets in some countries may be unreliable. The possibility of fraud, negligence, undue influence being exerted by the issuer, or refusal to recognize ownership exists in some emerging markets, and, along with other factors, could result in ownership registration being completely lost. The fund would absorb any loss resulting from such registration problems and may have no successful claim for compensation.

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American Depositary Receipts (“ADRs”) as well as other “hybrid” forms of ADRs, including European Depositary Receipts (“EDRs”) and Global Depositary Receipts (“GDRs”), are certificates evidencing ownership of shares of a foreign issuer. These certificates are issued by depository banks and generally trade on an established market in the United States or elsewhere. The underlying shares are held in trust by a custodian bank or similar financial institution in the issuer’s home country. The depository bank may not have physical custody of the underlying securities at all times and may charge fees for various services, including forwarding dividends and interest and corporate actions. ADRs are alternatives to directly purchasing the underlying foreign securities in their national markets and currencies. However, ADRs continue to be subject to many of the risks associated with investing in foreign 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 or other exposure to foreign markets. If the fund invests in securities issued by foreign issuers, the fund may be subject to the risks described above even if all of the fund’s investments are denominated in U.S. dollars, especially with respect to issuers whose revenues are principally earned in a foreign currency but whose debt obligations have been issued in U.S. dollars or other hard currencies.

Investing through Stock Connect. The fund may, directly or indirectly (through, for example, participation notes or other types of equity-linked notes), purchase shares in mainland China-based companies that trade on Chinese stock exchanges such as the Shanghai Stock Exchange and the Shenzhen Stock Exchange (“China A-Shares”) through the Shanghai-Hong Kong Stock Connect (“Stock Connect”), or that may be available in the future through additional stock connect programs, a mutual market access program designed to, among other things, enable foreign investment in the People’s Republic of China (“PRC”) via brokers in Hong Kong.

There are significant risks inherent in investing in China A-Shares through Stock Connect. The underdeveloped state of PRC’s investment and banking systems subjects the settlement, clearing, and registration of China A-Shares transactions to heightened risks. Stock Connect can only operate when both PRC and Hong Kong markets are open for trading and when banking services are available in both markets on the corresponding settlement days. As such, if either or both markets are closed on a U.S. trading day, the fund may not be able to dispose of its China A-Shares in a timely manner, which could adversely affect the fund’s performance. Because Stock Connect is relatively new, its effects on the market for trading China A-shares are uncertain. In addition, the trading, settlement and information technology (“IT”) systems required to operate Stock Connect are relatively new and continuing to evolve. In the event that the relevant systems do not function properly, trading through Stock Connect could be disrupted.

PRC regulations require that, in order to sell its China A-Shares, the fund must pre-deliver the China A-Shares to a broker. If the China A-Shares are not in the broker’s possession before the market opens on the day of sale, the sell order will be rejected. This requirement could also limit the fund’s ability to dispose of its China A-Shares purchased through Stock Connect in a timely manner. Additionally, Stock Connect is subject to daily quota limitations on purchases of China A Shares. Once the daily quota is reached, orders to purchase additional China A-Shares through Stock Connect will be rejected. The fund’s investment in China A-Shares may only be traded through Stock Connect and is not otherwise transferable. Stock Connect utilizes an omnibus clearing structure, and the fund’s shares will be registered in its custodian’s name on the Central Clearing and Settlement System. This may limit the ability of Putnam Management to effectively manage the fund, and may expose the fund to the credit risk of its custodian or to greater risk of expropriation. Investment in China A-Shares through Stock Connect may be available only through a single broker that is an affiliate of the fund’s custodian, which may affect the quality of execution provided by such broker. Stock Connect restrictions could also limit the ability of the fund to sell its China A-Shares in a timely manner, or to sell them at all. Further, different fees, costs and taxes are imposed on foreign investors acquiring China A-Shares acquired through Stock Connect, and these fees, costs and taxes may be higher than comparable fees, costs and taxes imposed on owners of other securities providing similar investment exposure.

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Stock Connect trades are settled in Renminbi (“RMB”), the official currency of PRC, and investors must have timely access to a reliable supply of RMB in Hong Kong, which cannot be guaranteed.

Investing through Bond Connect: Chinese debt instruments trade on the China Interbank Bond Market (“CIBM”) and may be purchased through a market access program that is designed to, among other things, enable foreign investment in the PRC (“Bond Connect”). There are significant risks inherent in investing in Chinese debt instruments, similar to the risks of investing in other fixed-income securities in emerging markets. The prices of debt instruments traded on the CIBM may fluctuate significantly due to low trading volume and potential lack of liquidity. The rules to access debt instruments that trade on the CIBM through Bond Connect are relatively new and subject to change, which may adversely affect the fund’s ability to invest in these instruments and to enforce its rights as a beneficial owner of these instruments. Trading through Bond Connect is subject to a number of restrictions that may affect the fund’s investments and returns. In addition, securities offered through Bond Connect may lose their eligibility for trading through the program at any time. If Bond Connect securities lose their eligibility for trading through the program, they may be sold but can no longer be purchased through Bond Connect. There can be no assurance as to the program’s continued existence or whether future developments regarding the program may restrict or adversely affect the fund’s investments or returns.

Investments made through Bond Connect are subject to order, clearance and settlement procedures that are relatively untested in China, which could pose risks to the fund. CIBM does not support all trading strategies (such as short selling) and investments in Chinese debt instruments that trade on the CIBM are subject to the risks of suspension of trading without cause or notice, trade failure or trade rejection and default of securities depositories and counterparties. Furthermore, Chinese debt instruments purchased via Bond Connect will be held via a book entry omnibus account in the name of the Hong Kong Monetary Authority Central Money Markets Unit (“CMU”) maintained with a China-based depository (either the China Central Depository & Clearing Co. (“CDCC”) or the Shanghai Clearing House (“SCH”)). The fund’s ownership interest in these Chinese debt instruments will not be reflected directly in book entry with CSDCC or SCH and will instead only be reflected on the books of the fund’s Hong Kong sub-custodian. Therefore, the fund’s ability to enforce its rights as a bondholder may depend on CMU’s ability or willingness as record-holder of the bonds to enforce the fund’s rights as a bondholder. Additionally, the omnibus manner in which Chinese debt instruments are held could expose the fund to the credit risk of the relevant securities depositories and the fund’s Hong Kong sub-custodian. While the fund holds a beneficial interest in the instruments it acquires through Bond Connect, the mechanisms that beneficial owners may use to enforce their rights are untested. In addition, courts in China have limited experience in applying the concept of beneficial ownership. Moreover, Chinese debt instruments acquired through Bond Connect generally may not be sold, purchased or otherwise transferred other than through Bond Connect in accordance with applicable rules.

The fund’s investments in Chinese debt instruments acquired through Bond Connect are generally subject to a number of regulations and restrictions, including Chinese securities regulations and listing rules, loss recovery limitations and disclosure of interest reporting obligations. The fund will not benefit from access to Hong Kong investor compensation funds, which are set up to protect against defaults of trades, when investing through Bond Connect.

Bond Connect can only operate when both China and Hong Kong markets are open for trading and when banking services are available in both markets on the corresponding settlement days. In addition, the trading, settlement and IT systems required for non-Chinese investors in Bond Connect are relatively new. In the event of systems malfunctions or extreme market conditions, trading via Bond Connect could be disrupted. The rules applicable to taxation of Chinese debt instruments acquired through Bond Connect remain subject to further clarification. Uncertainties in the Chinese tax rules governing taxation of income and gains from investments via Bond Connect could result in unexpected tax liabilities for the fund, which may negatively affect investment returns for shareholder.

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Bond Connect trades are settled in RMB, and investors must have timely access to a reliable supply of RMB in Hong Kong, which cannot be guaranteed.

Forward Commitments and Dollar Rolls

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 its books 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, to sell securities it owns under delayed delivery arrangements, or to take a short position in mortgage-backed securities. Proceeds of TBA sale commitments are not received until the contractual settlement date. During the time a TBA sale commitment is outstanding, either equivalent deliverable securities or an offsetting TBA purchase commitment deliverable on or before the sale commitment date are held as “cover” for the transaction, or other liquid assets in an amount equal to the notional value of the TBA sale commitment are segregated. Where the fund purchases or sells an option, which is to be settled in cash, to buy or sell a TBA sale commitment, the fund will segregate cash or liquid assets in an amount equal to the current “mark-to-market” value of the option. 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.

The fund may enter into dollar roll transactions (generally using TBAs) in which it sells a fixed income security for delivery in the current month and simultaneously contracts to purchase similar securities (for example, same type, coupon and maturity) at an agreed upon future time. By engaging in a dollar roll transaction, the fund foregoes principal and interest paid on the security that is sold while the dollar roll is outstanding, but receives the difference between the current sales price and the forward price for the future purchase. In addition, the fund may reinvest the cash proceeds of the sale while the dollar roll is outstanding in an effort to enhance returns. The reinvestment of such proceeds may be considered a form of investment leverage and may increase the fund’s risk and volatility. If the income and capital gains from the investment of the cash from the initial sale do not exceed the income, capital appreciation and gain or loss that would have been realized on the securities sold as part of the dollar roll, the use of this technique will result in a lower return than would have been realized without the use of the dollar rolls. The fund accounts for dollar rolls as purchases and sales. Because cash (or other assets determined to be liquid by Putnam Management in accordance with procedures established by the Trustees) in the amount of the fund’s commitment under a dollar roll is set aside on the fund’s books, the fund does not consider these transactions to be borrowings for purposes of its investment restrictions.

Purchases of securities on a forward commitment basis may involve more risk than other types of purchases. The obligation to purchase securities on a specified future date involves the risk that the market value of the securities that the fund is obligated to purchase may decline below the purchase price. In addition, when

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entering into a forward commitment transaction, the fund will rely on the other party to consummate the transaction. In the event that the other party files for bankruptcy, becomes insolvent or defaults on its obligation, the fund may be adversely affected. For example, the other party’s failure to complete the transaction may result in the loss to the fund of an advantageous yield or price.

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 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 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 CFTC, and must be executed through a futures commission merchant or brokerage firm which is a member of the relevant contract market. Examples of futures contracts that the fund may use (which may include single-security futures) include, without limitation, U.S. Treasury security futures, index futures, corporate or municipal bond futures, U.S. Government agency futures, interest rate futures, commodities futures, futures contracts on sovereign debt, and Eurodollar futures. In addition, as described elsewhere in this SAI, the fund may use foreign currency futures.

The value of a futures contract tends to increase and decrease in tandem with the value of its underlying instrument. Therefore, purchasing futures contracts will tend to increase the fund’s exposure to positive and negative price fluctuations in the underlying instrument, much as if it had purchased the underlying instrument directly. When the fund sells a futures contract, by contrast, the value of its futures position will tend to move in a direction contrary to the market for the underlying instrument. Selling futures contracts, therefore, will tend to offset both positive and negative market price changes, much as if the underlying instrument had been sold.

When the fund enters into a futures contract, the fund is required to deliver to the futures broker an amount of liquid assets 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 in that it is returned to the fund upon termination of the futures contract, assuming all contractual obligations have been satisfied. Initial margin requirements are established by the exchanges on which futures contracts trade and may, from time to time, change. Futures contracts also involve brokerage costs. Subsequent payments, called “variation margin” or “maintenance margin,” to and from the broker are made on a daily basis as the value of the futures contract fluctuates, a process known as “marking to the market.” For example, if the fund purchases a futures contract on an underlying security and the price of that security rises, the value of the futures contract will increase and the fund will receive from the broker a variation margin payment based on that increase in value. Conversely, if the price of the underlying security declines, the value of the futures contract will decrease and the fund will be required to make a variation margin payment to the broker based on that decrease in value. Upon the closing of a futures contract, the fund will receive or be required to pay additional cash based on a final determinations of variation margin.

Although futures contracts (other than index futures and futures based on the volatility or variance experienced by an index) 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. Index futures and futures based on the volatility or variance experienced by an index do not call for actual delivery or acceptance of commodities or securities, but instead require cash settlement of the futures contract on the settlement date specified in the contract. Such contracts may also be closed out before the settlement date. The fund may close some or all of its futures positions at any time prior to their expiration. Closing out a futures

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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 theoretical 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. Such closing transactions involve additional commission costs.

A portion of any capital gains from futures contracts in which the fund invests directly will be treated for federal income tax purposes as short-term capital gains that, when distributed to taxable shareholders, will be taxable as ordinary income. The fund’s investments in futures may cause the fund to recognize income without receiving cash with which to make the distributions necessary to qualify and be eligible for treatment as a regulated investment company and avoid a fund-level tax. The fund may therefore need to liquidate other investments, including when it is not advantageous to do so, to meet its distribution requirement.

Except in the case of Putnam PanAgora Managed Futures Strategy and Putnam PanAgora Risk Parity Fund, no fund intends 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.

Each of the funds and subsidiaries set forth below is a commodity pool under the Commodity Exchange Act (the “CEA”), and each of Putnam Management and PanAgora is registered as a “commodity pool operator” under the CEA with respect to each such fund. PanAgora is also registered as a “commodity trading advisor” under the CEA. Since Putnam Management, PanAgora, and the funds and subsidiaries set forth below are subject to regulation by the CFTC under the CEA, they are required to comply with applicable CFTC disclosure, reporting, and recordkeeping requirements. The disclosure, reporting and, recordkeeping requirements associated with registration with the CFTC as a “commodity pool operator” would ordinarily be in addition to those requirements already imposed onto the funds, Putnam Management, and PanAgora by the SEC. In August 2013, the CFTC issued a rule that permits a registered investment company to elect to comply with certain CFTC obligations by agreeing to comply with certain SEC disclosure, reporting, and recordkeeping requirements. The funds listed below have elected to comply with certain CFTC disclosure, reporting, and recordkeeping requirements by agreeing to comply with applicable SEC requirements.

Fund Subsidiary 
Putnam PanAgora Managed Futures Strategy Putnam PanAgora Managed Futures Strategy, Ltd. 
Putnam PanAgora Risk Parity Fund Putnam PanAgora Risk Parity Fund, Ltd. 

 

As a result, additional CFTC-mandated disclosure, reporting and recordkeeping obligations apply to these funds and their respective subsidiaries (listed above), and compliance with the CFTC’s regulatory requirements could increase fund expenses, adversely affecting a fund’s total return. With respect to each other Putnam fund, Putnam Management has claimed an exclusion from the definition of the term “commodity pool operator” under the CEA pursuant to Rule 4.5 under the CEA (the “exclusion”) promulgated by the CFTC. Accordingly, Putnam Management (with respect to these funds) is not subject to registration or regulation as a “commodity pool operator” under the CEA. To remain eligible for the exclusion, each of these funds will be limited in its ability to use certain financial instruments regulated under the CEA (“commodity interests”), including futures and options on futures and certain swaps transactions. In the event that a fund’s investments in commodity interests are not within the thresholds set forth in the exclusion, Putnam Management may be required to register as a “commodity pool operator” and/or “commodity trading advisor” with the CFTC with respect to that fund. Putnam Management’s eligibility to claim the exclusion with respect to a fund will be based upon, among other things, the level and scope of the fund’s investment in commodity interests, the purposes of such investments and the manner in which the fund holds out its use of commodity interests. A

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fund’s ability to invest in commodity interests (including, but not limited to, futures and swaps on broad-based securities indexes and interest rates) is limited by Putnam Management’s intention to operate the fund in a manner that would permit Putnam Management to continue to claim the exclusion under Rule 4.5, which may adversely affect the fund’s total return. In the event the fund’s investments in commodity interests require Putnam Management to register with the CFTC as a commodity pool operator with respect to a fund, the fund’s expenses may increase, adversely affecting that fund’s total return.

Index futures. 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 U.S. common stocks. The S&P 500 assigns relative weightings to the common stocks that comprise the index, and the value of the index fluctuates with changes in the market values of those common stocks. In the case of the S&P 500, contracts are currently to buy or sell 250 units. Thus, if the value of the S&P 500 were $150, one contract would be worth $37,500 (250 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 250 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 $1,000 (250 units x gain of $4). If the fund enters into a futures contract to sell 250 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 $500 (250 units x loss of $2).

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. Options on futures contracts possess many of the same characteristics as options on securities and indices. An option on a futures contract gives the holder the right, in return for the premium paid to assume a long position (call) or short position (put) in a futures contract at a specified exercise price at any time during the period of the option (in the case of an American-style option) or on the expiration date (in the case of European-style option). After entering into a put or call option on a futures contract, the fund will be required to deposit initial margin and variation margin as described above for futures contracts.

When a call option on a futures contract is exercised, the holder acquires a long position in the futures contract and the writer is assigned the opposite short position. When a put option on a futures contract is exercised, the holder acquires a short position in the futures contract and the writer is assigned the opposite long position. When an option is exercised, 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 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 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 underlying asset 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. The holder or writer of an option on a futures contract may terminate its position by selling or purchasing an offsetting option on the same financial instrument (subject to the availability of a liquid market).

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The fund may use options on futures contracts in lieu of purchasing or writing options directly on the underlying instruments or purchasing and writing 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 that the fund expects to purchase. Such options generally operate in the same manner, and involve the same risks, as options purchased or written directly on the underlying investments. As an alternative to purchasing or writing call and put options on index futures, the fund may purchase and write 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.

Compared to the purchase or sale of futures contracts, the purchase of call or put options on futures contracts generally 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 relating to the sale of futures contracts (which are described below). In addition, by writing a call option, the fund becomes obligated to sell a futures contract if the option is exercised, which may have a value higher than the exercise price. Similarly, by writing a put option, the fund becomes obligated to purchase a futures contract if the option is exercised, which may have a value lower than the exercise price. The writing of an option on a futures contract generates a premium, which may partially offset an increase (in the case of a written call option) or decrease (in the case of a written put option) in the value of the underlying futures contract. However, the loss incurred by the fund in writing options on futures contracts is potentially unlimited and may exceed the amount of the premium received. The fund will also incur transaction costs in connection with the writing of options on futures contracts.

Risks of transactions in futures contracts and related options. Successful use of futures contracts and options on futures contracts by the fund is subject to Putnam Management’s ability to predict movements in various factors affecting securities markets, including interest rates and market movements, and, in the case of index futures and futures based on the volatility or variance experienced by an index, Putnam Management’s ability to predict the future level of the index or the future volatility or variance experienced by an index. For example, it is possible that, where the fund has sold futures contracts to hedge its portfolio against a decline in the market, the index on which the futures contracts are written may advance and the value of securities held in the fund’s portfolio, which may differ from those that comprise the index, may decline. If this occurred, the fund would lose money on the futures contracts and 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.

The use of futures and options strategies also involves the risk of imperfect correlation among movements in the prices of the securities or other assets underlying the futures contracts 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. In addition to the possibility that there may be an imperfect correlation, or no correlation at all, between movements in the futures contracts used by the fund and the portion of the portfolio being hedged, the prices of futures contracts may not correlate perfectly with movements in the underlying asset 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 expected relationship between the underlying asset 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

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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 underlying asset and movements in the prices of related futures, even a correct forecast of general market trends by Putnam Management may still not result in a profitable position. In addition, in the case of hedging transactions, an incorrect correlation could result in a loss on both the hedged securities in the fund and the hedging vehicle, so that the portfolio return might have been greater had hedging not been attempted.

The risk of a position in a futures contract may be very large compared to the relatively low level of margin a fund is required to deposit. In many cases, a relatively small price movement in a futures contract may result in immediate and substantial loss or gain to the fund relative to the size of a required margin deposit. In addition, 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. The fund will typically be required to post margin with its futures commission merchant in connection with its transactions in futures contracts. In the event of an insolvency of the futures commission merchant, the fund may not be able to recover all (or any) of the margin it has posted with the futures commission merchant, or to realize the value of any increase in the price of its positions. The fund also may be delayed or prevented from recovering margin or other amounts deposited with a futures commission merchant or futures clearinghouse.

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 that may interfere with the timely execution of customer orders. For example, futures exchanges may limit the amount of fluctuation permitted in certain futures contract prices during a single trading day. The daily limit establishes the maximum amount that the price of a futures contract may vary either up or down from the previous day’s settlement price at the end of the current trading session. Once the daily limit has been reached in a futures contract subject to the limit, no more trades may be made on that day at a price beyond that limit. The daily limit governs only price movements during a particular trading day and therefore does not limit potential losses because the limit may work to prevent the liquidation of unfavorable positions. Futures prices have occasionally moved to the daily limit for several consecutive trading days with little or no trading, thereby preventing prompt liquidation of positions and subjecting some holders of futures contracts to substantial losses.

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. If the fund were unable to liquidate a futures contract or an option on a futures contract due to the absence of a liquid secondary market, the imposition of price limits or otherwise, it could incur substantial losses. The fund would continue to be subject to market risk with respect to the position. Also, except in the case of purchased options, the fund would continue to be required to make daily variation margin payments and might be required to maintain a position being hedged by the futures contract or option or to maintain cash or securities in a segregated account.

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Hybrid Instruments

Hybrid 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, commodity 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 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 the 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.

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 pays 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. In addition, the various benchmarks and prices for underlying assets can be highly volatile. 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 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.

If the fund attempts to use a hybrid instrument as a hedge against, or as a substitute for, a portfolio investment, the hybrid instrument may not correlate as expected with the portfolio investment, resulting in losses to the fund. While hedging strategies involving hybrid instruments can reduce the risk of loss, they can also reduce

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the opportunity for gain or even result in losses by offsetting favorable price movements in other fund investments.

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, and the value of the hybrid instrument may decline substantially if the issuer’s creditworthiness deteriorates. In addition, uncertainty regarding the tax treatment of hybrid instruments may reduce demand for such instruments. 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.

Illiquid Investments

Each Putnam money market 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 10% of the fund’s net assets (taken at current value) would be invested in securities described in (a), (b) and (c). Effective December 1, 2018, Rule 22e-4 under the 1940 Act provides that mutual funds (other than money market funds) may not acquire any illiquid investment if, immediately after the acquisition, the fund would have invested more than 15% of its net assets in illiquid investments that are assets. The term “illiquid investment” for this purpose means any investment that a fund reasonably expects cannot be sold or disposed of in current market conditions in seven calendar days or less without the sale or disposition significantly changing the market value of the investment.

A fund’s illiquid investments may be considered speculative and may be difficult to sell. The sale of many of these investments may be prohibited or limited by law or contract. Illiquid investments may be difficult to value for purposes of calculating a fund’s net asset value. A fund may not be able to sell illiquid investments when Putnam Management considers it desirable to do so, or a fund may be able to sell them only at less than their value. The larger size of certain fund holdings and the lack of liquidity in securities markets may limit a fund’s ability to sell illiquid investments, or to sell them at appropriate prices, thereby negatively impacting the fund.

Inflation-Protected Securities

The fund may invest in U.S. Treasury Inflation Protected Securities (“U.S. TIPS”), which are fixed income securities issued by the U.S. Department of Treasury, the principal amounts of which are adjusted daily based upon changes in the rate of inflation or deflation. The fund may also invest in other inflation-protected securities issued by non-U.S. governments or by private issuers. Two structures are common. While the U.S. Treasury and some other issuers use a structure that accrues inflation/deflation into the principal value of the bond, many other issuers adjust the coupon accruals for inflation-related changes.

U.S. TIPS pay interest on a semi-annual basis, equal to a fixed percentage of the inflation-adjusted principal amount. The interest rate on these securities is fixed at issuance, but over the life of the security this interest may be paid on an increasing or decreasing principal value that has been adjusted for inflation. U.S. TIPS currently are issued with maturities of five, ten, or thirty years, although it is possible that securities with other maturities will be issued in the future.

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Repayment of the original principal upon maturity (as adjusted for inflation) is guaranteed for U.S. TIPS, even during a period of deflation. However, because the principal amount of U.S. TIPS would be adjusted downward during a period of deflation, the fund will be subject to deflation risk with respect to its investments in these securities. In addition, the current market value of U.S. TIPS is not guaranteed, and will fluctuate. If the fund purchases U.S. TIPS in the secondary market whose principal values have been adjusted upward due to inflation since issuance, the fund may experience a loss if there is a subsequent period of deflation. The fund may also invest in other inflation-related securities which may or may not provide a guarantee of principal. If a guarantee of principal is not provided, the adjusted principal value of the security repaid at maturity may be less than the original principal amount.

In addition, inflation-indexed securities do not protect holders from increases in interest rates due to reasons other than inflation (such as changes in currency exchange rates). The periodic adjustment of U.S. TIPS is currently tied to the Consumer Price Index for Urban Consumers (“CPI-U”), which is calculated by the U.S. Department of Treasury. The CPI-U is a measurement of changes in the cost of living, made up of components such as housing, food, transportation and energy. Inflation-protected securities issued by a non-U.S. government are generally adjusted to reflect a comparable inflation index, calculated by that government. There can no assurance that the CPI-U or any non-U.S. inflation index will accurately measure the real rate of inflation in the prices of goods and services. If interest rates rise due to reasons other than inflation (for example, due to changes in currency exchange rates), investors in these securities may not be protected to the extent that the increase is not reflected in the security’s inflation measure, which could result in losses to the fund. In addition, there can be no assurance that the rate of inflation in a non-U.S. country will be correlated to the rate of inflation in the United States.

Although inflation-indexed bonds securities may protect their holders from long-term inflationary trends, short-term increases in inflation may result in a decline in value. In general, the value of inflation-protected securities is expected to fluctuate in response to changes in real interest rates, which are in turn tied to the relationship between nominal interest rates and the rate of inflation. Therefore, if inflation were to rise at a faster rate than nominal interest rates, real interest rates might decline, leading to an increase in value of inflation-protected securities. In contrast, if nominal interest rates increased at a faster rate than inflation, real interest rates might rise, leading to a decrease in value of inflation-protected securities. If inflation is lower than expected during the period the fund holds the security, the fund may earn less on the security than on a conventional bond.

Any increase in principal value is taxable in the year the increase occurs, even though holders do not receive cash representing the increase at that time. As a result, when the fund invests in inflation-protected securities, it could be required at times to liquidate other investments, including when it is not advantageous to do so, in order to satisfy its distribution requirements as a regulated investment company and to eliminate any fund-level income tax liability under the Code.

Initial Public Offerings

The fund may purchase debt or equity securities in initial public offerings (“IPOs”). These securities, which are often issued by unseasoned companies, may be subject to many of the same risks of investing in companies with smaller market capitalizations. Securities issued in an IPO frequently are very volatile in price (and may, therefore, involve greater risk) due to factors such as market psychology prevailing at the time of the IPO, the absence of a prior public market, unseasoned trading, the small number of shares available for trading, and limited availability of information about the issuer. Because of the price volatility of IPO securities, the fund may hold securities purchased in an IPO for a very short period of time. As a result, the fund’s investments in IPOs may increase portfolio turnover, which increases brokerage and administrative costs and may result in taxable distributions to shareholders.

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There can be no assurance that investments in IPOs will be available to the funds or improve a fund’s performance. At any particular time or from time to time the fund may not be able to invest in securities issued in IPOs, or invest to the extent desired because, for example, only a small portion (if any) of the securities being offered in an IPO may be made available to the fund. In addition, under certain market conditions a relatively small number of companies may issue securities in IPOs. Similarly, to the extent that the number of Putnam funds to which IPO securities are allocated increases, the number of securities issued to any one fund may decrease. The investment performance of the fund during periods when it is unable to invest significantly or at all in IPOs may be lower than during periods when the fund is able to do so. When a fund’s asset base is small, a significant portion of the fund’s performance could be attributable to investments in IPOs because such investments would have a magnified impact on the fund. As the fund increases in size, the impact of IPOs on the fund’s performance will generally decrease.

Interfund Borrowing and Lending

To satisfy redemption requests or to cover unanticipated cash shortfalls, the fund has entered into a Master Interfund Lending Agreement by and among each Putnam fund and Putnam Management (the “Interfund Lending Agreement”) under which a Putnam fund may lend or borrow money (Putnam money market funds may lend, but not borrow) for temporary purposes directly to or from another Putnam fund (an “Interfund Loan”), subject to meeting the conditions of an SEC exemptive order granted to the fund permitting such Interfund Loans. All Interfund Loans would consist only of uninvested cash reserves that the lending fund otherwise would invest in short-term repurchase agreements or other short-term instruments. At this time, Putnam Short-Term Investment Fund is the only Putnam fund expected to make its uninvested cash reserves available for Interfund Loans.

If the fund has outstanding borrowings, any Interfund Loans to the fund (a) would be at an interest rate equal to or lower than that of any outstanding bank loan, (b) would be secured at least on an equal priority basis with at least an equivalent percentage of collateral to loan value as any outstanding bank loan that requires collateral, and (c) would have a maturity no longer than any outstanding bank loan (and in any event not over seven days). In addition, if an event of default were to occur under any agreement evidencing an outstanding bank loan to the fund, the event of default would automatically (without need for action or notice by the lending fund) constitute an immediate event of default under the Interfund Lending Agreement entitling the lending fund to call the Interfund Loan (and exercise all rights with respect to any collateral, if any). Such a call would be deemed made if a lending bank exercises its right to call its loan under its agreement with the borrowing fund.

The fund may make an unsecured borrowing under the Interfund Lending Agreement if its outstanding borrowings from all sources immediately after the interfund borrowing total 10% or less of its total assets; provided, that if the fund has a secured loan outstanding from any other lender, including but not limited to another Putnam fund, the fund’s Interfund Loan would be secured on at least an equal priority basis with at least an equivalent percentage of collateral to loan value as any outstanding loan secured by collateral. If (i) the fund’s total outstanding borrowings immediately after an interfund borrowing would be greater than 10% of its total assets,(ii) the fund’s total outstanding borrowings exceed 10% of its total assets for any reason (such as a decline in net asset value or because of shareholder redemptions), or (iii) the fund has outstanding secured Interfund Loans, the fund may borrow through the Interfund Lending Agreement on a secured basis only. All secured Interfund Loans would be secured by the pledge of segregated collateral with a market value equal to at least 102% of the outstanding principal value of the Interfund Loan. The fund may not borrow from any source if its total outstanding borrowings immediately after the borrowing would exceed the limits imposed by Section 18 of the 1940 Act or the fund’s fundamental investment restrictions.

The fund may not lend to another Putnam fund under the Interfund Lending Agreement if the Interfund Loan would cause its aggregate outstanding Interfund Loans to exceed 15% of the fund’s current net assets at the time of the Interfund Loan. The fund’s Interfund Loans to any one fund may not exceed 5% of the lending fund’s net assets. The duration of Interfund Loans would be limited to the time required to receive payment for

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securities sold, but in no event may the duration exceed seven days. Interfund Loans effected within seven days of each other would be treated as separate loan transactions for purposes of this condition. Each Interfund Loan may be called on one business day’s notice by a lending fund and may be repaid on any day by a borrowing fund.

The limitations detailed above and the other conditions of the SEC exemptive order permitting interfund lending are designed to minimize the risks associated with interfund lending for both the lending fund and the borrowing fund. However, no borrowing or lending activity is without risk. If the fund borrows money from another fund, there is a risk that the Interfund Loan could be called on one business day’s notice or not renewed, in which case the fund may have to borrow from a bank at higher rates if an Interfund Loan were not available from another fund. A delay in repayment to a lending fund could result in a lost opportunity or additional lending costs, and interfund loans are subject to the risk that the borrowing fund could be unable to repay the loan when due. In the case of a default by a borrowing fund and to the extent that the loan is collateralized, the lending fund could take possession of collateral that it is not permitted to hold and, therefore, would be required to dispose of such collateral as soon as possible, which could result in a loss to the lending fund. Because Putnam Management provides investment management services to both the lending fund and the borrowing fund, Putnam Management may have a potential conflict of interest in determining whether an Interfund Loan is appropriate for the lending fund and the borrowing fund. The funds and Putnam Management have adopted policies and procedures that are designed to manage potential conflicts of interest, but the administration of the Interfund Program may be subject to such conflicts.

Inverse Floaters

Inverse floating rate debt securities (or “inverse floaters”) are debt securities structured with variable interest rates that reset in the opposite direction from the market rate of interest to which the inverse floater is indexed. An inverse floater may be considered to be leveraged to the extent that its interest rate varies by a magnitude that exceeds the magnitude of the change in the index rate of interest. As a result, inverse floaters may be more volatile and more sensitive to interest rate changes than other types of debt securities with comparable maturities. Inverse floaters may be subject to legal or contractual restrictions on resale and therefore may be less liquid than other types of securities. Certain inverse floaters may be illiquid.

Investments in Wholly-Owned Subsidiaries

Each of Putnam PanAgora Managed Futures Strategy and Putnam PanAgora Risk Parity Fund may invest up to 25% of its total assets in its wholly-owned and controlled subsidiary, organized under the laws of the Cayman Islands as an exempted company (each, a “Subsidiary” and collectively, the “Subsidiaries”) in order to gain exposure to the commodities markets within the limitations of the federal tax laws, rules and regulations that apply to regulated investment companies.

Generally, each Subsidiary will invest primarily in commodity futures, and, in the case of Putnam PanAgora Risk Parity Fund, swaps on commodity futures, but each Subsidiary may also invest in other commodity-related instruments (such as financial futures, option and swap contracts). Each Subsidiary may also have exposure to equity and fixed income securities, cash and cash equivalents, pooled investment vehicles (including those that are not registered pursuant to the 1940 Act) and other investments, either as investments or to serve as margin or collateral for the Subsidiary’s derivative positions. Unlike a fund, a Subsidiary may invest without limitation in commodity-linked derivatives. By investing in a Subsidiary, each of Putnam PanAgora Managed Futures Strategy and Putnam PanAgora Risk Parity Fund is indirectly exposed to the risks associated with the Subsidiary’s investments. Except as described below, the Subsidiaries are not registered under the 1940 Act and are not subject to all of the investor protections of the 1940 Act. Changes in the laws of the United States and/or the Cayman Islands could result in the inability of the fund and/or the Subsidiary to operate as described in the prospectus and could adversely affect the fund and its shareholders.

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The Chief Compliance Officer of Putnam PanAgora Managed Futures Strategy and Putnam PanAgora Risk Parity Fund oversees implementation of each Subsidiary’s policies and procedures, and makes periodic reports to the Board regarding each Subsidiary’s compliance with its policies and procedures. Each of Putnam PanAgora Managed Futures Strategy and Putnam PanAgora Risk Parity Fund test for compliance with investment restrictions on a consolidated basis with its Subsidiary, except that with respect to its investments in certain securities that may involve leverage, each Subsidiary complies with asset segregation requirements to the same extent as the applicable fund.

PanAgora provides investment management and other services to each Subsidiary. PanAgora does not receive increased compensation by virtue of providing each Subsidiary with investment management or administrative services. However, Putnam Management pays PanAgora based on each of Putnam PanAgora Managed Futures Strategy’s and Putnam PanAgora Risk Parity Fund’s assets, including the assets invested in the applicable Subsidiary. Each Subsidiary will also enter into separate contracts for the provision of custody and audit services with the same or with affiliates of the same service providers that provide those services to the applicable fund.

The financial statements of each of Putnam PanAgora Managed Futures Strategy and Putnam PanAgora Risk Parity Fund will be consolidated with the financial statements of the applicable Subsidiary in the fund’s Annual and Semi-Annual Reports. The fund’s Annual and Semi-Annual Reports are distributed to shareholders, and copies of the reports are provided without charge upon request as indicated on the back cover of the prospectus.

In order for the fund to qualify as a regulated investment company under Subchapter M of the Code the fund must derive at least 90 percent of its gross income each taxable year from certain sources of “qualifying income” specified in the Code. Income from certain commodity-linked derivative instruments in which the fund might invest may not be considered qualifying income. Each of Putnam PanAgora Managed Futures Strategy’s and Putnam PanAgora Risk Parity Fund’s investment in a Subsidiary is expected to provide the fund with exposure to the commodities markets within the limitations of the federal income tax requirements of Subchapter M of the Code. Each of Putnam PanAgora Managed Futures Strategy’s and Putnam PanAgora Risk Parity Fund’s pursuit of its investment strategy may be limited by the fund’s intention to qualify for treatment as a regulated investment company under Subchapter M of the Code. If a net loss is realized by a Subsidiary, such loss is generally not available to offset income or capital gain generated from the fund’s other investments. In addition, a Subsidiary is not permitted to carry forward any net ordinary losses it realizes in a taxable year to offset ordinary income it realizes in subsequent taxable years.

Legal and Regulatory Risks Relating to Investment Strategy

The fund may be adversely affected by new (or revised) laws or regulations that may be imposed by the Internal Revenue System or Treasury Department, the CFTC, the SEC, the U.S. Federal Reserve or other banking regulators, or other governmental regulatory authorities or self-regulatory organizations that supervise the financial markets. These agencies are empowered to promulgate a variety of rules pursuant to financial reform legislation in the United States. The fund may also be adversely affected by changes in the enforcement or interpretation of existing statutes and rules by these governmental regulatory authorities or self-regulatory organizations. For example, there has been an increase in governmental, as well as self-regulatory, scrutiny of the alternative investment industry. It is impossible to predict what, if any, changes in regulations may occur, but any regulation that restricts the ability of the fund to trade in securities could have a material adverse impact on the fund’s performance.

The regulatory environment for private funds is evolving, and changes in the regulation of private funds may adversely affect the value of the investments held by the fund and the ability of the fund to execute its investment strategy. In addition, the securities and futures markets are subject to comprehensive statutes, regulations and margin requirements. The CFTC, the SEC, the Federal Deposit Insurance Corporation, other regulators and self-regulatory organizations and exchanges are authorized to take extraordinary actions in the

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event of market emergencies. The regulation of securitization and derivatives transactions and funds that engage in such transactions is an evolving area of law and is subject to modification by government and judicial action.

In October 2016, the SEC adopted a liquidity risk management rule that requires each fund (other than Putnam money market funds) to establish a liquidity risk management program. The fund’s Board of Trustees has appointed Putnam Management to administer the fund’s liquidity risk management program, various aspects of which went into effect in December 2018 and June 2019. The impact the rule will have on the funds, and on the open-end fund industry in general, is not yet fully known, but the rule could impact a fund’s performance and its ability to achieve its investment objective(s). Please see “Illiquid Investments” above for more information.

The U.S. government has enacted legislation that provides for new regulation of the derivatives market, including clearing, margin, reporting and registration requirements. The CFTC, SEC, and other federal regulators have been tasked with developing the rules and regulations enacting the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”). The European Union (“EU”) and some other countries are implementing similar requirements that will affect the fund when it enters into derivatives transactions with a counterparty organized in that country or otherwise subject to that country’s derivatives regulations. For example, the U.S. government has adopted mandatory minimum margin requirements for bilateral derivatives. Similar requirements are expected to be adopted by the EU. Because the these requirements are new and evolving (and some of the rules are not yet final), their ultimate impact remains unclear. New regulations could, among other things, adversely affect the value of the investments held by the fund, restrict the fund’s ability to engage in derivatives transactions (for example, by making certain types of derivatives transactions no longer available to the fund) and/or increase the costs of such derivatives transactions (for example, by increasing margin or capital requirements), and the fund may be unable to execute its investment strategy as a result. It is unclear how the regulatory changes will affect counterparty risk.

The CFTC and certain futures exchanges have established limits, referred to as “position limits,” on the maximum net long or net short positions which any person may hold or control in particular options and futures contracts. The CFTC has proposed position limits for certain swaps. All positions owned or controlled by the same person or entity, even if in different accounts, may be aggregated for purposes of determining whether the applicable position limits have been exceeded. Thus, even if the fund does not intend to exceed applicable position limits, it is possible that different clients managed by Putnam Management and its affiliates may be aggregated for this purpose. Any modification of trading decisions or elimination of open positions that may be required to avoid exceeding such limits may adversely affect the profitability of the fund.

The SEC has in the past adopted interim rules requiring reporting of all short positions above a certain de minimis threshold and may adopt rules requiring monthly public disclosure in the future. In addition, other non-U.S. jurisdictions where the fund may trade have adopted reporting requirements. If the fund’s short positions or its strategy become generally known, the fund’s ability to implement its investment strategy could be adversely affected. In particular, other investors could cause a “short squeeze” in the securities held short by the fund forcing the fund to cover its positions at a loss. Such reporting requirements may also limit the fund’s ability to access management and other personnel at certain companies where the fund seeks to take a short position. In addition, if other investors engage in copycat behavior by taking positions in the same issuers as the fund, the cost of borrowing securities to sell short could increase drastically and the availability of such securities to the fund could decrease drastically. Such events could make a fund unable to execute its investment strategy. Short sales are also subject to certain SEC regulations. If the SEC were to adopt additional restrictions on short sales, they could restrict the fund’s ability to engage in short sales in certain circumstances. The SEC and regulatory authorities in other jurisdictions may adopt (and in certain cases, have adopted) bans on short sales of certain securities in response to market events. Bans on short selling may make it impossible for the fund to execute certain investment strategies and may have a material adverse effect on the fund’s ability to generate returns.

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Rules implementing the credit risk retention requirements of the Dodd-Frank Act for asset-backed securities require the sponsor of certain securitization vehicles to retain, and to refrain from transferring, selling, conveying to a third party, or hedging 5% of the credit risk in assets transferred, sold, or conveyed through the issuance of such vehicle, subject to certain exceptions. These requirements may increase the costs to originators, securitizers, and, in certain cases, collateral managers of securitization vehicles in which the fund may invest, which costs could be passed along to the fund as an investor in such transactions.

Some EU-regulated institutions (banks, certain investment firms, and authorized managers of alternative investment funds) are currently restricted from investing in securitizations (including U.S.-related securitizations), unless, in summary: (i) the institution is able to demonstrate that it has undertaken certain due diligence in respect of various matters, including its investment position, the underlying assets, and (in the case of authorized managers of alternative investment funds) the sponsor and the originator of the securitization; and (ii) the originator, sponsor, or original lender of the securitization has explicitly disclosed to the institution that it will retain, on an ongoing basis, a net economic interest of not less than five percent of specified credit risk tranches or asset exposures related to the securitization. In the future, EU insurance and reinsurance undertakings and UCITS funds are expected to become subject to similar restrictions. Although the requirements do not apply to the fund directly, the costs of compliance, in the case of any securitization within the EU risk retention rules in which the fund has invested or is seeking to invest, could be indirectly borne by the fund and the other investors in the securitization.

Lower-rated Securities

The fund may invest in lower-rated fixed-income securities (commonly known as “junk bonds”) and may hold fixed-income securities that are downgraded to a lower rating after the time of purchase by the fund. Compared to higher-rated fixed-income securities, lower-rated securities generally offer the potential for higher investment returns but subject holders to greater credit, market and liquidity risk, including the possibility of default or bankruptcy. The lower ratings 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. The market price of lower-rated securities also generally responds to short-term corporate and market developments to a greater extent than do the price and liquidity of higher-rated securities because such developments are perceived to have a more direct relationship to the ability of an issuer of lower-rated securities to meet its ongoing debt obligations. In addition, the market may be less liquid for lower-rated securities than for higher-rated 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 fixed-income assets. Conversely, during periods of rising interest rates, the value of the fund’s fixed-income assets will generally decline. The values of lower-rated securities may often be affected to a greater extent than higher-rated securities 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, whether or not justified by fundamental factors. Changes

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by nationally recognized securities rating agencies in their ratings of any fixed-income security, changes in the ability of an issuer to make payments of interest and principal or regulation that limits the ability of certain categories of financial institutions to invest in lower-rated securities 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 goal(s).

Lower-rated securities may contain redemption, call or prepayment provisions which permit the issuer of such securities to, at its discretion, redeem the securities. During periods of falling interest rates, issuers of these securities are likely to redeem or prepay the securities and refinance them with debt securities with a lower interest rate. To the extent an issuer is able to refinance the securities, or otherwise redeem them, the fund may have to replace the securities with a lower yielding security, which would result in a lower return.

Issuers of lower-rated fixed-income securities may be (i) in poor financial condition, (ii) experiencing poor operating results, (iii) having substantial capital needs or negative net worth, or (iv) facing special competitive or product obsolescence problems, and may include companies involved in bankruptcy or other reorganizations or liquidation proceedings. Issuers of lower-rated securities are also often highly leveraged, and their relatively high debt-to-equity ratios increase the risk that their operations may not generate sufficient cash flow to service their debt obligations, especially during an economic downturn or during sustained periods of rising interest rates. 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 issuers of lower-rated securities is significantly greater than for issuers of higher-rated securities 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 Code may limit the extent to which the fund may exercise its rights by taking possession of such assets.

To the extent the fund invests in lower-rated securities, 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 higher-rated securities

Market Risk

The value of securities in a fund’s portfolio may fall or fail to rise over extended periods of time for a variety of reasons, including general economic, political or financial market conditions, investor sentiment and market perceptions (including perceptions about monetary policy, interest rates or the risk of default), government actions (including protectionist measures, intervention in the financial markets or other regulation, and changes

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in fiscal, monetary or tax policies), geopolitical events or changes (including natural disasters, terrorism and war), and factors related to a specific issuer, geography, industry or sector. In addition, the increasing popularity of passive index-based investing may have the potential to increase security price correlations and volatility. (As passive strategies generally buy or sell securities based simply on inclusion and representation in an index, securities prices will have an increasing tendency to rise or fall based on whether money is flowing into or out of passive strategies rather than based on an analysis of the prospects and valuation of individual securities. This may result in increased market volatility as more money is invested through passive strategies). These and other factors may lead to increased volatility and reduced liquidity in the fund’s portfolio holdings, particularly for larger investments. During those periods, the fund may experience high levels of shareholder redemptions, and may have to sell securities at times when it would otherwise not do so, and at unfavorable price.

Legal, political, regulatory and tax changes may cause fluctuations in markets and securities prices. In the past, governmental and non-governmental issuers have defaulted on, or have been forced to restructure, their debts, and many other issuers have faced difficulties obtaining credit. Defaults or restructurings by governments or others of their debts could have substantial adverse effects on economies, financial markets, and asset valuations around the world. In addition, financial regulators, including the U.S. Federal Reserve and the European Central Bank, at times have taken steps to maintain historically low interest rates, such as by purchasing bonds. Some governmental authorities at times have taken steps to devalue their currencies substantially or have taken other steps to counter actual or anticipated market or other developments. Steps by those regulators and authorities to implement, or to curtail or taper, these activities could have substantial negative effects on financial markets. The withdrawal of support, failure of efforts in response to a financial crisis, or investor perception that these efforts are not succeeding could negatively affect financial markets generally as well as the values and liquidity of certain securities.

The fund is subject to the risk that geopolitical events will disrupt securities markets and adversely affect global economies and markets. War, terrorism, economic uncertainty, and other geopolitical events (including sanctions, tariffs, exchange controls or other cross-border trade barriers) have led, and in the future may lead, to increased short-term market volatility and may have adverse long-term effects on U.S. and world economies and markets generally. Likewise, natural and environmental disasters and systemic market dislocations may be highly disruptive to economies and markets. Those events as well as other changes in foreign and domestic economic and political conditions also could adversely affect individual issuers or related groups of issuers, securities markets, interest rates, credit ratings, inflation, investor sentiment, and other factors affecting the value of the fund’s investments. In addition, securities and financial markets may be susceptible to market manipulation or other fraudulent trade practices, which could disrupt the orderly functioning of these markets, contribute to overall market volatility and adversely affect the values of the fund’s investments.

Given the increasing interdependence among global economies and markets, conditions in one country, region or market might adversely affect financial conditions or issuers in other countries, regions or markets. For example, any partial or complete dissolution of the Economic and Monetary Union of the European Union, or any increased uncertainty as to its status, could have significant adverse effects on global currency and financial markets, and on the values of the fund’s investments. To the extent the fund has focused its investments in a particular country, region or market, adverse geopolitical and other events impacting that country, region or market could have a disproportionate impact on the fund.

Master Limited Partnerships (MLPs)

A MLP generally is a publicly traded company organized as a limited partnership or limited liability company and treated as a partnership for U.S. federal income tax purposes. MLPs may derive income and gains from, among other things, the exploration, development, mining or production, processing, refining, transportation (including pipelines transporting gas, oil, or products thereof), or the marketing of any mineral or natural resources. MLPs generally have two classes of owners, the general partner and limited partners. The general partner of an MLP is typically owned by one or more of the following: a major energy company, an investment

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fund, or the direct management of the MLP. The general partner may be structured as a private or publicly traded corporation or other entity. The general partner typically controls the operations and management of the MLP through an up to 2% equity interest in the MLP plus, in many cases, ownership of common units and subordinated units. Limited partners own the remainder of the partnership through ownership of common units and have a limited role in the partnership’s operations and management.

MLP securities in which certain funds may invest can include, but are not limited to: (i) equity securities of MLPs, including common units, preferred units or convertible subordinated units; (ii) debt securities of MLPs, including debt securities rated below investment grade; (iii) securities of MLP affiliates; (iv) securities of open-end funds, closed-end funds or exchange-traded funds (“ETFs”) that invest primarily in MLP securities; or (v) exchange-traded notes whose returns are linked to the returns of MLPs or MLP indices.

The risks of investing in an MLP are generally those inherent in investing in a partnership as opposed to a corporation. For example, MLP common units represent an equity ownership interest in a partnership, providing limited voting rights and entitling the holder to a share of the company’s success through distributions and/or capital appreciation. Unlike shareholders of a corporation, common unit holders do not elect directors annually and generally have the right to vote only on certain significant events, such as mergers, a sale of substantially all of the assets, removal of the general partner or material amendments to the partnership agreement. In addition, state law governing partnerships is often less restrictive than state law governing corporations. Accordingly, there may be fewer protections afforded investors in an MLP than investors in a corporation.

MLP common units and other equity securities can be affected by macro-economic and other factors affecting the stock market in general, expectations of interest rates, investor sentiment towards MLPs, changes in a particular issuer’s financial condition, or unfavorable or unanticipated poor performance of a particular issuer (in the case of MLPs, generally measured in terms of distributable cash flow). Prices of common units of individual MLPs and other equity securities can also be affected by fundamentals unique to the partnership or company, including earnings power and coverage ratios.

Additional risks involved with investing in an MLP are risks associated with the specific industry or industries in which the partnership invests. For example, companies operating in the energy MLP sector are subject to risks that are specific to the industry in which they operate. MLPs and other companies that provide crude oil, refined product and natural gas services are subject to supply and demand fluctuations in the markets they serve which may be impacted by a wide range of factors including fluctuating commodity prices, weather, increased conservation or use of alternative fuel sources, increased governmental or environmental regulation, depletion, rising interest rates, declines in domestic or foreign production, accidents or catastrophic events, and economic conditions, among others. Energy MLP companies are subject to varying demand for oil, natural gas or refined products in the markets they serve, as well as changes in the supply of products requiring gathering, transport, processing, or storage due to natural declines in reserves and production in the supply areas serviced by the companies’ facilities. Declines in oil or natural gas prices, as well as adverse regulatory decisions, may cause producers to curtail production or reduce capital spending for production or exploration activities, which may in turn reduce the need for the services provided by energy MLP companies. Lower prices may also create lower processing margins. Energy MLPs may also be subject to regulation by the Federal Energy Regulatory Commission (“FERC”) with respect to tariff rates that these companies may charge for interstate pipeline transportation services. An adverse determination by FERC with respect to tariff rates of a pipeline MLP could have a material adverse effect on the business, financial conditions, result of operations, cash flows and prospects of that pipeline MLP and its ability to make cash distributions to its equity owners.

Money Market Instruments

Money market instruments, or short-term debt instruments, consist of obligations such as commercial paper, bank obligations (e.g., 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

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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 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.

Commercial paper is a money market instrument issued by banks or companies to raise money for short-term purposes. Commercial paper is usually sold on a discounted basis rather than as an interest-bearing instrument. Unlike some other debt obligations, commercial paper is typically unsecured, which increases the credit risk associated with this type of investment. In some cases, commercial paper may be backed by some form of credit enhancement, typically in the form of a guarantee by a commercial bank. Commercial paper backed by guarantees of foreign banks may involve additional risk due to the difficulty of obtaining and enforcing judgments against such banks and the generally less restrictive regulations to which such banks are subject. Commercial paper also may be issued as an asset-backed security (that is, backed by a pool of assets representing the obligations of a number of different issuers), in which case certain of the risks discussed in “Mortgage-backed and Asset-backed securities” would apply. Commercial paper is traded primarily among institutions.

Certificates of deposit are receipts issued by a depository institution in exchange for the deposit of funds. The issuer agrees to pay the amount deposited plus interest to the bearer of the receipt on the date specified on the certificate. The certificate usually can be traded in the secondary market prior to maturity. Certificates of deposit may include those issued by foreign banks outside the United States. Such certificates of deposit include Eurodollar and Yankee certificates of deposit. Eurodollar certificates of deposit are U.S. dollar-denominated certificates of deposit issued by branches of foreign and domestic banks located outside the United States. Yankee certificates of deposit are certificates of deposit issued by a U.S. branch of a foreign bank denominated in U.S. dollars and held in the United States.

Bankers’ acceptances typically arise from short-term credit arrangements designed to enable businesses to obtain funds to finance commercial transactions. Generally, an acceptance is a time draft drawn on a bank by an exporter or an importer to obtain a stated amount of funds to pay for specific merchandise. The draft is then “accepted” by a bank that, in effect, unconditionally guarantees to pay the face value of the instrument on its maturity date. The acceptance may then be held by the accepting bank as an earning asset or it may be sold in the secondary market at the going rate of discount for a specific maturity. Although maturities for acceptances can be as long as 270 days, most acceptances have maturities of six months or less. Putnam Money Market Fund may invest in bankers’ acceptances issued by banks with deposits in excess of $2 billion (or the foreign currency equivalent) at the close of the last calendar year. If the Trustees change this minimum deposit requirement, shareholders would be notified. Other Putnam funds may invest in bankers’ acceptances without regard to this requirement.

Time deposits are interest-bearing non-negotiable deposits at a bank or a savings and loan association that have a specific maturity date. A time deposit earns a specific rate of interest over a definite period of time. Time deposits cannot be traded on the secondary market and those exceeding seven days and with a withdrawal penalty are considered to be illiquid.

In accordance with rules issued by the SEC, the fund may from time to time invest all or a portion of its cash balances in money market and/or short-term bond funds advised by Putnam Management. In connection with such investments, Putnam Management may waive a portion of the advisory fees otherwise payable by the fund. See “Charges and expenses” in Part I of this SAI for the amount, if any, waived by Putnam Management in connection with such investments.

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Mortgage-backed 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. Mortgage-backed securities may be issued by agencies or instrumentalities of the U.S. government (including those whose securities are neither guaranteed nor insured by the U.S. government, such as Freddie Mac, Fannie Mae, and FHLBs), foreign governments (or their agencies or instrumentalities), or non-governmental issuers. Interest and principal payments (including prepayments) on the mortgage loans underlying mortgage-backed securities pass through to the holders of the mortgage-backed securities. 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, home equity loans, leases of various types of real, personal and other property and receivables from credit card agreements. Similar to mortgage-backed securities, other types of asset-backed securities may be issued by agencies or instrumentalities of the U.S. government (including those whose securities are neither guaranteed nor insured by the U.S. government), foreign governments (or their agencies or instrumentalities), or non-governmental issuers.

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-backed securities. In that event the fund may be unable to invest the proceeds from the early payment of the mortgage-backed securities in an investment that provides as high a yield as the mortgage-backed securities. Consequently, early payment associated with mortgage-backed 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-backed securities. During periods of rising interest rates, the rate of mortgage prepayments usually decreases, thereby tending to increase the life of mortgage-backed securities. If the life of a mortgage-backed security is inaccurately predicted, the fund may not be able to realize the rate of return it expected.

Adjustable rate mortgage securities (“ARMs”), like traditional mortgage-backed securities, are interests in pools of mortgage loans that provide investors with payments consisting of both principal and interest as mortgage loans in the underlying mortgage pool are paid off by the borrowers. Unlike fixed-rate mortgage-backed securities, ARMs are collateralized by or represent interests in mortgage loans with variable rates of interest. These interest rates are reset at periodic intervals, usually by reference to an interest rate index or market interest rate. Although the rate adjustment feature may act as a buffer to reduce sharp changes in the value of adjustable rate securities, these securities are still subject to changes in value based on, among other things, changes in market interest rates or changes in the issuer’s creditworthiness. If rates increase due to a reset, the risk of default by underlying borrowers may increase. Because the interest rates are reset only periodically, changes in the interest rate on ARMs may lag changes in prevailing market interest rates. The market value of an ARM may be adversely affected if interest rates increase faster than the rates of interest payable on the ARM or by the adjustable rate mortgage loans underlying the ARM. Also, some ARMs (or the underlying mortgages) are subject to caps or floors that limit the maximum change in the interest rate during a specified period or over the life of the security. As a result, changes in the interest rate on an ARM may not fully reflect changes in prevailing market interest rates during certain periods.

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The fund may also invest in “hybrid” ARMs, whose underlying mortgages combine fixed-rate and adjustable rate features. A hybrid ARM is a type of mortgage in which the interest rate is fixed for a specified period and then resets periodically, or floats, for the remaining mortgage term. During the initial interest period, hybrid ARMs behave more like fixed income securities and are thus subject to the risks associated with fixed income securities. All hybrid ARMs have reset dates. A reset date is the date when a hybrid ARM changes from a fixed interest rate to a floating interest rate. At the reset date, a hybrid ARM can adjust by a maximum specified amount based on a margin over an identified index. Like ARMs, hybrid ARMs have periodic and lifetime limitations on the increases that can be made to the interest rates that mortgagors pay. Therefore, if during a floating rate period interest rates rise above the interest rate limits of the hybrid ARM, a fund holding the hybrid ARM does not benefit from further increases in interest rates.

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. The automatic interest rate adjustment feature of mortgages underlying ARMs likewise reduces the ability to lock-in attractive rates. As a result, mortgage-backed and asset-backed 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.

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. Prepayments may cause losses on securities purchased at a premium.

Mortgage-backed and asset-backed securities are subject to varying degrees of credit risk, depending on whether they are issued by agencies or instrumentalities of the U.S. government (including those whose securities are neither guaranteed nor insured by the U.S. government) or by non-governmental issuers. Securities issued by private organizations may not be readily marketable, and since the deterioration of worldwide economic and liquidity conditions that became acute in 2008, mortgage-backed and asset-backed securities have been subject to greater liquidity risk. These conditions may occur again. Also, government actions and proposals affecting the terms of underlying home loans, changes in demand for products (e.g., automobiles) financed by those loans, and the inability of borrowers to refinance existing loans (e.g., sub-prime mortgages), have had, and may continue to have, adverse valuation and liquidity effects on mortgage-backed and asset-backed securities. Although liquidity of mortgage-backed and asset-backed securities has improved recently, there can be no assurance that in the future the market for mortgage-backed and asset-backed securities will continue to improve and become more liquid.

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 (such as Freddie Mac, Fannie Mae, or Ginnie Mae), 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. CMOs may also be less liquid and may exhibit greater price volatility than other types of mortgage- or other asset-backed securities.

Prepayments could cause early retirement of CMOs. CMOs are designed to reduce the risk of prepayment for investors by issuing multiple classes of securities (or “tranches”), 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

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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. A common type of stripped mortgage-backed security will have one class receiving all of the interest from the mortgage assets (interest only or “IOs”), while the other class will receive all of the principal (principal only or “POs”). The yield to maturity on an 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, POs tend to increase in value if prepayments are greater than anticipated and decline if prepayments are slower than anticipated. Generally, the market value of POs is unusually volatile in response to changes in interest rates. 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.

The risks associated with other asset-backed securities (including in particular the risks of issuer default and of early prepayment) are generally similar to those described above for CMOs. In addition, because asset-backed securities generally do not have the benefit of a security interest in the underlying assets that is comparable to a mortgage, asset-backed securities present certain additional risks that are not present with mortgage-backed securities. The ability of an issuer of asset-backed securities to enforce its security interest in the underlying assets may be limited. For example, revolving credit receivables are generally unsecured and the debtors on such receivables are entitled to the protection of a number of state and federal consumer credit laws, many of which give debtors the right to set-off certain amounts owed, thereby reducing the balance due. Automobile receivables generally are secured, but by automobiles, rather than by real property.

Asset-backed securities may be collateralized by the fees earned by service providers. The value of asset-backed securities may be substantially dependent on the servicing of the underlying asset and are therefore subject to risks associated with negligence by, or defalcation of, their servicers. In certain circumstances, the mishandling of related documentation may also affect the rights of the security holders in and to the underlying collateral. The insolvency of entities that generate receivables or that utilize the assets may result in added costs and delays in addition to losses associated with a decline in the value of the underlying assets.

Payment of interest on asset-backed securities and repayment of principal largely depends on the cash flows generated by the underlying assets backing the securities and, in certain cases, may be supported by letters of credit, surety bonds, or other credit enhancements. The amount of market risk associated with asset-backed securities depends on many factors, including the deal structure (</